Consider the following scenario: You’re a successful business owner, and you have a customer base that’s expanding daily. Recently, you decided it’s time to start a website to continue growing your business, but when you try to register your trademark as your domain name, you find out someone else already owns it. Without warning, you may have just become the victim of cybersquatting.

What Is Cybersquatting?

Cybersquatting is the bad faith registration, trafficking in, or use of a domain name that is identical to, or confusingly similar to a distinctive mark, or dilutive of a famous mark, without regard to the goods or services of the parties.

In other words, cybersquatting is when someone beats a company to the punch by reserving the company’s name or trademark as a domain name with the bad faith intent to profit from it.

Cybersquatters perpetrate this act because they expect the company will buy the domain name back at an exorbitant price or pay a licensing fee to use it instead.

Cybersquatting is prohibited by federal law under the Anticybersquatting Consumer Protection Act (ACPA), but remains problematic because reserving domain names is primarily done on a first-come, first-served basis.

However, if a trademark owner can show:

• that it owns a distinctive or famous mark;
• that the defendant registers, uses, or traffics in a domain name that is identical to or confusingly similar to the distinctive or famous mark; and
• that the defendant had a “bad faith intent to profit” from the mark

A court can then award as much as $100,000 in statutory damages for each domain name, cancel or transfer the domain name to the rightful trademark owner, and even award the plaintiff attorney fees.

Domain Name Basics

Websites are identified by their Internet Protocol (IP) addresses, which consist of a series of numbers. A domain name is simply a more intuitive representation of the IP address that’s easier to remember.

For instance, the numbers 68.71.212.158 likely have no initial meaning to most people, but virtually everyone recognizes the domain name that represents them: www.espn.com.

For this reason, companies prefer to use their trademarks as their domain names because the public can locate them easily online.

Cybersquatters capitalize off this fact and reserve domain names knowing how valuable they are to trademark owners.

Cybersquatting in Michigan

Federal courts in Michigan have handled a number of cybersquatting lawsuits. One case in particular, Audi AG v. D’Amato, even made its way to the United States Court of Appeals for the Sixth Circuit.

In that case, Volkswagen and Audi sued an alleged cybersquatter in federal district court for registering the domain name www.audisport.com. The district court found that the website owner violated the ACPA, and he appealed.

The Sixth Circuit upheld the ruling, reasoning that even though the website provided information and goods to Audi enthusiasts, the owner of the domain name had no intellectual property rights in the “Audi” mark, and the owner of the domain name diverted consumers from purchasing goods and services from Audi’s legitimate website.

Therefore, even though the domain name owner wasn’t trying to coerce Audi into purchasing the domain name from him, he still violated the ACPA because the court found that he intended to capitalize off Audi’s mark; in other words, the defendant still had a bad faith intent to profit.

What If You’re the Cybersquatting Defendant?

An important aspect of cybersquatting liability hinges on the plaintiff proving that the defendant acted with the bad faith intent to profit. The ACPA has a so-called “safe harbor” provision that protects a domain name owner who “believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.”

It is entirely possible that one can be sued for cybersquatting and not be found liable because she truly believed that her use of the domain name was legitimate.

The Nine Statutory Bad Faith Factors Under the ACPA

The ACPA, codified at 15 U.S.C. § 1125(d), does not leave the determination of bad faith entirely to the court’s discretion. Congress provided nine non-exclusive factors for courts to consider when evaluating whether a domain name registrant acted with bad faith intent to profit:

• The trademark or other intellectual property rights of the registrant in the domain name;
• The extent to which the domain name consists of the registrant’s legal name or a name commonly used to identify the registrant;
• The registrant’s prior use of the domain name in connection with a bona fide offering of goods or services;
• The registrant’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
• The registrant’s intent to divert consumers from the mark owner’s online location;
• The registrant’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used it in a bona fide commercial site;
• The registrant’s provision of material and misleading false contact information when applying for the domain name registration;
• The registrant’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to the marks of others; and
• The extent to which the mark incorporated in the domain name registration is or is not distinctive and famous.

Courts balance these factors in light of all the circumstances, and no single factor is dispositive. A cybersquatter who registers hundreds of domain names incorporating famous marks is a textbook case under factors six, seven, and eight. A registrant who holds one domain name that happens to be identical to a third party’s trademark but who was using the name legitimately before the trademark owner achieved fame may have a strong defense.

UDRP: An Alternative to Federal Court Litigation

For trademark owners seeking a faster and less expensive alternative to ACPA litigation, the Uniform Domain Name Dispute Resolution Policy (UDRP) — administered by the Internet Corporation for Assigned Names and Numbers (ICANN) — provides a streamlined administrative procedure for recovering domain names that were registered and used in bad faith.

Under the UDRP, a trademark owner must prove three elements: (1) the domain name is identical or confusingly similar to a trademark in which the complainant has rights; (2) the registrant has no rights or legitimate interests in the domain name; and (3) the domain name was registered and is being used in bad faith. If the complainant prevails, the panel can order the domain name transferred to the trademark owner or cancelled.

UDRP proceedings are typically resolved within two to three months, compared to years for federal court litigation. Filing fees are moderate. The process is conducted entirely through written submissions, with no live testimony. For clear-cut cybersquatting cases — particularly those involving famous marks and obvious registration-for-resale schemes — UDRP is often the preferred remedy. However, UDRP panels cannot award monetary damages, so trademark owners seeking financial compensation must pursue ACPA claims in federal court.

Preventive Strategies for Brand Owners

The best defense against cybersquatting is a proactive domain name strategy. Brand owners should register their trademark as a domain name — including common misspellings and alternative top-level domains (TLDs) like .net, .org, .co, and country-code TLDs relevant to their markets — before cybersquatters have the opportunity. Monitoring services can alert trademark owners to new domain name registrations that incorporate their marks, providing an opportunity to initiate UDRP or ACPA proceedings while the registration is fresh.

If you think you’re the victim of cybersquatting, or if you believe that someone has wrongfully accused you of cybersquatting, contact our experienced Internet attorneys here or call 855-473-8474.