Legislation to Prevent Cybersquatting/Cyberpiracy

Order Code RS20367

Updated May 1, 2000

Legislation to Prevent

Cybersquatting/Cyberpiracy

name redacted

Legislative Attorney

American Law Division

Summary

The Anticybersquatting Consumer Protection Act is Title III of S. 1948, 106th

Congress, the Intellectual Property and Communications Omnibus Reform Act of 1999,

which was incorporated into H.R. 3194, 106th Congress, the Consolidated

Appropriations Act for FY2000. S. 1948 was enacted as the final appendix to P.L.

106-113 (1999). The problem that this bill is intended to address is a “new form of

piracy on the Internet caused by acts of ‘cybersquatting,’ which refers to the deliberate,

bad-faith, and abusive registration of Internet domain names in violation of the rights

of trademark owners.”

The Anticybersquatting Consumer Protection Act is Title III of S. 1948, 106th

Congress, the Intellectual Property and Communications Omnibus Reform Act of 1999,

which was incorporated into H.R. 3194, 106th Congress, the Consolidated Appropriations

Act for FY2000. S. 1948 was enacted as the final appendix to Public Law 106-113

(1999). A previous version of this legislation was S. 1255, 106th Congress, which the

Senate passed on August 5, 1999, and the House passed on October 26, 1999 (the House

version was originally H.R. 3028, 106th Congress). The problem that this legislation is

intended to address is explained in a Senate committee report that accompanied S. 1255:

Trademark owners are facing a new form of piracy on the Internet caused by acts of

‘cybersquatting,’ which refers to the deliberate, bad-faith, and abusive registration of

Internet domain names in violation of the rights of trademark owners. For example,

when Mobil and Exxon announced their proposed merger in December, 1998, a

speculator registered every variation of the possible resulting domain name, i.e.,

mobil-exxon.com, exxon-mobil.com, mobilexxon.com, etc., ad infinitum. . . .

Cybersquatters target distinctive marks for a variety of reasons. Some register

well-known brand names as Internet domain names in order to extract payment from

the rightful owners of the marks, who find their trademarks ‘locked up’ and are forced

to pay for the right to engage in electronic commerce under their own brand name. . . .

In addition, cybersquatters often register well-known marks to prey on consumer

confusion by misusing the domain name to divert customers from the mark owner’s

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site to the cybersquatter’s own site, many of which are pornography sites that derive

advertising revenue based on the number of visits, or ‘hits,’ the site receives. For

example, the Committee was informed of a parent whose child mistakenly typed in

the domain name for ‘dosney.com,’ expecting to access the family-oriented content

of the Walt Disney home page, only to end up staring at a screen of hardcore

pornography because a cybersquatter had registered that domain name in anticipation

that consumers would make that exact mistake. . . . Others attempt to divert

unsuspecting consumers to their sites in order to engage in unfair competition. For

example, the business operating under the domain name ‘disneytransportation.com’

greets online consumers at its site with a picture of Mickey Mouse and offers shuttle

services in the Orlando area and reservations at Disney hotels, although the company

is in no way affiliated with the Walt Disney Company and such fact is not clearly

indicated on the site. . . .

Finally, and most importantly, cybersquatters target distinctive marks to defraud

consumers, including to engage in counterfeiting activities. For example, the

Committee heard testimony regarding a cybersquatter who registered the domain

names ‘attphonecard.com’ and ‘attcallingcard.com’ and used those names to establish

sites purporting to sell calling cards and soliciting personally identifying information,

including credit card numbers. . . .1

S. 1948 addresses these problems by amending the Trademark Act of 1946

(popularly known as the Lanham Act), 15 U.S.C. §§ 1051 et seq., to allow “the owner of

a mark, including a personal name which is protected as a mark under [15 U.S.C.

§ 1125]”2 to sue any person who, with a “bad faith intent to profit from that mark” or

personal name “registers, traffics in, or uses a domain name that — ”

(I) in the case of a mark that is distinctive at the time of registration of the

domain name, is identical or confusingly similar to such mark;

(II) in the case of a famous mark that is famous at the time of registration of the

domain name, is dilutive of such mark; or

(III) is a trademark, word, or name protected by reason of section 706 of title

18, United States Code, or section 220506 of title 36, United States Code.3

S. 1948 lists nine factors that a court may consider in determining whether there was

a bad-faith intent, but does not limit courts to these nine.4 The nine factors (paraphrased)

are (1) the domain name user’s trademark rights in the domain name, (2) the extent to

1

S.Rept. 106-140, 106th Congress, 1st session (1999) 4-7.

2

S. 1255 and H.R. 3028 (previous versions of the legislation) referred to “trademark or service

mark” rather than “a mark, including a personal name which is protected as a mark under [15

U.S.C. § 1125].”

3

18 U.S.C. § 706 prohibits fraudulently wearing or displaying the sign of the Red Cross or any

insignia colored in imitation of it. 36 U.S.C. § 220506 prohibits anyone but the U.S. Olympic

Committee from using that committee’s name, symbol, emblem, or various associated words.

4

The Senate report claims that these factors “balance[ ] the property interests of trademark

owners with Internet users who would make fair use of others’ marks or otherwise engage in

protected speech online.” S.Rept. 106-140, supra note 1, at 9.

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which the domain name is his legal name or commonly used name, (3) his prior use of the

domain name in connection with the bona fide offering of goods and services, (4) his

legitimate noncommercial or fair use of the mark in a site accessible under the domain

name, (5) his intent to divert consumers from the mark owner’s online location that could

harm the goodwill represented by the mark, (6) his offer to sell the domain name to the

mark owner or a third party for substantial consideration without having used it in the

bona fide offering of any goods or services, (7) his provision of misleading false contact

information when applying for the registration of the domain name, (8) his acquisition of

multiple domain names that are confusingly similar to others, and (9) the extent to which

the mark incorporated in his domain name registration is distinctive and famous within

the meaning of 15 U.S.C. § 1125(c)(1), which lists eight factors for “determining whether

a mark is distinctive and famous” for purposes of determining whether its owner is

entitled to an injunction to prevent dilution.

S. 1948 authorizes various forms of relief, including, in particular situations, “a court

order for the forfeiture or cancellation of the domain name or the transfer of the domain

name to the owner of the mark,” injunctions, damages, and statutory damages of not less

than $1,000 and not more than $100,000 per domain name. S. 1948 also prescribes

situations in which a “domain name registrar, domain name registry, or other domain

name registration authority” would and would not be liable.

S. 1948 contains two sections that were not in previous versions of the legislation.

Section 3006 requires “the Secretary of Commerce, in consultation with the Patent and

Trademark Office and the Federal Election Commission, to conduct a study and report to

Congress with recommendations on guidelines and procedures for resolving disputes

involving the registration or use by a person of a domain name that includes the personal

name of another person, in whole or in part, or a name confusingly similar thereto . . . .”

Section 3007 added to the National Historic Preservation Act, 16 U.S.C. § 470a(a)(1)(A),

a sentence providing that, notwithstanding the Trademark Act of 1946, “buildings and

structures on or eligible for inclusion on the National Register of Historic Places . . . or

designated as an individual landmark or as a contributing building in a historic district by

a unit of State of local government, may retain the name historically associated with the

building or structure.”

The First Amendment

S. 1948 also includes a “Savings Clause,” which provides:

Nothing in this Act shall affect any defense available to a defendant under the

Trademark Act of 1946 . . . or a person’s right of free speech or expression under the

first amendment of the United States Constitution.

The reference to the First Amendment is unnecessary, as, even in the absence of such

a savings clause, no federal statute may be enforced in a manner that violates the

Constitution. In San Francisco Arts & Athletics, Inc. v. United States Olympic

Committee, the Supreme Court held that a trademark protection statute did not violate the

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First Amendment.5 The statute was § 110 of the Amateur Sports Act of 1978, 36 U.S.C.

§ 380, which prohibits the use of the word “Olympic,” by anyone other than the United

States Olympic Committee (USOC), “to induce the sale of any goods or services, or to

promote any theatrical exhibition, athletic performance, or competition.” The Supreme

Court found that, although the statute restricts expressive speech, it does so merely

incidentally “to the primary congressional purpose of encouraging and rewarding the

USOC’s activities. The appropriate inquiry is thus whether the incidental restrictions on

First Amendment freedoms are greater than necessary to further a substantial

governmental interest.”6

As this suggests, the Supreme Court uses a looser standard to determine the

constitutionality of incidental restrictions on speech than it does to determine the

constitutionality of laws that restrict speech on the basis of its content. In fact, subsequent

to San Francisco Arts & Athletics, Inc., the Court made clear that, though it had said that

an incidental restriction must not be “greater than necessary” to further a substantial

governmental interest, such a restriction actually “need not be the least restrictive or least

intrusive means of furthering a governmental interest.” Rather, the restriction must be

“narrowly tailored,” and “the requirement of narrow tailoring is satisfied ‘so long as the

. . . regulation promotes a substantial governmental interest that would be achieved less

effectively absent the regulation.’”7

The Senate committee report quoted above, as well as the congressional findings set

forth in § 2 of S. 1255 (the House bill does not include findings), indicate that the

legislation is designed in part, like the statute the Supreme Court upheld in San Francisco

Arts & Athletics, Inc., to protect trademarks, not to restrict speech on the basis of its

content. S. 1255’s other stated purposes, such as preventing consumer fraud, also indicate

that the legislation, if challenged on free speech grounds, would apparently be subject

only to the looser standard that the Supreme Court uses to determine the constitutionality

of incidental restrictions on speech. As such, there seems little doubt that the bills, on

their face, would not be found to abridge the First Amendment.8

This is not to say that the bills, if enacted, could never be applied unconstitutionally.

For example, with respect to dilution of a trademark by tarnishment (linking it to shoddy

products of another), a commentator states:

5

483 U.S. 522 (1987).

6

Id. at 536-537.

7

Ward v. Rock Against Racism, 491 U.S. 781, 798-799 (1989).

8

A trade name itself “is a form of commercial speech and nothing more.” Friedman v. Rogers,

440 U.S. 1, 11 (1979). As such, the constitutionality of a governmental restriction on trade

names is also subject to a less-strict test than is applied to content-based restrictions. See, Central

Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 566

(1980). A domain name need not be commercial speech, however, as not all websites propose

a commercial transaction, which is the test that defines whether speech is commercial. See,

Board of Trustees of the State University of New York v. Fox, 492 U.S. 469, 482 (1989). But

this has no great significance, as the test to determine the constitutionality of restrictions on

commercial speech and the test to determine the constitutionality of incidental restrictions on

non-commercial speech are similar. See, San Francisco Arts & Athletics, Inc., supra note 5, 483

U.S., at 537, n.16.

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Tarnishment caused merely by an editorial or artistic parody which satirizes plaintiff’s

product or its image is not actionable under an anti-dilution statute because of the free

speech protections of the First Amendment.9

It seems possible that a domain name could constitute an editorial or artistic parody

of a trademark to which it was similar and thereby be protected by the First Amendment

from suit under the legislation.

9

J. Thomas McCarthy, 3 McCarthy on Trademarks and Unfair Competition, § 24-105.

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