Domain names and brand protection strategies

By Mayora IP

Domain names were first born under a pure first-come-first served registration policy by Network Solutions, which posed significant risks to trademark owners because such system implied that anyone could get away with appropriating a domain name merely because they registered them first. Some people –namely cyber-squatters– began to take advantage of famous trademarks to divert consumers to their sites for a profit. On the other hand, companies with a legitimate interest attached to their domain names could protect them, but that meant millions of dollars in attorney’s fees and court costs. Others, simply settled because of the prospect of having to spend millions of dollars. Naturally, trademark owners felt it was an unfair system. Why would trademark owners not be able to claim ownership over the domain names that incorporated their trademarks?

Understandably, Network Solutions got sued. But why? They were merely intermediaries. So, Network Solutions changed the system and adopted new rules whereby all domain name registrants had to indemnify them and gave trademark owners the opportunity to present a certificate. Unless the registrants could show that their rights were superior to those of trademark owners, the latter were entitled to suspend the domain name. However, this also did not stop Network Solutions from getting sued; it meant that registrants had to go to court to stop them from inactivating their domains in cases where domain names were not suspended.
An ad hoc international group of Internet organizations and trademark owners decided to introduce new generic top-level domains. Companies who had not registered in the first round could now have an opportunity to use their trademarks containing the same alphanumeric strings. Yet this was not enough; since it would simply multiply the potential for confusion. Some argued that this was not likely because consumers would know that there existed several similar o identical domain names but with different extensions. Nevertheless, consumer confusion allowed trademark stakeholders to claim stronger property interests. Efforts were aimed towards a system that would only allow trademark owners to use domain names bearing their trademarks. Indeed, their main concern was to protect trademarks from infringement and dilution, but were perhaps to focused on their claims.

Such concerns placed trademark owners above non-trademark owners, which is why rules have been now enacted to protect them. It does not follow, however, that because they have preference due to the goodwill attached to their trademarks that they have unlimited rights over all domain names. Not only would it exclude third parties with a legitimate cause or interest from using similar or identical domain names, but it would also be impossible to control. Therefore, the launching of new generic top-level domains was very valuable because they represented new opportunities for entrants into the world of e-commerce. Before, the existence of only few generic domain names constituted an entry barrier to do business on the internet and, importantly, gave competitors a marketing advantage that was difficult to overcome.

Depending on the circumstances, one or the other will consider that they have a superior claim. And that is precisely why the principle of first-come-first-serve needs to be applied. Given the global nature of the internet, it is more likely than not that several individuals or businesses will come up with the same name or mark; one will probably even register it as a trademark without the other one knowing.

Does that mean that the one who registered the mark first has a right to request the transfer of a domain name bearing the same mark because he obtained trademark rights before he who registered the domain name first, even though he registered it first? Absent an element of bad faith, intent to profit from a certain trademark, the showing of a bona fide offering of goods or services, or the showing that a person believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful, the cancellation or transfer of a domain name is highly unlikely.

This is the current domain name allocation system and Guatemala is not the exception. Although the AntiCybersquatting Consumer Protection Act from the United States enacted in 1999 contemplated these factors in depth, Guatemala also enacted legislation regarding domain names on 2006, whereby any trademark holder may request the court the cancellation or transfer of a domain name registered in bad faith, when such domain name constitutes the imitation of a famous trademark and the use of such domain name may cause confusion, dilution or cause any risk of association of such trademark.

Domain names are no longer purely technological goods; rather they are intangible assets of great value, many of which incorporate some of the most valuable trademarks of the world. Trademark stakeholders hold a very relevant position but a competitive market warrants the principle of first-come-first-serve to be superior absent a case of bad faith or lack of legitimate bona fide use. Companies must seek professional experts to assess them in their brand protection strategies, which involves the proactive registration of domain names that secure a domain name portfolio.