In yet another delivery in our series of articles on the importance of selecting the correct domain names, the role that Internet Law plays therein, the effect of cyber squatting and the online protection of your trademarks and brand, we bring you the following article which appeared on www.ibls.com, namely INTERNET LAW - Domain names and dilusion of trademarks. Full credits are given to the original author.
The case of E. & J. Gallo Winery v. Spider Webs Ltd, considered the issue of dilution of a trademark through the use of domain names. In this case, plaintiff, a holder of a trademark, sued defendant under the Anti-Cyber Squatting Act and under Texas Anti-delusion and Trademark Law. The case was decided in 2002 and became one of the first cases in applying (”ACPA”) together with state intellectual property laws. Cyber squatting of domain names will not be permitted and state and federal laws provide remedies to prevent this type of action that directly affect trademarks. Although the Internet permits the exercise of free speech, United States courts have been prompt to ban borderline exercise of free speech, especially when it infringes upon intellectual property rights.
Trademarks are defined in the Lanham Act Section 45 (or 15 U.S.C. Section 1127). They are defined as “any word, name, symbol, or device or any combination thereof (1) used by a person or (2) which a person has a bone fide intention to use in commerce and applies to register on the principal register.”
A domain name or a web address is the Internet Protocol (IP) address that provides an Internet identity. Domain names provide an easy means for locating Internet addresses that otherwise would be impossible to memorize if we were to use numerical identification only. Domain name registrars assist with registering domain names. As more and more individuals come online, domain names are becoming crucial marketing and business tools. Since most companies are using their trademarks as domain name, certain domain name uses constitute violation or delusion of trademarks
What is the Anticybersquatting Consumer Protection Act?
The AntiCybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. Section 1125(d), went into effect in 1999. It states that “any person who registers a domain name that consists of the name of another person, or a name substantially and confusingly similar thereto without that person’s consent, with the specific intent to profit from such name by selling the domain name for financial gain to that person or any third party, shall be liable in a civil action by such person.”
The court looks to whether the squatter has registered the marks willfully and in bad faith. Under the ACPA, the court may award injunctive relief including the forfeiture or cancellation of the domain name or the transfer to the plaintiff. Under 15 U.S.C. Section 1117(d), a court can award statutory damages ranging from $1,000 to $100,000 per domain name. The ACPA was passed to remedy the shortcomings of applying the FTDA in cyber squatting cases
Aren’t domain names on a first come, first served basis?
Domain names are awarded on a first-come, first-serve basis. The domain names must be registered and used in good faith, or by an individual or corporation that has a legitimate interest in the domain name. If an individual or entity registers the domain name in bad faith or with the intention to extort money from the legitimate trademark holder, then cyber squatting issues arise.
Cyber squatting lawsuits may be costly for the infringer and may result on the court ordering the domain name transferred to the trademark holder. The domain name registrants have the responsibility to make sure that the domain name being registered does not infringe upon or violate someone else’s rights. The registrant is not liable for looking up trademark registrations all over the world, but the domain name holder must be able to demonstrate that they did not have any bad faith in registering the domain name.
Who were the parties and the facts underlying the case of E. & J. Gallo Winery v. Spider Webs Ltd?
“Gallo” is the registered trademark holder of the name “Ernest & Julio Gallo.” Spider Webs Ltd. registered the internet domain name “ernestandjuliogallo.com.” Gallo sent Spider Webs a ‘Cease and Desist’ letter and requesting that they release or transfer the domain name to Gallo. Spider Webs refused to comply. Gallo sued Spider Webs under the Anti-Cyber squatting Consumer Protection Act (”ACPA”), and under federal and Texas anti-dilution, trademark infringement, and unfair competition laws. Shortly after this litigation began, Spider Webs hosted a web site at the domain name that was critical for this litigation and for corporate America.
What is dilution by blurring and tarnishment?
To establish a dilution claim under the Texas Anti-Dilution statute, the trademark holder must demonstrate that it owns a distinctive mark and that there is a likelihood of dilution. This distinctive is shown by secondary meaning in which customers can associate the mark. A likelihood of dilution may be shown under two separate theories: dilution by ‘blurring’ or by ‘tarnishment.’ Dilution by blurring is when there is a diminution in the uniqueness or individuality of the trademark. Tarnishment is an injury that results from another’s use of the mark in a manner that tarnishes or appropriates the goodwill and reputation associated with the plaintiff’s mark.
What did the lower court and the appellate court determine in of E. & J. Gallo Winery v. Spider Webs Ltd?
The court enjoined the defendant, Spider Webs Ltd, from using the domain name ernestandjuliogallo.com, and directed them to transfer the name to plaintiff E. and J. Gallo Winery (”Gallo”), which holds a trademark in the mark “Ernest and Julio Gallo.” The court also held that defendants had violated the Texas Anti-Dilution Act and awarded Gallo statutory damages under the Anticybersquatting Consumer Protection Act (”ACPA”) in the amount of $25,000. The court determined that the defendants had registered the domain name with bad faith intent to profit. The court noted the fact that defendants admitted that they had registered the mark “with a view to holding it as ‘real estate’ and eventually realizing a profit from it, preferably from Gallo itself.” Indeed, defendants had registered approximately 2000 domain names, many of them containing the names of famous companies, and had been offered by defendants for sale. The court considered whether or not the defendants had any intellectual property interest in the name, given that their company was called Spider Webs, and had never used the name for a bona fide offering of any goods or services. In its decision, the court also confirmed the constitutionality of the ACPA. The appellate court upheld the decision of the lower court. The court affirmed the fact that Spider Webs had”bad faith intent to profit” and was liable under the ACPA. The court determined that Spider Webs’ use of “ernestandjuliogallo.com” violated Texas’ anti-dilution statute, which provides for an injunction if the defendant’s actions are likely to injure a business reputation or to dilute a trademark, without a showing that there is competition between the parties or confusion as to the source of goods or services.
This decision was remarkable because this was the first time that the Fifth Circuit had applied the federal Anti-Cyber squatting Consumer Protection Act and the Texas’ anti-dilution law to cyber squatting. The court also affirmed the lower’s court decision on the constitutionality of the ACPA.
