Intellectual Property Law

Bad Faith Intent to Profit After Innocent Registration Constitutes Cybersquatting

By Michael Atkins

“Even if a domain name was put up innocently and used properly for years, a person is liable under 15 U.S.C. § 1125(d) if he subsequently uses the domain name with a bad faith intent to profit from the protected mark by holding the domain name for ransom.”

The Ninth Circuit decided this proposition last week in DSPT Int’l, Inc. v. Nahum.

The plaintiff is a men’s fashion designer. Its founder, Paolo Dorigo, worked with his then friend, defendant Lucky Nahum, to develop a Web site for DSPT. Eventually, their friendship soured, DSPT did not renew Mr. Nahum’s contract, and Mr. Nahum joined a competitor.

Soon thereafter, DSPT’s Web site disappeared. If a customer typed the URL into his or her browser, all he or she would find was a screen saying “All fashion related questions to be referred to Lucky Nahum at: lnahum@yahoo.com.” Mr. Nahum explained to his new boss that “he had inserted that sentence in order to get [one of DSPT’s brands] to pay him funds that were due to him.”

DSPT repeatedly but unsuccessfully asked Nahum to give its Web site back. It ultimately filed suit against Mr. Nahum in the Central District of California for cybersquatting, among other Lanham Act claims. Mr. Nahum counterclaimed for an amount he alleged was still owing him under the parties’ contract.

A jury found for DSPT on its cybersquatting claim, awarded it $152k, and denied Mr. Nahum’s counterclaim.

Mr. Nahum appealed, arguing that he only used DSPT’s mark to gain leverage over DSPT in bargaining for money he claimed he was owed. In other words, he said he did not register the domain name in bad faith; he only used DSPT’s domain name to get what he was entitled to.

The Ninth Circuit rejected his argument and affirmed the jury’s award.

“His arguments are not implausible,” the court found, “but we conclude that they are mistaken. True, the statute was intended to prevent cybersquatters from registering well-known brand names as internet domain names in order to make the trademark owners buy the ability to do business under their own names.”

It concluded that “[t]he statute, like so many, is written more broadly than what may have been the political catalyst that got it passed. As in Bosley Medical Institute v. Kremer, [3 F.3d 672, 680-81 (9th Cir. 2005)], we conclude that the words of the statute are broader than this political stimulus that led to its enactment. Though there was no evidence of anything wrong with Nahum’s registration of the domain name to himself, the evidence supported a verdict that Nahum subsequently, years later, used the domain name to get leverage for his claim for commissions. The statute says ‘registers, traffics in, or uses,’ with ‘or’ between the terms, so use alone is enough to support a verdict, even in the absence of violative registration or trafficking.” 

The case cite is DSPT Int’l, Inc. v. Nahum, __ F.3d. __, 2010 WL 4227883, No. 08-55062 (Oct. 27, 2010).

Full post as published by Seattle Trademark Lawyer on November 01, 2010 (boomark / email).