By Carl Oppedahl

Carl Oppedahl is a partner in the intellectual property firm of Oppedahl & Larson LLP, which has handled numerous domain name trademark matters. The firm's web site is www.oppedahl.com.

Recent trademark cases examine reverse domain name hijacking

This is a draft of an article published at 21 Hastings Comm/Ent L.J. 535 (1999)

Trademark owners who seek to challenge domain name owners can do so either in regular court (typically a federal district court) or in the administrative "court" run by Network Solutions, Inc. ("NSI"), the government contractor that administers all domain names ending in COM, NET, or ORG. The outcome of the domain name dispute can fall anywhere along a spectrum, at one end being the cases in which courts have granted strong remedies against domain name owners, (hereinafter "strong remedies" cases), and at the other end being the cases in which it is decided that a domain name owner, who has registered with NSI a common or generic dictionary word that is used by many companies, has done nothing illegal (hereinafter "innocent domain name owner" cases).

The earliest district court decisions on the merits were all at the "strong remedies" end of the spectrum. Best known are the "Toeppen" cases⁽¹⁾, which arose because the defendant Dennis Toeppen had registered about two hundred domain names, many of them matching trademarks that were unique or coined or both. He made no secret of his interest in selling each of these names to the respective trademark owner. Another is the "Candyland" case⁽²⁾, in which the defendant offered pornography on a web site having a name matching a well-known childrens' game, and found itself enjoined. In each of these cases, the district court gave sweeping remedies to the trademark-asserting plaintiff. In the one appealed case⁽³⁾ the sweeping remedies were upheld on appeal. These cases, together with the Actmedia case,⁽⁴⁾ became a string-cite plugged into virtually every domain-name-related cease-and-desist letter.

For every highly visible "strong remedies" case in which the trademark owner chose to go to federal court, there have been dozens of unpublicized cases in which the challenger went to NSI's "court" instead. Challengers choose the NSI "court" because NSI is likely to side with the challenger and against its customer the domain name owner,⁽⁵⁾ regardless of the actual merits of the challenge. When NSI makes its decision to side with the challenger, it sends a "30-day letter" to the domain name owner in which it announces that the domain name will be cut off in 30 days.⁽⁶⁾

Three recent cases have reached the merits in which domain name owners, faced with NSI decisions in favor of challengers, brought court actions to block NSI cutoffs. In each of these cases (epix.com, cds.com, and dci.com), a court reversed NSI's decision and ruled that the domain name owner was innocent of any wrongdoing and was entitled to keep its domain name. These three cases are the subject of this article.

EPIX.COM. The first district court reversal of an NSI decision was Interstellar Starship Services, Ltd. v. Epix, Inc.⁽⁷⁾ The domain name owner Interstellar Starship Services, Ltd. ("Interstellar"), located in Oregon, registered the epix.com Internet domain name in January of 1995, and used it to promote theater groups including a group that performed the Rocky Horror Show. Epix, Inc. ("Epix"), the Massachusetts-based challenger, had a trademark registration⁽⁸⁾ dating from 1984, for "epix" as related to circuit boards and image processing software.⁽⁹⁾ (The mark is not unique; for example, a Los Angeles company has the mark registered for men's and women's sportswear⁽¹⁰⁾, and a Minnesota company has the mark registered for medical apparatus.⁽¹¹⁾)

In 1996, some twelve years after obtaining its trademark registration, Epix tried to obtain the epix.com domain name, only to find out that Interstellar had registered it in 1995. Epix then presumably did a trademark search, discovered that Interstellar lacked a trademark registration (thus ensuring that NSI would take the side of the challenger), and asked NSI to cut off Interstellar's domain name. NSI sent Interstellar a 30-day letter.

Interstellar filed suit in a federal district court to block NSI's plans. The court noted that promoting a theater group is much different than selling electronic circuit boards and software, and ruled that the domain name owner was not infringing any rights of the challenger. Interstellar got to keep the epix.com domain name and was awarded costs⁽¹²⁾ but not attorney's fees⁽¹³⁾.

Note: After this article was published, the EPIX.COM case was reversed on appeal and remanded for further proceedings.

CDS.COM. The second case to decide in favor of a domain name owner reversing NSI involved the domain name cds.com. A company called CD Solutions that sells compact disks selected the domain name cds.com when it established an Internet presence in February of 1996. Some eight years earlier, a company called CDS Networks (its name CDS stands for "Commercial Documentation Services") had started using the mark "CDS."⁽¹⁴⁾ In 1997 CDS networks tried to register the cds.com domain name but found it was already taken.⁽¹⁵⁾ CDS Networks did not go to regular court, but instead selected NSI's "court". As usual, NSI ruled in favor of the challenger and mailed a 30-day letter to CD Solutions.

CDS Networks is but one of twelve companies holding a US trademark registration for "CDS". CDS Networks' trademark registration is for "printing and desktop publishing for others". Other companies have registered the trademark "CDS" for such goods and services as circuit board design and layout services, capitation services, computer programming for others, circulating fluid bed dry scrubbing systems, computers, jewelry, laboratory equipment, diagnosing operating parameters of a centrifugal machine, cardiovascular catheters and stents, delivery and storage of chemicals, and underwriting and administering dental health care programs.

Common sense suggests that none of these twelve users of the mark "CDS" ought to be entitled to take away the cds.com domain name from the other. Common sense also suggests that a generic use of the letters "CDs" to refer to compact disks should not constitute infringement of anyone's trademark rights. And indeed the Court concluded⁽¹⁶⁾ that the domain name owner was not doing anything wrong and that "[a]ny encumbrance attached to this domain name cds.com as a result of [challenger's] actions must be removed immediately," presumably a reference to the challenger's request to NSI to cut off the domain name. The court ruled that a generic use of the letters "CDs" referring to compact disks could not possibly infringe the rights of the challenger whose trademark was for "printing and desktop publishing for others".

In so ruling the Court stated that "unlike a patent or copyright, a trademark does not confer on its owner any rights. There is no prohibition against the use of trademarks or service marks as domain names. Only uses that infringe or dilute an owner's trademark or service mark are prohibited."⁽¹⁷⁾ The Court stated that "'CDS' or 'cds' are the initials of defendants' businesses, and as such are descriptive of these businesses. ... While 'CDS' may have acquired a slight secondary meaning with their consumers ... the mark itself now denotes a term in common usage, and is not entitled to protection as a strong mark [emphasis added]."⁽¹⁸⁾ The Court had the following to say about the trademark: "[d]efendants now seek to expand the scope of this mark's protection to preclude the use of 'CDS' in reference to compact disk products and services, and this renders the mark invalid as being generic."⁽¹⁹⁾

It is instructive to appreciate what happened from the challenger's point of view. Before bringing its NSI challenge, the challenger held a US trademark registration that was as enforceable as any other. As a consequence of the district court's published decision, if CDS Networks were to assert its trademark against anybody, the accused infringer can point to the district court opinion calling the mark "a term in common usage", a mark that "is not entitled to protection as a strong mark", and a mark that is "invalid as being generic". In retrospect, it might have been better for CDS Networks' trademark rights if it had not challenged the cds.com domain name.

DCI.COM. The third and most recent consideration of an NSI decision came from the Court of Appeals for the Sixth Circuit in Data Concepts Inc. v. Digital Consulting Inc.⁽²⁰⁾ In 1993 a company called Data Concepts Inc. ("Data Concepts") decided to obtain a domain name, selecting dci.com using the company's three initials. Another company called Digital Consulting Inc. ("Digital Consulting") had registered its three initials "DCI" as a trademark in 1987.⁽²¹⁾ In 1996, nine years later, Digital Consulting tried to obtain dci.com but found that it was three years late. Digital Consulting brought a challenge in NSI's "court". As expected, NSI sided with the challenger and sent a 30-day letter to Data Concepts.

Data Concepts filed a lawsuit asking a federal district court to order NSI not to cut off the domain name, and to rule that Data Concepts was not violating any legal rights of the challenger. NSI canceled its stated plan of cutting off the domain name and was let out of the case with a promise that it would comply with later court orders.

The case was referred to a magistrate who concluded that the domain name owner was a wrongdoer under the Lanham Act and recommended that the dci.com domain name be given over to the challenger.⁽²²⁾ The magistrate apparently did not take into account the long period of time during which the dci.com domain name had been in use without any infringement having occurred,⁽²³⁾ and gave no significance to the domain name owner's showing that hundreds of companies had the initials "DCI" and that many companies had with trademark registrations for "DCI." The domain name owner appealed to the district judge, but the judge adopted the magistrate's report and recommendation. Pursuant to court order the dci.com domain name was transferred to the challenger.

Data Concepts, now no longer the owner of the dci.com domain name, appealed to the Sixth Circuit Court of Appeals. The appellate court reviewed the eight trademark likelihood-of-confusion factors, pointing out that the magistrate (and thus the district judge) had made numerous errors. Regarding the first factor (strength of the mark), the court below had failed to take into account the evidence of numerous other users of the "DCI" mark. The Sixth Circuit did its own research to find, for example, that there are many Internet domain names incorporating the initials "DCI."

The court below had also incorrectly and inadequately analyzed the relatedness of services, the similarity of the marks, and the likely degree of purchaser care, said the Court of Appeals. The court below had also wrongly inferred that Data Concepts had selected dci.com with knowledge of Digital Consulting, said the Court of Appeals, because "the record indicates that Data really was unaware of Digital at the time it decided to use DCI as part of its Internet address." For all these reasons, the Court of Appeals reversed and remanded.

In a concurrence, one judge of the Court of Appeals pointed out that not all domain names function as trademarks, and stated the belief "that there is a serious question regarding whether Data Concepts' use of the dci.com domain name constituted use of a trademark in the first place."⁽²⁴⁾

One consequence of Digital Consulting's having brought its challenge is that a Court of Appeals has gone to some length to show how many other companies use the letters "DCI". If Digital Consulting were ever to to assert its trademark in the future against a third party, the accused infringer will be able to point to the importance given by the Sixth Circuit to those other uses of the letters "DCI". The effect of the challenge has been to weaken the trademark.

Conclusion. These three cases illustrate what has come to be called "reverse domain name hijacking",⁽²⁵⁾ in which a trademark owner covets an existing domain name and seeks to gain possession of the domain name by launching a challege in NSI's "court" where the challenger almost always wins without consideration of the merits. These three cases demonstrate that the innocent domain name owner who is prepared and able to fund a lawsuit can overcome the initial disadvantage created by NSI's policy by having a regular court consider the challenge on its merits. The cds.com and dci.com cases also warn the trademark owner who engages in reverse domain name hijacking that the outcome may be a court opinion that weakens the trademark.

Footnotes

1. Panavision Intern., L.P. v. Toeppen, 945 F.Supp. 1296, 41 USPQ2d 1310, (C.D.Cal., 1996); Intermatic Inc. v. Toeppen, 947 F.Supp. 1227, 40 USPQ2d 1412, (N.D.Ill., 1996).

2. Hasbro, Inc. v. Internet Entertainment Group, Ltd., 40 USPQ2d 1479, 1996 WL 84853 (W.D.Wash., 1996).

3. Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316, 46 USPQ2d 1511 (9th Cir., 1998).

4. Actmedia, Inc. v. Active Media Int'l Inc., 1996 WL 466527 (N.D.Ill., 1996). The Actmedia case, though reported as if it were a court opinion, is merely a consent judgment that was "so ordered" by the judge.

5. For a challenger who has satisfied the several conditions of the NSI policy (e.g. the trademark matches the disputed domain name), the only circumstance in which NSI will not automatically side with the challenger is the extremely rare case in which the domain name owner already has a trademark registration. This almost never happens in real life because normally the would-be challenger checks, before bringing an NSI challenge, to see if the domain name owner has a trademark registration, and does not bother to bring the challenge in that event. Thus the real-life result is almost always that NSI sides with the challenger, regardless of the actual of the dispute. See Analysis and Suggestions Regarding NSI Domain Name Trademark Dispute Policy, 7 Fordham Intellectual Property, Media & Entertainment L.J. 73 (1996), draft available at http://www.patents.com/nsi/iip.htm .

6. The only way a domain name owner may avert this result is by (1) suing to block the cutoff, (2) agreeing to let the domain name be cut off in 90 days, (3) giving up the domain name to the challenger, or (4) producing a trademark registration matching the domain name.

7. 983 F.Supp. 1331, 45 USPQ2d 1304, (D.Ore. 1997) .

8. US trademark reg. No. 1,618,449.

9. The opinion in the Epix case is silent as to why Epix, which adopted the Epix trademark in 1984, waited twelve years to try to obtain the epix.com domain name. It would certainly have been possible for Epix to act sooner. For example, IBM obtained ibm.com in 1986, and Harvard University obtained harvard.edu in 1985.

10. US Reg. No. 1,953,466.

11. US Reg. No. 1,292,027.

12. 1998 US Dist.Lexis 3163, 1998 WL 117929.

13. 42 USPQ2d 1156, 1998 U.S.Dist.Lexis 3070, 1998 WL 117930.

14. US trademark reg. No. 2,006,249.

15. The opinion is silent as to why CDS Networks waited some nine years before trying to obtain the cds.com domain name.

16. CD Solutions Inc. v. Tooker, 15 F.Supp.2d 986, 47 USPQ2d 1755, (D. Ore. 1998).

17. 47 USPQ2d at 1758.

18. Id.

19. Id. at 1759.

20. 150 F3d 620, 47 USPQ2d 1672 (1998).

21. US trademark reg. no. 1,471,005.

22. The magistrate's report and recommendation may be found at ?? .

23. It will be recalled that the dci.com domain name was registered and first used in 1993, yet the challenger did nothing about it in 1993 or 1994 or 1995.

24. 47 USPQ2d at 1677.

25. See J. Theodore Smith, "1-800-Ripoffs.com": Internet Domain Names Are the Telephone Numbers of Cyberspace, 1997 U. Ill. L. Rev. 1169, 1176 (1997); Ira S. Nathenson, Showdown at the Domain Name Corral, 58 U. Pitt. L. Rev. 911, 915 (1997); Adrian Wolff, Pursuing Domain Name Pirates Into Uncharted Waters, 34 San Diego L. Rev. 1463, 1485 (1997); Danielle Weinberg Swartz, The Limitations of Trademark Law in Addressing Domain Name Disputes, 45 UCLA L. Rev. 1487, 1494 (1998).

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