The following is a guest post by Paul Raynor Keating (paul@law.es). He is a domain industry attorney with offices in Barcelona and London.

The recent decision in autoownersinsurance.com is a perfect example of things going from worse to horrible. While the decision itself contains many substantive flaws, my overwhelming issue is with the lack of due-process rights evidenced by this UDRP.

The complaint was limited to a 3-paragraph argument which asserted a USPTO registration for “Auto-Owners”. The complaint asserted lack of legitimate interest because the domain was used in PPC and included links to insurance (surprise). The complaint did not allege bad faith registration and allegations of bad faith use were limited to the same PPC argument.

Read more after the jump.

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The following is a guest post by Paul Raynor Keating, Esq. Paul is an attorney specializing in the domain space. He has offices in Barcelona and London.

Although the UDRP has functioned for over a decade, the evidence continues to mount in favor of a certification process so all can be assured that panelists have the proper legal knowledge and address claims seriously. Examples abound of panel errors but I have seen few that competes with the likes of Hardware Resources, Inc. v. Yaseen Rehman, Claim Number: FA1201001423229 (HardwareResources.org), a recent decision by NAF-favored panelist Atkinson (see the related study by Zak Muscovitch).

In Hardware Resources, the panelist was so absorbed with the Complainant’s assertions that he failed to examine even the most basic aspects of the claim. Granted the case was a default. But that provides little excuse given the obviousness of the problems. Given Mr. Atkinson’s litigation experience (he authored an article entitled “How to Respond to Trial Objections in 1995), I am somewhat perplexed.

Complainant asserted 4 registered trademarks for “HR Hardware Resources”. A 10-second trip to the USPTO site satisfied my surprise that the PTO would allow registration of such a descriptive trademark. Complainant’s “trademarks” consisted of 2 text marks and 2 design marks. Each of the marks contained the following disclaimer:

“NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE “HARDWARE RESOURCES” APART FROM THE MARK AS SHOWN.”

The significance of the disclaimer is of course that the Complainant had expressly disclaimed the words “Hardware Resources” if they did not appear with “HR”. Perhaps Mr. Atkinson (or more likely the intern at NAF who may have written the decision?) missed that bit.

Notwithstanding the clear disclaimers, the Mr. Atkinson boldly stated:

“The differences between the mark and the disputed domain name include the deletion of the initial letters “H” and “R” of Complainant’s mark, the removal of the space between the terms, and the addition of the generic top-level domain (“gTLD”) “.org.” The Panel holds that removing letters from a mark does not differentiate a disputed domain name from the mark.”

Had Mr. Atkinson (or his associate) taken 20 seconds of time he could easily have discovered that the elimination the “HR” was in fact material for the simple reason that Complainant held no trademark rights in their absence. Actually, come to think if it, the disclaimer would have been printed in the trademark registration certificate that Complainant surely produced.

From this highpoint, the analysis gets only worse. Legitimate interest is found lacking because “using a confusingly similar disputed domain name to host pay-per-click links and pop-up advertisements, whether competing or not, does not constitute a bona fide offering of goods or services or a legitimate noncommercial or fair use according to Policy ¶¶ 4(c)(i) and 4(c)(iii).” Of course no mention is made of the descriptive nature of the asserted trademark or of the domain.

The authority for the panelist’s position? Two NAF decisions, Hewlett-Packard Co. v. Collazo, FA 144628 (Nat. Arb. Forum Mar. 5, 2003) and ALPITOUR S.p.A. v. Albloushi, FA 888651 (Nat. Arb. Forum Feb. 26, 2007). The panelist was obviously not familiar with either of the decisions. Hewlett-Packard addressed the domain HPCanada.com. HP is obviously a famous, non-descriptive mark and there could be no legitimate interest in using the domain to display links for computer equipment. Alpitour dealt with the domain BravoClub.com. The asserted mark was used for a hotel chain and obviously not descriptive; respondent used the domain for PPC for (surprise….) hotels. Exactly how HardwareResources.org presents a factual or legal scenario that is even close to Hewlet-Packard or Aplitour is a mystery.

Going from bad to worse, Mr. Atkinson next finds bad faith because Respondent offered to sell the domain to the Complainant for a whopping $40.00. Surely this is a joke. The opinion is apparently based on an empty allegation by complainant. God forbid there be any reference to evidence. I am always amazed how far panelists will go to “justify” an expansion beyond the actual text of the UDRP when doing so in favor of complainants. I rarely see this when the issue might favor the respondent. This $40-issue is yet another example. While it is possible that $40.00 was more than the out-of-pocket costs, the rule in this regard is tied to the concept of targeting and registering domain names for the purpose of holding them ransom to a known trademark holder. This case fails the mark by any stretch and by even mentioning the issue Mr. Atkinson opens both himself and the UDRP process to ridicule.

Yet again showing his preference for complainants, Mr. Atkinson finds bad faith registration based upon PPC use with websites that “have featured pay-per-click links, some relating to Complainant’s competitors and some being simply generic” and some that “displayed information about Complainant“. Mr. Atkinson thus finds that the respondent must have registered the domain “to attract consumers and create confusion for its own profit“. This is lumped together with the $40-issue to support a finding of bad faith.

It is telling that the only reference to “generic” was in the Complainant’s allegations. The panelist certainly does not mention the word or deal at all with the descriptive nature of the phrase at issue. The use of a descriptive domain for descriptive purposes has repeatedly been found both legitimate and in good faith. It has long been held that the foundational issue is whether the respondent “targeted” the complainant. Here, the Complainant had no trademark in “Hardware Resources”. The domain was used for – guess what – PPC links related to items long considered to be hardware-related. That Complainant may have appeared in any of the PPC links is the fault of the Complainant who voluntarily selected a less-than-stellar trademark.

The most important lesson to be learned here, however, is not that Mr. Atkinson should abstain from being involved in the UDRP process. The important lesson is that decisions such as these destroy the carefully structured balance of the UDRP process as a whole. Respondents are repeatedly told that they can legitimately register and use domain names for descriptive purposes. It instills little confidence in the “system” when panelists such as Mr. Atkinson issue ill-thought out opinions such as this one.

While panelists aren’t earning the salaries of bankers in New York, this case shows that 20 seconds of thought would have produced the correct result. Trademark disclaimers are there for a reason; without the disclaimer the USPTO would not have issued the registration. It defies logic to permit a registration with a disclaimer and then support a trademark in only what has been disclaimed. Complainants must be held responsible for selecting descriptive trademarks. After all, they do it for a reason – a descriptive mark gives them a leg-up on the competition. If a consumer is looking for “hardware”, coming across a sign for “hardware resources” leads to the assumption that one will indeed find hardware items there. However, having selected such descriptive marks they should not be permitted to use them as a sword to prevent others from doing so.

And, $40 for a domain name? I am not sure who was being sillier; the panelist in using this as bad faith or the respondent who thought it was a good idea to make the offer.

Do Facebook and Twitter need a UDRP?

As reported by Tech:Blorge today, German pharmaceutical giant Merck is suing Facebook in a New York Court (reported by WSJ) to demand details as to why Facebook will not allow them to use the “facebook.com/merck” username for their Facebook page.

According to Tech:Blorge, “The German firm came first, while the US firm was created using American assets surrendered by the German firm during the first world war. To minimize confusion and to avoid trademark disputes, the German firm is known as EMD Chemicals in North America, while the US firm is known as Merck Sharp & Dohme outside of North America.”

The German company says it cut a deal with Facebook last year allowing them exclusive rights to the address but has failed to follow through (BBC).

What do you think, do we need UDRP-like rules for social media URLs?

[via Tech:Blorge]

While WIPO recently reported somewhat misleading that “Cybersquatting hit(s) record level“, the National Arbitration Forum reported their numbers today. They also report a higher amount of filed cases for 2010, up to 2,177 from 1,759 in 2009. Only 1,819 of the cases were actually heard by panellists, the remainder were settled beforehand.

When looking at Cybersquatting you need to put the numbers in relation to numbers of registered domain names and only look at those cases where a transfer or cancellation was ordered as a result of the dispute.

[via Press Release]

While the loss of the UDRP over ChiliBeans.com at the end of 2008 was certainly bad news for Frank Schilling’s Name Administration Inc. (NAI), Schilling did not sit still, but fought back. Now, after the suit made its way through the court of the Cayman Islands the result is a significant (but non-disclosed) settlement payment to NAI, acknowledging the generic nature of the domain name.

Both parties have agreed that NAI’s use of the generic Chillibeans.com domain name violated no enforceable rights of Balglow Finance. The settlement of this dispute will see NAI transfer title of this generic name to Balglow Finance to assist it in its online efforts relating to Balglow Finance’s expansion of the “Chilli Beans” brand of eyewear.

“While it’s unfortunate that this dispute necessitated a trip to the Cayman Court, we are most pleased to have resolved the matter in such a mutually beneficial way”, Frank Schilling MD for NAI told DNN. He continued, “NAI’s only interest in the domain name was as a generic term. Now that it’s been settled that NAI’s registration and use of the domain name violated no rights of Balglow Finance we are pleased to facilitate the transfer, as the domain name is beneficial in advancing the business of Balglow Fianance, and while valuable to NAI, has less long term value to our company”".

In a recent decision in the dispute for the domain name Evoq.com, the WIPO panel let the original registrant keep the domain name. However the 3-person panel did not agree how exactly the “bad faith” criteria should be applied. The panel was not clear whether it mattered if a domain name was registered in bad faith when compared to the complainant’s trademark, or if this criteria could be applied against any existing trademark.

From the decision (emphasis added):

Faced with the fact that the Domain Name was registered in 2004, well before the Complainant was formed in 2007, the Complainant argues that the Domain Name was registered in bad faith directed at General Motors, which had announced a concept car called “Evoq” in 1999.

Some members of the Panel are inclined to conclude that, to prove bad faith registration, the Respondent must have had a bad faith intention with respect to the Complainant’s mark. However, the Panel does not need to reach a definitive conclusion on that issue because, even if bad faith directed at third parties could constitute bad faith for the purpose of this requirement, the Panel does not find the existence of any such bad faith on the evidence in this case.

So while the panel clearly thought that the domain owner did not register this domain in order to infringe on the complainant’s brand, at least one panelist thought it may have been infringing on another companies’ brand and thus could potentially constitute a bad faith registration.

In a conversation with DNN, Zak Muscovitch of DNAttorney commented as follows:

Zak Muscovitch at DomainConvergence

The Complainant’s position is absurd. The Complainant argues that the Respondent should be found to have registered the domain name in bad faith, even though the Complainant wasn’t even in existence at the time the domain name was registered, because the disputed domain name was registered after  an unrelated third party; General Motors, acquired trademark rights. The fact that the Complainant was able to adopt EVOQ as a trade name and trademark for its communications and branding business years after General  Motors acquired trademark rights,  in ostensible “good faith”, means that  the Respondent was equally able to register the domain name in good faith notwithstanding General Motor’s limited rights. What is good for the goose is good for the gander. EVOQ is a name that could lend itself to any number of business endeavours. This is a case of attempted domain name hijacking in my opinion, pure and simple.

[Thank you safesys/DBR]

TechDirt covered a unique twist in domain name disputes last week.  Pet Holdings, Inc, the company behind wildly popular websites such as Icanhascheezburger.com, FailBlog.org and Failbooking.com, sued the owner of the domain name FailBook.com because the owner framed PHI’s FailBooking.com site on his FailBook.com domain and put a for sale banner on the top of the page.

Failbook.com owner Cristian Castillo claims that he made a mistake framing the Failbooking.com content but was using it to demonstrate what the domain could be used for while attempting to sell it. Based on statistics sent to us by Castillo the domain seems to be generating around 10,000 unique visitors a day. Castillo is still offering the domain name for sale for $50,000.

As a result of  the domain owners actions of framing the content of Failbooking.com, Pet Holdings is claiming cybersquatting, trademark infringement, copyright infringement, unfair competition, and breach of contract.  Castillo clearly has the better domain and one that predates FailBooking.com by 3 years, a domain that PHI likely covets but is unwilling to pay $50,000 to acquire.

It’s unclear why PHI sued first and didn’t file a UDRP or simply send Castillo a cease and desist to stop his actions.  Posts on TechDirt and the current Failbook site indicate Castillo believes that suing and not sending a cease and desist was over the top.   We wonder why they didn’t just go with a UDRP instead. Based on several recent bad UDRP decisions, DNN believes Castillo might be lucky that PHI didn’t go that route.  Actions like this seem to be readily pinned as bad faith in a UDRP proceeding, so he’d have lost the domain.  As far as we know, PHI still has the option to file a UDRP.

Techdirt makes the argument that PHI shouldn’t be bothered and that in fact Failbooking.com benefited from the traffic from the Failbook.com framing of their site, but others clearly don’t see it the same pointing out that the action could confuse users in to thinking one site was the other.  The legal battle seems to have continued in the comments section with both sides making additional arguments. Arm-chairing techies also seem to be chiming in on the issue. Debate centers over whether Castillo’s actions were or were not harming PHI and if the actions were more of a defrauding on potential buyers of the domain.

The case is ongoing and will be interesting to follow and see where this leads.  PHI has offered a settlement which calls for Castillo to pay PHI around $8,000, but it doesn’t appear that he is going to accept that any time soon.

According to an ICANN announcement published yesterday, all UDRP providers must accept electonic filings by UDRP claimants and respondents as of March 1st, 2010. The original rules had required UDRP providers such as WIPO to provide hard copies of the entire complaint. As of March 1st they will only be required to forward a hard copy notice that a UDRP complaint has been filed.

ICANN | Announcement Regarding Implementation of Modification to Implementation Rules for Uniform Domain Name Dispute Resolution Policy.

Despite being clearly limited in scope, the purpose of the UDRP continues to be ignored by experienced panelists. The result is an ever-expanding environment for domain disputes that exists completely far from any legislative or judicial oversight.

In the recently decide Deutsche Kreditbank AG v. DKB Data Services (USA), Inc. D2009-1084 (WIPO Sept 30, 2009), the respondent registered a three letter domain name (dkb.com) in 2001. NB: DomainTools (my favorite research tool) shows a record creation date in 1996. During this period the domain had been registered with a single registrar with only 2 name-server changes in seven years. Evidently the domain had not been used recently. The panelist, Mr. Swinson, accepted the statement of the complainant’s private investigator’s that the respondent was dissolved after it had merged with another company in 2002. Mr. Swinson concluded that the dissolution, followed by non-use was sufficient to transfer it to the complainant. (Obviously, the panelist did not know that the company was a client of “The Mill House Inn” in Long Island.  It will also be a disappointment to cfsoftware who will no doubt have lost a customer.) Whether the “investigator’s” statement was a sworn declaration was not disclosed in the decision. Notwithstanding the apparent dissolution, however, the respondent did maintain the registration. Is this “cybersquatting”? According to this panelist, it is.

Respondent’s default meant the complainant’s allegations were not challenged. Nevertheless, an unchallenged complaint does not entitle a panelist to issue decisions that are so obviously contrary to the purposes of the UDRP. In case it has escaped anyone, the UDRP Policy was designed to deal only with the limited problem of “cybersquatting”. “Cybersquatting” is the “deliberate, bad faith, abusive registration of domain names in violation of others rights.” (WIPO Final Report, 1999, p29). Numerous decisions confirm that it is NOT designed to resolve trademark disputes, business disputes, contract disputes, employment disputes etc. Such “complicated” matters fall outside the scope. The Policy is not designed to decide who has a “better” right to a domain, but merely whether a registration is abusive according to certain standards.

In Deutsche Kreditbank, the panelist first found a lack of legitimate interest because none of the paragraph 4(c) descriptions of a possible legitimate interest could apply and, of course the Respondent, who was no longer in business, obviously had not provided any evidence of a bona fide use. The most troubling aspect, however, was the panelist’s fabrication of bad faith registration based on the Telstra decision. The panelist concluded that the current use was “passive” thus supporting a presumption of original bad faith intent.

The panelist’s application of Telstra leaves much to be desired. He openly doubted whether the complainant’s mark was well-known, holding that it was reasonable to conclude that the U.S. located respondent did not know about the German bank. Normally, if a respondent is unaware of the complainant, much more is required to show the kind of deliberate intent required for a finding of “cybersquatting”. The panelist then concluded that despite the fact that the respondent once was an existing company, it was not possible to conceive the respondent using the domain in any legitimate way. Finally, the panelist held that although the respondent may not have intentionally concealed its identity, it was not possible to contact him on a given address and respondent did not provide a response. Ultimately, Mr. Swinson justified his illogical decision by pointing out that the respondent “in all likelihood” was dissolved and thus the domain name would be of limited value to its operation as a business. This final point clarifies the inappropriateness of the entire decision.

The fact that the respondent had existed when the time the domain was registered is conclusive evidence of the absence of bad faith registration. The statements by the complainant’s investigator – that the respondent had been dissolved – are an admission that the respondent had in fact existed. The continued registration clearly indicates that a valid property right remained in the hands of the respondent. Dissolution does not cause property rights to evaporate – they transfer to the proper successor in interest. The lack of use here is irrelevant.

This decision typifies the continued expansion of the UDRP well beyond its intended scope. Without judicial oversight it is impossible to effectively challenge such wayward panelists and guide the UDRP process so that it is truly equitable. While Telstra may have been created to deal with a particular difficult factual situation, that decision itself went beyond the bounds of the UDRP. While the rationale of Telstra may be justified by the limited circumstances it was intended to address, the Deutsche Kreditbank decision shows the danger of a system where panelists with little or no judicial sense apply “precedent” to justify a decision to award a domain name to the person with a “better” use.

Decisions like Deutsche Kreditban only encourage trademark owners to try to use the UDRP to obtain domains that they are not in any manner entitled to but desire nevertheless. They are but another reason to encourage the establishment of an appeals process (or at least an ombudsman) or to require a regular peer review of panelists.

Author Paul Keating, ESQ. is a California attorney who is lucky enough to both live and work in Barcelona, Spain.

Karen Bernstein, a New York City domain dispute attorney, is urging domainers to fight back and protect their rights after seeing business owners use the UDRP process to force domain transfers time and time again.

In one of Ms. Bernstein’s recent cases she was able to defend WeDirect Inc.‘s ownership for www.CheapAutoInsurance.com despite the complainant having a federally registered trademark for CHEAP AUTO INSURANCE. The Panel held that WeDirect – and anybody else – is entitled to register a commonly used phrase as long as it is being used in a descriptive fashion. However, while WeDirect was financially able to defend its rights, its request for the panel to acknowledge that the arbitration complaint was brought in bad faith was declined – causing Ms. Bernstein to publicly question the flaws in the UDRP system which make it difficult for domainers with less funds to defend their domains. (more…)