GoDaddy Hit with another Trademark Infringement Suit – A Hint of Things to Come?

Number one domain name registrar GoDaddy has been hit by another trademark infringement lawsuit.

Earlier this month GoDaddy failed in its efforts to recuse U.S. District Court Judge Audrey Collins from presiding over a case brought against it by the Academy of Motion Picture Arts and Sciences.[i] The litigation alleges that GoDaddy committed cybersquatting trademark infringement when it “parked” more than 100 AMPAS-related domains, including oscarlist.com, academyawardz.com and academyawardsinc.com.

The Court had previously ruled that GoDaddy did not qualify for the safe harbor provisions of the Anticybersquatting Consumer Protection Act (ACPA) because its activities ventured beyond acting in a mere registration or maintenance capacity when it affirmatively placed the domains in a program meant to generate revenue to itself. It now looks like the case is heading for trial if it isn’t settled first.

Now we’ve just learned that Principal Financial Services, Inc. and
Principal Global Investors, LLC filed suit[ii] against GoDaddy for trademark infringement in the U.S. District Court for Northern Illinois on February 20^th.  We don’t yet have further details — and we have no view on the merits of either case.

As we recently reported[iii], there is an ongoing dispute as to whether contributory trademark infringement even exists under the ACPA. That case also involved GoDaddy but arose from the use of its domain name forwarding service to direct allegedly infringing domains to adult content websites hosted by a third party. The Oscar (and likely the Principal) lawsuits appear to involve charges of direct trademark infringement.

This litigation leads us to speculate that major brands may react to any significant cybersquatting in new gTLDs by going after wholesale middlemen who offer programs to generate parking or other income from domains that are identical or confusingly similar to trademarks, and might also target auction providers and secondary market services that facilitate their sale.

The new gTLD program created two new rights protection mechanisms (RPMs). The first, Universal Rapid Suspension (URS) seems to be working as intended to provide a narrow supplement to the traditional UDRP. IBM brought the first successful URS actions against new gTLDs when it got IBM.ventures and IBM.guru suspended six days after filing. But each URS filings costs $500 plus attorney fees, and brands could quickly tire of playing whack-a-mole if there is significant cybersquatting at hundreds of new gTLDs.

The other RPM, the Trademark Clearinghouse (TMCH), does not appear to have attracted anywhere near the expected number of registrations. That prompted Deloitte, which operates the TMCH, to unilaterally decide that the complainant services side of the Trademark Claims Service will operate for an indefinite period, rather than the required 90-day period set by the consensus agreement of ICANN stakeholders – a move that we criticized[iv] back in December.

But that apparently has still has not boosted TMCH registrations sufficiently, so now Deloitte and its spokespersons have launched a scare campaign to try to gin up registrations, warning, “our research shows that some of the biggest American brand names are at risk of intellectual property infringement online as the new TLDs are rolled out, with many unknown entities eager to capitalize on the traffic and illegitimate opportunities a branded website will generate. This potentially compromises the reputation of each brand targeted”[v].The reaction from the brand side was basically “we told you so”.

We have also read that some parties have succeeded in registering generic, trademark-ineligible terms in the TMCH; and that the Chair of ICANN’s Security and Stability Advisory Committee (SSAC) recently raised technical concerns about a “broken TMCH”. None of that will increase brands’ confidence in it.

The problem for Deloitte and the TMCH is that, unless a major brand intends to make use of TMCH registrations as a means to gain the right to register its trademarks in dozens of new gTLDs during higher pricing “sunrise” periods, the TMCH offers little else to attract them enough to invest $150 per mark in annual registrations. Existing domain monitoring services offer a broader warning of infringing websites than the TMCH, which only generates notices of registrations of identical matches to its database. And apparently lots of big brands have decided that they have no intention of developing large portfolios of defensively registered domains in new gTLDs but will rely instead on monitoring and legal actions.

Many large brands may indeed be concluding that the very scale of the new gTLD program make the traditional recourse of defensive registrations and actions against individual domain registrants impractical. If that’s the case, we may well see many more lawsuits directed at the wholesale level in an effort to stop the monetization or resale of infringing domains – and to incentivize the middlemen to more proactively review the domains they are servicing. We’ll be monitoring these developments closely, especially to see if some overbroad lawsuits have the potential to impose unreasonable standards and thereby harm legitimate domain marketplace services.