SOPA Could Shutter Registrars and other Domain Name Industry Intermediaries – And Terminate Their Vital Registrant Services

 

The Internet Commerce Association has just sent a letter to senior members of the House Judiciary Committee  regarding the likely unintended but potentially devastating impact of H.R. 3261 (”SOPA”) as introduced upon ICANN-accredited registrars and other participants in the broad domain name industry, as well as upon the domain registrants who use those services. Registrants, for example, might find it impossible to renew domains due to the extrajudicial termination of payments services sanctioned by the proposal, or to complete domain sales or transfers. Further, many of the domain name industry companies subject to potential payment and advertising service termination under the bill might lack the income to pursue their legal rights, and could well be forced into bankruptcy.

This potential impact arises because, while domain names are subject to trademark law, the Anti-Cybersquatting Consumer Protection Act (ACPA)  as well as ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP) place the responsibility for domain name infringement upon the domain registrant and look at a variety of factors, particularly the actual use of the associated domain, before reaching a determination as to whether infringement exists.

ICA believes that SOPA, as introduced, creates the strong possibility that trademark rights holders will seek to have payment and ad services terminated to registrars and other domain name intermediaries based upon the allegation that they are facilitating the use of domains that constitute “counterfeit marks” in and of themselves, without reference to actual use or available defenses. This potential shifting of “cybersquatting” responsibility from registrants to registrars and other domain name intermediaries, as well as the failure to incorporate the more comprehensive and nuanced analysis of the ACPA and UDRP, appears unjustified and unwise – and could lead to the shutdown of these domain name intermediaries and the associated termination of critical domain-related services to millions of registrants engaged in non-infringing uses of their websites.

The letter also expresses concerns that the introduced legislation needs substantial narrowing and is not required to effectively address infringement on websites subject to U.S. court jurisdiction, and will also have negative effects on cybersecurity and on the availability of venture capital for innovative Internet startups.

At this time the full House Judiciary Committee is tentatively scheduled to “markup” – amend and vote on reporting the bill to the full House of Representatives – on Thursday, December 15^th. U.S.-based domain industry participants who have concerns about any aspect of the legislation should contact their representatives at once, especially if they serve on the Committee.  A complete list of Committee members is available at http://judiciary.house.gov/about/members.html .

The full text of ICA’s letter follows —

 

VIRTUALAW LLC

Philip S. Corwin, Founding Principal
1155 F Street, NW  Suite 1050
Washington, DC 20004
202-559-8597/Direct
202-559-8750/Fax
202-255-6172/Cell
psc@vlaw-dc.com

 

                                                                                                                                December 7, 2011

 

Honorable Lamar Smith

Chairman, House Committee on the Judiciary

2138 Rayburn House Office Building

Washington, DC 20515

 

Dear Chairman Smith:

 

I am writing on behalf of the Internet Commerce Association (ICA; www.internetcommerce.org) in regard to H.R. 3261, the “Stop Online Piracy Act” (SOPA), which was introduced by you on October 26, 2011.

As fully discussed in this letter, we believe that SOPA may have an unintended but nonetheless devastating impact upon domain name registrars and other intermediary companies that participate in the domain name industry, and may also impose excessively burdensome and intrusive registrant monitoring responsibilities that will result in substantial cost increases in the pricing of domain name registrations and renewals as well as many other domain-related services. In addition, the collateral impact upon the domain registrants that our industry serves may be severe in many cases, resulting in extreme disruption of the Internet-based economy.

That potential effect is due to the fact that the legislation deviates from existing trademark law applicable to domains as well as ICANN-sanctioned arbitration procedures by shifting trademark law compliance from the domain registrant to domain name intermediaries, and by suggesting that a domain name may be considered a “counterfeit mark” in isolation from its intended or actual use. We believe that this would be an inappropriate expansion of trademark rights vis-à-vis registrars, registrants and the overall domain
name system (DNS). It also risks the termination of vital and valuable services rendered to tens of thousands of domain registrants, as well as disruption of a thriving secondary marketplace for domain sales, based upon allegations made in regard to a handful of, or even one, domain that is in some way associated with the targeted domain name intermediary. Such allegations can result in the termination of vital payment and advertising services to a domain name intermediary long before any court has an opportunity to scrutinize the alleged facts in the context of relevant law.

We therefore urge the Committee to carefully consider this potential impact and to negate it by adopting clarifying language to the effect that SOPA does not place new liabilities or responsibilities on domain name industry intermediaries, and does not supplement or supplant existing arbitration and litigation remedies for “cybersquatting”.

 

ICA Background

 

ICA is a not-for-profit trade association representing the domain name industry, including domain registrants, domain marketplaces, and direct search providers. Its membership is composed of domain name registrants who invest in domain names (DNs) and develop the associated websites, as well as the companies that serve them. Professional domain name registrants are a major source of the fees that support registrars, registries, and ICANN itself. ICA members own and operate approximately ten percent of all existing Internet domains on behalf of their own domain portfolios as well as those of thousands of customers.

ICA supports SOPA’s goal of reducing online infringement of copyrights and trademarks. We respect the consumer protection aspects of trademark law as well as the legitimate expectations of trademark owners desiring to protect their reputation and goodwill. In particular, we believe that consumers must be protected against the potential dangers posed by counterfeit prescription drugs, auto and aircraft parts, and other counterfeit goods sold over the Internet.

ICA’s Member Code of Conduct (http://internetcommerce.org/member_code_of_conduct) takes a strong position against the use of domains for the trademark violation known as “cybersquatting”, stating:

Protection of Intellectual Property Rights: A registrant shall follow accepted trademark law and respect the brands and trademarks of others. Members will not intentionally and in bad faith register and use a domain name that is identical or confusingly similar to a trademark or service mark.          Registrants shall respond promptly to legitimate disputes relating to alleged infringement of intellectual property rights.

While ICA fully respects trademark rights, ICA also believes that domains are valuable intangible assets and that the interests of trademark owners vis-à-vis domain registrants must be carefully balanced to respect the legitimate rights and expectations of both. SOPA’s in rem jurisdiction provisions, along with those of other enacted Federal laws such as the Anticybersquatting Consumer Protection Act (ACPA; 15 U.S.C. 1125(d)), are consistent with the view that domains embody a quasi-property status that is similar to that of established forms of intellectual property (IP) such as copyrights and trademarks.

 

ICA Position on SOPA

 

ICA must oppose SOPA as introduced.

While a principal and worthy intent of the legislation is to curtail the Internet sale of counterfeit hard goods to U.S. individuals and businesses, scant attention has been given to its potential effect on the hundreds of highly competitive domain registrars accredited by the Internet Corporation for Assigned Names and Numbers (ICANN), as well as upon other intermediary participants in the domain name ecosystem — including “parking” companies that arrange for the display of click-through ads on domains, domain hosting companies, and domain auction and resale websites that facilitate the operation of a thriving secondary free market in domains.

Our concerns are heightened by the fact that SOPA would facilitate the termination of payment and ad services to a website – including the website of an ICANN-accredited registrar or other domain industry intermediary – before any judge had reviewed the factual allegations brought against it much less determined whether such allegations, if true, would constitute a violation of trademark law.

Such a result would not only be devastating to the companies operating through such websites but to their customers, who might find it impossible to renew valuable domains in a timely manner — potentially resulting in the unjustified closure of their own web-based business — or to complete domain transfers or sales that were in process at the time the allegations were levied.

We therefore urge the Judiciary Committee to give careful attention to the potential impact of SOPA upon the domain name industry and to amend the legislation to clarify that the mere fact that an industry participant facilitates the de novo registration of a domain, or its renewal, transfer, or sale, or provides other domain-related services, cannot give rise to an allegation that it is involved with unlawful activities concerning goods or services bearing a “counterfeit mark”.

The remainder of our letter provides further background on the basis of our concerns and also discusses the current remedies available to U.S. trademark owners against “cybersquatting”.

 

< span style="color: rgb(0, 0, 0);">SOPA Provisions Are Unclear in Regard to Whether a Domain Can be Considered a “Counterfeit Mark”

 

Our principal concern with SOPA involves whether a domain name industry intermediary – and all domain name industry intermediaries conduct their operations almost exclusively through the Internet rather than through physical or other contact – could be alleged to be operating an “Internet site dedicated to theft of U.S. property” under Section 103(a)(1). The relevant portion of that definition reads:

(1) DEDICATED TO THEFT OF U.S. PROPERTY- An `Internet site is dedicated to theft of U.S. property’ if–

(A) it is an Internet site, or a portion thereof, that is a U.S.-directed site and is used by users within the United States; and

(B) either–

(i) the U.S.-directed site is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates–

… (III) the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark, as that term is defined in section 34(d) of the Lanham Act or section 2320 of title 18, United States Code; (Emphasis added)

The initial question that arises is whether this definition could be relied upon by a trademark holder for the position that a registrar or other domain intermediary was engaged in offering goods (domains) or (domain-related) services bearing a “counterfeit mark”. It could also be alleged that a website operating under an allegedly infringing domain name was itself engaged in the offering of various copyright or trademark infringing activities.

As noted above, while U.S. law is not settled on the question of whether or not domains constitute a form of intangible property and thereby might be considered “goods”, there is case law precedent for that position – and Congress’ in rem treatment of domains in the ACPA, and as proposed in SOPA, would tend to further that viewpoint.[1] Notwithstanding the answer to that question, there is absolutely no doubt that domain intermediaries are involved in the offering of services. In fact, the Patent and Trademark Office’s own classification of goods and services, undertaken under authority of the Lanham Act, has established such domain-related service classes as:

• Services relating to the analysis, evaluation, creation and brand establishment of trademarks, trade names and domain names
• Parking domain names for others, namely, providing computer servers for facilitation of the storage of domain name addresses
• Computer services, namely, domain forwarding services
• Domain name search services, namely, conducting online computerized searches for the availability of domain names
• Domain name registration services

The question then arises as to whether a domain might be alleged under SOPA to constitute a “counterfeit mark” in and of itself, without reference to the intended or actual use of the associated website.  SOPA references two separate definitions of “counterfeit mark”.

The first, contained in Section 34(d) or the Lanham Act, reads in part:

As used in this subsection the term “counterfeit mark” means–

(i) a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered…

This definition might well be cited for the position that the offering of services that facilitate the registration, renewal, or sale or transfer of a domain that is identical to, or contains within it a trademark registered with the PTO, could be the basis for alleging that a domain industry intermediary is operating an “Internet site dedicated to theft of U.S. property”, even if the operator had no knowledge of such trademark registration. Our concern on this point is heightened further by the fact that SOPA does not look to the actual or intended use of a particular domain, which is solely within the ultimate control of the registrant and not the registrar or other intermediary, and that such use is a key component of both the ACPA as well as the Uniform Domain Name Dispute Resolution Policy (UDRP) established by ICANN to provide a lower cost administrative means for addressing cybersquatting.

The second, alternate definition of “counterfeit mark” referenced in SOPA (18 U.S.C. 2320) reads in relevant part:

the term “counterfeit mark” means –

          (A) a spurious mark –

(i) that is used in connection with trafficking in any goods, services, labels,…documentation,…of any type or nature;

(ii) that is identical with, or substantially indistinguishable from, a mark registered on the pr
incipal register in the United States Patent and Trademark Office and in use, whether or not the defendant knew such mark was so registered;

(iii) that is applied to or used in connection with the goods or services for which the mark is registered with the United States Patent and Trademark Office, or is applied to or consists of a label,…documentation,…of any type or nature that is designed, marketed, or otherwise intended to be used on or in connection with the goods or services for which the mark is registered in the United States Patent and Trademark Office; and

(iv) the use of which is likely to cause confusion, to cause mistake, or to deceive… (Emphasis added)

While the third element of this four-part test does take a domain’s actual or intended use into consideration, the inclusion of “otherwise intended” use could give rise to allegations that the registrar or other intermediary knew or should have known that the domain registrant interacting with it intended to use the domain for trademark-infringing purposes.

In fact, even if a registrar or other domain-industry intermediary knows that a particular domain that is being registered by a registrant is identical to or confusingly similar to a trademark registered with the PTO, that should not enough to establish culpability for trademark infringement. In this regard, we call to your attention that:

• ·         Thousands of trademarks consist in whole or part of dictionary words, but infringement arises only if they are used in conjunction with the service class for which they are registered. While Time and Tide may wait for no man, their use is infringing of trademark only in conjunction with an online news magazine and a website selling laundry detergent, respectively. And while the word United is used in conjunction with trademarks for a prominent airline, moving service, and charity, among others, that does not preclude its incorporation in other trademarks – or domain names.
• ·         Domain names are a form of user-generated content over which registrars and other domain intermediaries have no content control. It is common practice for many registrants, especially Internet startups, to create domain names that are made up, non-dictionary terms that are similar to dictionary words that may constitute trademarks for particular service classes of goods or services, but that similarity is insufficient to establish infringement.
• ·         SOPA is unclear on the issue of whether an action can be brought in regard to a PTO-registered trademark that has been translated into another language or script. There is no way for a registrar or other domain intermediary to know that a particular PTO-trademarked term has been translated into a particular language or script for domain registration purposes. This inability to conduct due diligence for the global Internet is further complicated by the fact that the Internet is now being opened up to International Domain Names (IDNs) that consist entirely of domains in non-ASCII scripts such as Arabic, Chinese, Cyrillic, and Japanese.

We are aware that some parties might view our concerns as overstated and argue that courts will ultimately find that the provision of domain name-related services cannot give rise to a finding that one is enabling or facilitating the sale, distribution or promotion of goods (domains) or (domain-related) services bearing a “counterfeit mark”. ICA would certainly argue against that interpretation of SOPA if it were to be enacted in its current form. However, only a few years ago the State of Kentucky alleged that domains constituted “gambling devices” and seized dozens of domains in a state court action. While that reading of its statute was eventually negated by its courts, it is much less of a stretch to allege that a domain is a “counterfeit mark” for SOPA purposes as domains are clearly encompassed by existing trademark law – indeed, such arguments have already been heard and accepted in U.S. courts.[2] Also, there can be no argument that some (but by no means all) domains which are identical to or confusingly similar to registered trademarks are used in conjunction with the online offering of counterfeit goods and services for which the marks are registered – but, again, such activities are under the ultimate control of the domain registrant, not a registrar or other domain name industry intermediary.

Regardless of how U.S. courts might ultimately rule on the question of whether a domain can be regarded as a “counterfeit mark” for SOPA purposes, it would take years for a clear judicial interpretation to emerge. In the interim, scores of registrars and other domain name intermediaries could be effectively shuttered because SOPA would sanction extrajudicial, de facto injunctions cutting off payment and ad services that would render it impossible for them to serve customers, generate income, and remain in operation.

Our understanding of the procedure contemplated under SOPA is:

• A trademark rights holder claiming harm (but not necessarily direct infringement) stemming from a website “dedicated to infringement” under the bill’s expansive definition would notify the website’s providers of payment and advertising services. Those providers would have to expeditiously terminate their services to the website, but in no event later than five days after serving the website operator with notice that these allegations had been received. While this cessation of services is characterized as “voluntary”, in actuality it is largely compulsory because the service providers face potential judicial sanctions and monetary fines unless they can establish an affirmative defense that compliance is technically infeasible or economically burdensome – while simultaneously being immunized from any damages from the harm ensuing to their customer from the termination of services.
• After being advised of the allegations by his service providers, the website operator has, at most, five days before those services are terminated. He has the right to file a counter-notification maintaining that the website is not in fact dedicated to infringement as defined in the bill – but five days is very little time to retain counsel and file such a countersuit, so in most instances the operator will be funding this legal action after its
  payment and ad services and associated income have been choked off. (Foreign websites, including foreign-domiciled registrars, that direct any activities to the U.S. can also be the target of a SOPA service termination action, and if they choose to file a countersuit in Federal court they automatically consent to full U.S. jurisdiction going forward.)
• Payment and ad providers have no obligation to restore services if a countersuit is filed by the website operator, and are provided with full immunity against any claims for damages resulting from initial or continued compliance so long as they reasonably believe the allegations and such termination is consistent with their terms of service and other contract provisions. But, if they do restore services, the rights holder alleging harm can then file a lawsuit seeking a court order to compel them to again terminate such services.  That would be the first instance where a federal judge is involved — the fact that a domain name industry company’s  income can be shut down absent any judicial review of the alleged facts or statutory interpretation prior to such termination raises serious due process concerns.
• The proposed system is unbalanced in favor of rights holders and against service providers and website operators. Both entities alleging that a website is dedicated to infringement as well as operators of such websites filing a counter-notification would face the possibility of damages only if they had knowingly and materially misrepresented the claim. However, no mechanism is provided for website operators to seek restitution. And, as noted, service providers are immunized against any damages resulting from their cessation of services but face potential monetary sanctions for refusal to comply with a court order, as well as the possibility of a contributory infringement lawsuit filed by the rights holder.

Domain registrants regularly receive cease-and-desist letters from trademark owners or their attorneys falsely or mistakenly alleging that a website is infringing and demanding that it be transferred. Such “trademark bully” letters often display an ignorance of trademark law or an attempt to abuse it to obtain a valuable asset at no cost. Registrants who understand their rights generally reject such demands – and often find that the trademark owner either drops the matter or, if he initiates a UDRP or ACPA action, it subsequently fails (sometimes with the trademark owner being cited for attempted reverse domain name hijacking or abuse of judicial process). However, if SOPA is enacted in its present form, these same trademark owners could direct similar allegations against those who provide critical payment and ad services to registrars and other domain intermediaries. These payment providers do not have in-house knowledge of general trademark law much less the complex treatment of domains under it, and are fully incentivized by the legislation to simply take the allegations at face value, immediately terminate services, and thereby avoid any potential liability. This is an unacceptably dangerous prospect for domain industry intermediaries and their domain registrant customers.

We are hardly alone in raising concerns about the procedural deficiencies of this proposed process for sanctioning the termination of a website’s income before any judge has reviewed the substance of the allegations, much less issued a ruling. For example,  the Trademark Legislation Committee of the American Bar Association’s Section of Intellectual Property Law – hardly an apologist for infringers – adopted a November 7^th Resolution supporting the bill’s introduction in principle but requesting “that certain aspects of the Bill be revised before the Section could support the Bill as currently proposed”. In addition to noting inconsistencies in the standard of proof required of those providing notices of alleged infringement to payment and ad providers, the Resolution raises serious concerns about the legislation’s failure to place the entirety of such allegations under a perjury standard:

Absence of Requirement to State Allegations in Notification Under Penalty of Perjury Opens the Door to Rampant Abuse – § 103(b)(4)(A) – The Notification provisions of this Bill prescribes a list of information that must be provided by a qualifying plaintiff to either a Payment Network Provider or an Internet Advertising Service in order to trigger the cessation of certain services to the Internet site at issue.  Only one of these items requires any statement under oath that they are true:  “A statement . . . , under penalty of perjury, that the signatory is authorized to act on behalf of the holder of the intellectual property right harmed by the activities described in subsection (a)(1).”  Id. § 103(b)(4)(A)(vii).  While the beginning part of this provision requires a qualifying plaintiff to submit a statement “that the information in the notification is accurate,” such statement does not require oath under penalty of perjury, considering the plain language of this clause.

We believe this oversight needs to be corrected, so that qualifying plaintiffs have the burden to allege their claim within a sworn statement.  Omitting this requirement simply opens the door to rampant misuse – particularly by those who may be judgment proof such that an attempt to enforce the monetary damages provisions of § 103(b)(6) would have no deterrent effect.  Given that the private right of action in § 103 permits private rights holders to pursue either foreign or U.S. Internet sites, the risk that a legitimate U.S. business could be harmed by malicious or merely frivolous filings under this provision is real and must be minimized. (Emphasis added)

 

SOPA Provisions are Inconsistent with Current Administrative and Statutory Remedies for “Cybersquatting”

 

Many domain industry intermediaries, including many ICA members, already provide voluntary in-house administrative procedures through which trademark owners who believe that a domain under its ownership or management is infringing may file for expedited review and remedial action. While not required or specifically sanctioned by law, this process is similar to the “notice-and-takedown” procedures undertaken to satisfy the Digital Millennium Copyright Act’s (DMCA) safe harbor provisions. Often a trademark owner’s concerns can be effectively alleviated simply by altering the type of ads being displayed on a particular website so that they do not overlap with its service class and thereby give rise to inadvertent infringement.[3]

Where such remedies
are unavailable, or the trademark holder is dissatisfied with the result, it can utilize either the low-cost administrative remedy provided by ICANN’s UDRP[4] (http://www.icann.org/en/dndr/udrp/policy.htm) or can bring suit under the ACPA.[5]

Both the UDRP and the ACPA focus on the direct responsibility of the registrant, who has ultimate control over the use of a particular website, rather than on trying to establish secondary liability and sanctions for domain name intermediaries.

The UDRP provides notice to all registrants that their use of a domain name may be subject to a mandatory administrative procedure; ICANN-accredited registrars are, in turn, required to abide by the results of any UDRP proceeding under the standard Registrar Accreditation Agreement (RAA) entered into with ICANN.

The UDRP looks beyond the domain name itself and establishes a multi-part test for determination of cybersquatting:

Mandatory Administrative Proceeding.

This Paragraph sets forth the type of disputes for which you are required to submit to a mandatory administrative proceeding. These proceedings will be conducted before one of the administrative-dispute-resolution service providers listed at www.icann.org/en/dndr/udrp/approved-providers.htm (each, a “Provider”).

a. Applicable Disputes. You are required to submit to a mandatory administrative proceeding in the event that a third party (a “complainant”) asserts to the applicable Provider, in compliance with the Rules of Procedure, that

(i) your domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; and

(ii) you have no rights or legitimate interests in respect of the domain name; and

(iii) your domain name has been registered and is being used in bad faith.

In the administrative proceeding, the complainant must prove that each of these three elements are present.

The UDRP then goes on to list a number of factors that may be looked to as evidence of bad faith registration and use, including one that speaks to the trademark concerns addressed by SOPA:

…by using the domain name, you have intentionally attempted to attract, for commercial gain, Internet users to your web site or other on-line location, by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation, or endorsement of your web site or location or of a product or service on your web site or location.

The UDRP also outlines ways in which the domain registrant can establish its rights to and legitimate interests in a domain name, including:

…you are making a legitimate noncommercial or fair use of the domain name, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service mark at issue.

It is critically important that the Judiciary Committee understand that under the UDRP the mere fact that a domain is identical or confusingly similar to a trademark is insufficient to establish it as a “counterfeit” – a much more detailed and nuanced examination must be undertaken.

In this regard, the World Intellectual Property Organization (WIPO), which is the leading ICANN-accredited provider of UDRP arbitration services, has recently published the “WIPO Overview of WIPO Panel Views on Selected UDRP Questions, Second Edition (“WIPO Overview 2.0”; available at http://www.wipo.int/amc/en/domains/search/overview2.0/index.html). A quick review of this compilation of WIPO panelist precedents will clearly establish that the question of whether or not a domain is infringing a trademark is a complex undertaking that goes far beyond the domain name itself.

In fact, the very first issue addressed by this WIPO overview establishes that use of a domain name that is identical or confusingly similar to a trademark is sufficient to establish the trademark owner’s rights – but is insufficient to demonstrate the required element of bad faith registration and use, for which a more thorough inquiry and analysis is required:

Does ownership of a registered trademark to which the domain name is identical or confusingly similar automatically satisfy the requirements under paragraph 4(a)(i) of the UDRP?

Consensus view: If the complainant owns a trademark, then it generally satisfies the threshold requirement of having trademark rights. The location of the trademark, its date of registration (or first use), and the goods and/or services for which it is registered, are all irrelevant for the purpose of finding rights in a trademark under the first element of the UDRP. However, such factors may bear on a panel’s determination whether the respondent has registered and used the domain name in bad faith under the third
element of the UDRP. (Emphasis added)

Similarly, the ACPA looks to a domain registrant’s bad faith intent:

(d) Cyberpiracy prevention

(1)(A) A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person –

(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and

(ii) registers, traffics in, or uses a domain name that –

(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;

(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or 

(III) is a trademark, word, or name protected by reason of section 706 of title 18 or section 220506 of title 36. (Emphasis added)

The statute then goes on to list nonexclusive factors that the court may consider in determining bad faith intent, including “the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services” and “the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name”.

The statute also provides a safe harbor for a registrant who establishes that he had a reasonable belief that the domain name’s use was fair use of or otherwise lawful:

Bad faith intent described under subparagraph (A) shall not  be found in any case in which the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful. (Emphasis added)

The use of a trademarked term in a domain name is not necessarily infringing, even if it is used for the good or service class for which the trademark is registered. For example, in the 2010 decision Toyota Motor Sales U.S.A. v. Tabari, the Ninth Circuit Court of Appeals rules that the registrant of the domains buy-a-lexus.com and buyorleaselexus.com was not guilty of trademark infringement, stating:

“The Tabaris are using the term Lexus to describe their business of brokering Lexus automobiles; when they say Lexus, they mean Lexus. We’ve long held that such use of the trademark is a fair use, namely nominative fair use. And fair use is, by definition, not infringement.”

Yet, under SOPA, Toyota could well have proceeded against any domain name intermediary associated with the two domains in question by alleging that they were enabling or facilitating the distribution of domains constituting “counterfeit marks”  and, absent any adjudication of their fair use for legitimate business purposes, cause its payment and ad services to be terminated.

It is also well-established that the use of domains for “gripe sites” is a fair use protected by the First Amendment. Thus, a registrant is free to register domains with such names as “RIAAexploitsartists” or “Googleisevil” if they are using the websites that incorporate these trademarked names to engage in legitimate criticism and speech. Yet SOPA opens the possibility that a rights holder aggrieved by such use could block payment and ad services to a domain name intermediary involved with such a domain in an attempt to squelch legitimate speech.

While differing from the UDRP, the ACPA also stands for the proposition that a domain name alone, even if identical or confusingly similar to a registered trademark, is insufficient to establish cybersquatting by its registrant.[6] Yet, as described above, SOPA would appear to establish the possibility that a domain name intermediary could have its payment services terminated on the mere allegation by a single disgruntled trademark rights holder that it was facilitating the use of domains constituting “counterfeit marks”. It would take years for the courts to sort out such cases (if the accused domain name intermediaries could even afford to litigate the cases to conclusion after having their payment and ad services terminated) and in the interim the domain sector would be thrown into turmoil, with negative consequences for millions of domain registrants and their associated speech and businesses. This potential damage and disruption is unacceptable. SOPA’s inconsistencies with existing arbitration and statutory remedies for allegedly infringing domain names must be corrected.

 

Conclusion

 

As described above, we believe that SOPA’s trademark provisions could have unintended but nonetheless devastating consequences for domain registrars and a broad array of other intermediary participants in the domain name industry. It is not at all clear that active monitoring of registrant domain use by these intermediaries would be sufficient to alleviate potential liability, but it would be extremely intrusive to our customers and would add considerable new costs that would have to be passed along in the form of significantly higher pricing for registrations, renewals, and other domain-related services. We therefore urge the Committee to carefully consider our views and to eliminate any possibility that SOPA could be utilized against domain name industry intermediaries to terminate their ability to conduct business with their domain registrant customers.

We are also quite concerned about SOPA’s potential impact on domain name registrants. Many of the most successful websites incorporate user-generated content and links to a
variety of copyrighted works as well as advertisements for trademarked goods and services. SOPA appears to expose Internet entrepreneurs to the effective loss of their valuable intangible property and domain-based businesses based upon the allegations of a single aggrieved rights holder and absent adequate due process.

We also share the concerns expressed by many other parties that enactment of SOPA in its present form will make access to capital for Internet start-ups and other cyber-investments much more difficult to secure and thereby hamper innovation and job growth, and will severely undermine efforts to improve cybersecurity through the adoption of DNSSEC and other mechanisms.

Finally, we believe that existing statutory protections for copyright and trademark and more than sufficient to successfully address and deter infringement committed by parties subject to U.S. court jurisdiction, and urge that SOPA be recast as a narrowly focused measure targeting the very worst IP infringers operating from outside the U.S. 

We appreciate the opportunity to comment on this proposed legislation and are open and willing to interacting with Committee staff in regard to resolving the issues we have raised.

 

Sincerely,

Philip S. Corwin

Counsel, Internet Commerce Association

 

Cc:      Honorable John Conyers, Jr.

            Honorable Robert Goodlatte

Honorable Melvin Watt