The Uniform Domain Name Dispute Resolution Policy (UDRP) is not an exclusive forum for the resolution of domain names accused of cybersquatting even though registration agreements use the word "mandatory" in the event of third-party claims. The UDRP is mandatory only in the sense that respondents are "obliged by virtue of the [registration] agreement to recognize the validity of a proceeding initiated by a third-party claimant." Storey v. Cello Holdings, LLC., 347 F.3d 370, 381 (2nd Cir. 2003).
However, even if the UDRP is not the exclusive forum, it is "the proceeding of choice for trademark owners alleging abusive registration of domain names and the main instrument for recovering them." Neil A. Brown QC, Foreword to Domain Name Arbitration. It is also the main instrument for defending against overreaching of trademark owners which is the basis for a finding of reverse domain name hijacking.
The nonexclusive feature of the UDRP is found in paragraph 4(k): "[T]he mandatory administrative proceeding requirements . . . shall not prevent either [respondent] or the complainant from submitting the dispute to a court of competent jurisdiction for independent resolution," either before a dispute is taken up by a Panel or after it renders its award. The question is, what is a court of competent jurisdiction?
In the U.S., that's an easy answer. Either party (assuming other conditions are met) may file a complaint in a U.S. district court for a declaratory judgment under the Anticybersquatting Consumer Protection (ACPA). U.S. federal courts have subject matter jurisdiction under the 1999 amendment to the Trademark Act of 1946 (the "Lanham Act"), one section of which denominated "Cyberpiracy Prevention" is found in 15 U.S.C. § 1125(d). Therefore, by statute federal district courts are courts of competent jurisdiction.
But, not all national courts are "competent" as a losing domain name holder learned in Yoyo.email Limited v. Royal Bank of Scotland Group PLC and Others,  EWHC 3509 (Ch). In that case, the Court held that the proper construction of the UDRP clause 4k does not give rise to a separate cause of action in favour of the claimant [aggrieved domain name registrant]." It further noted that,
there is no practical utility in granting declaratory relief in this case because the UDRP scheme has dealt with the issue between the parties, because any declaration made by this Court could not alter the findings of the Panel and the effect of my conclusions on the application for summary judgment on the counterclaim render the claim otiose.
In the course of its decision, the Court cited an earlier decision relating to a dot uk domain name that held that "it is trite law that an agreement cannot confer a jurisdiction on the court which it does not otherwise have. Under the [UDRP] the Registrar will abide by a judicial decision, but the function of this Court is not as a judicial review or appellate body. The claimant must demonstrate some independent right of action justiciable in this court." Patel v. Allos Therapeutics, Inc.,  EWHC 1730 (Ch).
What constitutes actionable cybersquatting and remedies for infringement under U.S. trademark law are detailed in separate sections of the 1999 amendment to the Lanham Act, not all of them placed in the ACPA. Section 1125(d) (the ACPA) defines the proscribed conduct — "bad faith intent to profit from [the targeted] mark; §1114 (2)(D)(iv) and (v) (interweaving with remedies for trademark infringement) define reverse domain name hijacking and injunctive remedies; §1117(a) provides for prevailing party attorney's fees in exceptional cases, and §1117(d) for statutory damages (discretionary with the court up to $100,000).
In the U.S. there have been relatively few challenges from UDRP awards and of those that have been filed fewer have gone the distance to a decision. Several domain name holder claims have been settled without any public disclosure of terms; a couple were settled with trademark owners (defendants) paying to dismiss the actions after prevailing in UDRP proceedings, which is prudent for claims involving trademark terms on the lower end of protection — "Austin Pain" (Complainant had alleged common law rights for the term) and random characters claimed as an acronym "SDT" (Respondent exercised its 4(k) right to commence a federal action), but it does show that parties commencing and defending ACPA actions must carefully weigh the menu of risks before willingly girding themselves for combat.
On the other side of the caption, losing domain name holders as plaintiffs in ACPA actions have been on the wrong end of several large statutory damage judgments, but with common words and phrases, more successful. Foreign, non-appearing defendants sued for reverse domain name hijacking after prevailing in the UDRP under the in rem provisions of the ACPA lose only what they thought they had gained by the UDRP award.
This last point is discussed in Marchex Sales, Inc. V. Tecnologia Bancaria, S.A. 14cv1306 (E.D. Va. Alexandria Division May 21, 2015). The foreign defendant, having prevailed in Tecnologia Bancaria S.A. v. Marchex Sales Inc., D2014-0834 (WIPO September 24, 2014) for two domain names, <banco24 horas.com> and defaulted in the ACPA action. Plaintiff moved for default judgment and damages of $100,000 dollars (the maximum under 15 U.S.C. § 1117(d)).
There is an open question as to whether damages are available to in rem plaintiffs where courts lack personal jurisdiction over foreign defendants. A suggested answer is found in 15 U.S.C. §1125(d)(D)(i): "The remedies in an in rem action under this paragraph shall be limited to a court order for the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark although this may apply solely to trademark-owner initiated lawsuits.
The Court in Marchex Sales based its decision not on the statute but on parties' expectations in agreeing to an arbitration rather than on the statute:
[T]he UDRP requires the parties to submit to arbitration only claims concerning the registration of a domain name and a party to a "mutual jurisdiction" clause like the one required in the UDRP complaint should not be forced to submit to the jurisdiction of a foreign forum for any claims that it has not agreed to submit.
The "mutual jurisdiction" clause (defined in the Policy Rules) is not a submission to personal jurisdiction; rather
the agreement is limited to a challenge of a decision to the transfer of the domain name. It is not a broadly worded agreement whereby the complainant agrees to a specific jurisdiction for the resolution of all claims between the parties to be litigated, or even an agreement that all claims arising out of or related to the UDRP complaint to be litigated in the forum. The language is specific; it involves only a challenge to a panel's decision to transfer a domain name. To find that such a provision would subject a party to anything more than a challenge to the panel's decision would be unfair and would be inconsistent with the due process clause of the U.S. Constitution.
Tecnologia Bancaria owned no U.S. trademark but had persuasively argued to the Majority (over a vigorous Dissent) that its prior commercial use of the terms incorporated in the domain names infringed its rights and were abusive registrations.
Its importance to this discussion is that the decision not to appear can probably be read as an implicit acknowledgment of the risks (and legal expenses) of challenging common phrases. In reported cases challenging awards cancelling or transferring domain names composed of common words and phrases (personal names, geographic locations, acronyms, dictionary words) courts have generally sided with domain name holders (Barcelona.com, Inc. v. Excelentisimo Ayuntamiento De Barcelona, 330 F.3d 617, 626 (4th Cir. 2003), ) but the determination in federal court rests on a number of other factors, not least of which is a switch of use to infringing.
Bulbs 4 East Side, d/b/a Just Bulbs made two unsuccessful attempts in UDRP proceedings to take possession of <justbulbs.com> in 2003 and 2014, Superiority, Inc. d/b/a Just Bulbs v. none/ Motherboards.com, D2003-0491 (WIPO October 9, 2003)) and Bulbs 4 East Side Inc., d/b/a Just Bulbs v. Fundacion Private Whois/ Gregory Ricks, D2013-1779 (WIPO January 13, 2014). Returning to the battlefield as plaintiff in 2014 the Court granted summary judgment in its favor on the ACPA claim and reserved the trademark claims for trial, Bulbs 4 East Side Inc. V. Gregory Ricks, 14-CV-3672 (S.D. Texas Houston Div. August 10, 2016).
This, too, is an important decision for a couple of reasons. First, it reinforces the construction of the UDRP that bad faith use after good faith registration does not support abusive registration, which is the reason the 2014 UDRP proceeding was doomed to fail. However, and this is the second reason for its importance, bad faith use (even with good faith registration) supports plaintiff's claim of cybersquatting under U.S. trademark law.
Although not cited in the Bulbs case, there's a decision on point from the Fourth Circuit, Newport News Holdings Corporation v. Virtual City Vision, Incorporated, d/b/a Van James Bond Tran, 650 F3d 423 (4th Cir. 2011). In that case the trademark owner (complaint dismissed in Newport News, Inc. v. Vcv Internet, AF-0238 [eResolution July 18, 2000]) chose to commence an action under the Lanham Act rather than refile a UDRP proceeding when in 2008 the respondent/defendant "shifted its focus away from the legitimate service of providing information related to the City of Newport News" to competing with the plaintiff for Internet traffic. The Court held a domain name holder "cannot escape the consequences of its deliberate metamorphosis." Plaintiff successfully moved for partial summary judgment on its ACPA claim and obtained in addition to the domain name substantial statutory damages.
Among the factors supporting bad faith under ACPA law in Bulbs for East Side were the registrations of a number of other domain names clearly infringing others' marks, but also the Court found that the "prior WIPO decisions are … relevant to the 'totality of the circumstances,' because they clearly demonstrate that Defendant knew or should have known that his conduct was illegal, but continued to use his website to advertise light bulbs."
In the 2003 proceeding, Respondent rebutted Complainant's prima facie case by showing the resolving website offered flower bulbs, not light bulbs. In the 2014 proceeding, Complainant alleged the resolving website was using the domain name in bad faith by offering light bulbs, thus competitive with the mark owner. The Court found this conclusive against defendant and granted summary judgment on that issue while reserving judgment on the trademark infringement issues. Plaintiff's application for statutory damages for $100,000 has to await the conclusion of the litigation.
Written by Gerald M. Levine, Intellectual Property, Arbitrator/Mediator at Levine Samuel LLP
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