Contributory Cybersquatting

Posted by on Dec 11, 2013

Does the Anticybersquatting Consumer Protection Act (ACPA) provide a basis of liability for a domain name registration service if one of its registrants is guilty of cybersquatting?  The United States Court of Appeals for the Ninth Circuit upheld the district court’s opinion that the ACPA does not provide for so-called contributory cybersquatting as a legal basis for liability.

The dispute centered on a company known as Petroliam Nasional Berhad (“Petronas,”) a Malaysian petroleum company which owns the trademark “Petronas.”  Petroliam sued major internet domain name registration service provider GoDaddy.com for contributory cybersquatting because one of GoDaddy’s users registered the domains “Petronastowers.net” and “Petronastower.net” using a different registration service, transferred the registrations to GoDaddy and then used GoDaddy’s domain name forwarding service to redirect users arriving at these sites to a third party adult content website.

The lawsuit very much depends on the interpretation of the ACPA.  Petronas sued under 15 U.S.C. § 1125(d) for actual cybersquatting.  When that cause of action was dismissed, Petronas amended its claims and asserted its novel theory of contributory cybersquatting.  The district court granted GoDaddy summary judgment and an appeal to the Ninth Circuit ensued.

The Ninth Circuit discussed the theoretical underpinnings of trademark and unfair competition law.  When the Lanham Act was enacted, it largely incorporated the then existing body of tort law that dealt with unfair competition.  In Inwood Labs and other cases, courts ruled that the Lanham Act created a basis for secondary or contributory liability based on the tort-law origins of trademark law.  The ACPA was passed in 1999, as an amendment to the Lanham Act.  Petronas argued that the ACPA was intended to create a basis for contributory liability.

The Ninth Circuit analyzed three factors.  First the plain text of the ACPA did not include any basis for contributory liability.  Liability under the ACPA is premised under a rather specific requirement of bad-faith intent to profit from cybersquatting.

Second, the court discussed Petronas’ argument that there was legislative intent to include existing common-law principles of trademark law, including contribution.  The gist of the court’s reasoning was that cybersquatting under the ACPA can be distinguished from the Lanham Act in many ways.  Among them, the problem the Lanham Act addressed was that of customer confusion; liability required no bad faith on the part of the infringer.  The ACPA did not require commercial use of the domain, but it did specifically require bad faith.   Thus, the ACPA can be distinguished from the Lanham Act at large in that it did not come from the common law of unfair competition and thus should not have the same kind of liability for contribution.

Third, the court viewed the ACPA as a narrowly tailored measure to address a specific problem.  It felt that expanding the basis for liability would not serve the goals of the law.  The law was specifically tailored to limit who could be liable for cybersquatting.  Narrow definitions of bad faith and domain name user give a lot of support for this theory.

The court also made a common-sense argument that held a lot of weight.  If a party like GoDaddy were indeed liable for contributory cybersquatting, they would have the near-impossible task of using the nine-factor test for bad faith articulated in the ACPA on each and every single domain name registered in order to shut down or prevent cybersquatting and thus avoid liability.  The court made the correct-sounding interpretation that domain name registration companies are “neutral” and should not be dragged into disputes.  The court also mentioned the high risk of false positives, where a party that could not win an ACPA action could and would serve notice to the domain name registration company directly of alleged cybersquatting, providing a perverse incentive to prevent an otherwise legitimate use of a domain name.