Federal Court or UDRP Arbitration? How the Forum that Decides a Domain Name Dispute Can Make a Big Difference in the Results
Combatants in cybersquatting or domain name disputes are often not aware of the great degree to which the result they get depends on the judicial body that makes the decision. A clear illustration of how forum choice affects results can be seen in the widely varying deference given by the different judicial bodies to a defendant's assertion of a "laches" defense to a cybersquatting complaint.
A laches defense has a lot in common with a statute of limitations defense. When recognized by a judge, it bars recovery by a plaintiff who has waited an unreasonably long time to bring suit and thus prejudiced the defendant. Judges tend to allow a laches defense when a plaintiff has deliberately delayed bringing its suit until key evidence has been lost, witnesses have died, or the memories of witnesses have grown stale. The defense may also be allowed where a defendant has relied on the plaintiff's long delay in bringing suit to build up a valuable business around a trademark.
To resolve a dispute over a domain name, a U.S. plaintiff may file a suit in Federal court under the Anti-Cybersquatting Consumer Protection Act. See 15 U.S.C. § 1125(d). If the dispute is over a "generic top-level domain name" (e.g., .com, .org, .biz) or certain country top-level domain names, it can file for arbitration using ICANN's dispute resolution system -- called UDRP (for Uniform Dispute Resolution Policy). Under UDRP, a plaintiff (called a "complainant") can choose to have its domain name dispute resolved by one of four ICANN-approved resolution providers. The two providers that are most commonly used by U.S. firms are the National Arbitration Forum (NAF), a private ADR firm, headquartered in Minneapolis, and the World Intellectual Property Organization (WIPO), a U.N. agency. (Fn1)
Cybersquatting cases area subspecies of trademark infringement cases, so in theory laches should be permitted as a defense. In practice, the availability of laches varies greatly, depending on which of these three tribunals -- Federal court, NAF or WIPO -- decides the case.
Federal courts
The greatest deference to the laches defense is given in Federal courts. At least five federal courts have found that this defense can be applied to cybersquatting claims. These include the 6th Circuit, and District Courts in the 1st, 7th and 11th Circuits. (Fn2)
For example, in September 2008, in Southern Grouts & Mortars, Inc. v. 3M Co. (S.D. Fla., No. 0:07-cv-61388), a Florida District Court dismissed a cybersquatting case concerning the domain name diamondbrite.com on laches grounds. The Court found that the plaintiff knew that 3M owned the diamondbrite.com domain and that the domain was inactive as early as July 2002, but neglected to bring suit for five years. During this intervening period, the plaintiff made little attempt to assert its claim to the name, only sending two letters and one email to 3M regarding the domain. The delay had also prejudiced 3M. Many of 3M's employees who had information regarding its acquisition and use of the diamondbrite.com name had left its employ, and relevant documents have been destroyed or lost.
NAF
Decisions by NAF Panelists give less deference to laches.
UDRP proceedings are governed by ICANN's Uniform Domain Name Resolution Policy -- often referred to as the "Policy." The Policy gives three elements that a complainant must prove in order to get an offending domain name held by a respondent cancelled, transferred or changed. These include that: (i) the domain name is identical or confusingly similar to a mark held by the complainant, (ii) that the respondent has no rights in the domain name, and (iii) that the domain name has been registered and is being used in bad faith. Policy at 4.a
The Policy does not specifically provide a respondent with any affirmative defenses, such as laches, acquiescence, or unclean hands. Because these defenses are not provided for in the Policy language, some NAF Panelists have held that they are not available in UDRP actions at all. For example in Tropicana Products, Inc. v. Dunne, FA0811001235498 (NAF Jan. 13, 2009), that Panelist refused to apply the laches defense based on the simple reason that "[e]quitable defenses such as laches or limitations do not feature in the Policy."
On the other hand, many NAF Panelists, while giving lip service to the official view that laches is not technically available as a defense, have nevertheless relied on a complainant's delay in commencing a UDRP proceeding as evidence that the complainant did not truly believe that the domain name was registered in bad faith. See, e.g., Shoe Land Group LLC v. Development, Services c/o Telepathy, Inc., FA0904001255365 (NAF June 9, 2009); Everglades Direct, Inc. v. HR Direct LLC, FA0908001278110 (NAF Sept. 23, 2009). The delay technically constitutes an admission by that complainant that the respondent did not act in bad faith when it registered the domain name. However, in effect it results in a recognition of laches by NAF panelists.
WIPO
Recent WIPO decisions give the least deference to the laches doctrine -- although there are exceptions.
Many WIPO Panelists make dismissive statements, such as: "[T]he equitable defense of laches does not properly apply to this Policy proceeding." See, e.g., GoDaddy.com, Inc. v. Domainsnext.com, D2009-0073 (WIPO March 23, 2009). According to many Panelists, this is because "the basic objective of the Policy" is to "provide[e] an expeditious and relatively inexpensive procedure for the determination of disputes relating to egregious misuse of domain names" and "[t]he availability of defences such as laches could result in significant delay and expense." E.W. Scripps Co. v. Sinologic Industries, D1003-0447 (WIPO July 1, 2003). According to a number of WIPO Panelists, if a respondent desires to use a laches defense, it should bring the case to a court. Id.
Other WIPO Panelists recognize that ICANN rules require a panel to "decide a complaint on the basis of . . . law that it deems applicable." ICANN, Rules of Uniform Domain Name Dispute Resolution Policy 15a. However, many then erroneously conclude that under U.S. law, a laches defense only bars the recovery of damages prior to the filing of a lawsuit, but not injunctive relief -- such as ordering the respondent to transfer the domain name to the complainant. See, e.g., GoDaddy.com, Inc. v. Domainsnext.com, D2009-0073; The Jennifer Lopez Foundation v. Tieman, D2009-0057 (WIPO March 24, 2009).
These Panelists are simply wrong on U.S. trademark law. To the contrary, as stated in the Restatement, Third, Unfair Competition, § 30, comment e, "There is no rule that precludes the recognition of laches as a defense to injunctive relief" in a trademark case." The exception is where there a "strong case" of likely consumer confusion has been proven. McCarthy on Trademarks and Unfair Competition at § 31:6. Indeed, the leading treatise on trademark law lists dozens of cases in which injunctions were denied based on the laches defense. Id. at § 31:7.
However, at least one recent WIPO case found that the laches doctrine should be considered in a cybersquatting case. The case was National Football League v. Bachand, D2009-0121 (WIPO April 20, 2009), in which the NFL sought enjoin Bachand's use of 26 domain names that included the term "superbowl." Bachand used these domains to drive traffic to his website at www.superbowl-rooms.com at which he offered hotel room, party and ticket packages for NFL Super Bowls. In 2005, the NFL wrote a letter to Bachand complaining about his use of the names. However, after sending this letter, the NFL did nothing for over three years and four Super Bowls. Finally, in 2009, the NFL brought its UDRP action against Bachand.
After concluding that the NFL had established each of the elements required under the ICANN Policy for a cybersquatting claim, the WIPO Panelist turned to Bachand's laches defense. The Panelist stated that "[a]lthough generally held not to apply under UDRP proceedings, . . . the doctrine of laches may be recognized in the Policy in appropriate limited circumstances." Id. at 13. He then noted that despite being aware of Bachand's use of the term Super Bowl in his domain names, the NFL had let more than three years pass without taking action. He further noted that in the meantime Bachand had spent significant amounts of money to develop and maintain the domain names, corresponding website and business plan. As a result, he found that "Respondent may have a colorable argument that it suffered prejudice as a result of Complainant's dilitoriness" and "[t]hat is the essence of a laches claim . . ." Id. at 13.
Despite these findings, the Panelist ultimately concluded that Bachand was not entitled to a laches defense, because he had acted with unclear hands. He found that Bachand had unclean hands because after being notified in 2005 of the NFL's objections to his user of the Super Bowl mark, Bachand proceeded to register several additional domain names that used this term. Having found against Bachand on his laches defense, the Panelist then ordered Bachand to transfer the domain names to the NFL.
What this means to you
It is important for a prospective litigant to understand the institutional biases of the available forums in strategizing about the best place to file its dispute, in interpreting the results, and in deciding whether or not to challenge a decision. If you are interested in exploring your options in a domain name dispute, I welcome you to contact me.
Notes
Fn1 Both NAF and WIPO publish decisions reached by the "Panelist" in a cybersquatting suit. Prior NAF and WIPO decisions are cited as persuasive authority by both bodies. This has in effect created a new form of case law.
Fn2 See Southern Grouts & Mortars, Inc., S.D. Fla, No 0:07-cv-61388 (Sept. 19, 2008), Flentye v. Kathrein, 485 F.Supp.2d 903, 916 (N.D. Ill. 2007), Ford Motor Co. v. Catalanotte, 342 F.3d 543, 550 (6th Cir. 2003), Omega S.A. v. Omega Eng'g, Inc., 228 F.Supp.2d 112, 140041 (D. Conn. 2002).
