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[bc-gnso] FW: New Webpost on 9th Circuit ACPA Decision

  • To: "bc-gnso@xxxxxxxxx" <bc-gnso@xxxxxxxxx>
  • Subject: [bc-gnso] FW: New Webpost on 9th Circuit ACPA Decision
  • From: Phil Corwin <psc@xxxxxxxxxxx>
  • Date: Sat, 7 Dec 2013 19:15:40 +0000

I thought that BC members would find this of interest...


Ninth Circuit says Anticybersquatting Act was Separated at Birth from Lanham Act

On December 4th the Ninth Circuit Court of Appeals issued a decision that will 
reverberate for years to come in cybersquatting cases brought under the 
Anticybersquatting Consumer Protection Act (ACPA). While the Court's 
declaration that "the ACPA does not provide a cause of action for contributory 
cybersquatting" is important in itself, its dicta regarding the history of the 
ACPA - finding that "Congress did not incorporate the common law of trademark, 
including contributory infringement, into the ACPA" - will likely have broad 
future repercussions.
The opinion was rendered in the case of Petronas v. Godaddy.com, Inc. 
Petronas, a Malaysian oil and gas company, alleged that Godaddy.com engaged in 
contributory cybersquatting when a registrant used its domain name forwarding 
service to direct the domains petronastower.net and petronastowers.net to adult 
content websites hosted by a third party.
According to the Court's opinion:
In late 2009, a Petronas subsidiary responsible for ferreting out potential 
trademark infringement contacted GoDaddy and requested that it "take action 
against the website associated with the 'petronastower.net' domain name." 
Officials from the Malaysian and U.S. governments also contacted GoDaddy 
regarding the domain name. GoDaddy investigated the issue, but took no action 
with respect to the alleged cybersquatting because (1) it did not host the 
site; and (2) it was prevented by the Uniform Domain Name Dispute Resolution 
Policy ("UDRP") from participating in trademark disputes regarding domain name 
Petronas then sued Godaddy.com in the U.S. District Court for the Northern 
District of California, which made inquiry of the technical aspects of 
GoDaddy's domain forwarding and routing services -- and then granted summary 
judgment in favor of Go Daddy.
The Court's discussion of the distinct differences between the Lanham Act (the 
U.S. trademark law) and the ACPA has import far beyond the facts of the case 
before it:
The Lanham Act, 15 U.S.C. § 1051 et seq., passed in 1946, codified the then 
existing common law of trademarks, which in turn was based on the tort of 
unfair competition...Due primarily to the common law origins of trademark 
infringement, courts have concluded that the Lanham Act created a cause of 
action for secondary liability...
In 1999, Congress passed the ACPA, which amended the Lanham Act by adding two 
new causes of action aimed at cybersquatting...Congress also created an in rem 
action to facilitate recovery of domain names by their rightful owners... 
Petronas contends that the ACPA also provides a cause of action for 
contributory cybersquatting because Congress intended to incorporate common law 
principles of secondary liability into the Act by legislating against the 
backdrop of the common law of trademark infringement, and by placing the ACPA 
within the Lanham Act. We disagree.
...We hold that the ACPA does not include a cause of action for contributory 
cybersquatting because: (1) the text of the Act does not apply to the conduct 
that would be actionable under such a theory; (2) Congress did not intend to 
implicitly include common law doctrines applicable to trademark infringement 
because the ACPA created a new cause of action that is distinct from 
traditional trademark remedies; and (3) allowing suits against registrars for 
contributory cybersquatting would not advance the goals of the statute. 
(Emphasis added)
In further discussing its key finding of law, the Court states:
Petronas argues that by legislating against this background, and by placing the 
ACPA within the Lanham Act, Congress intended to include within the ACPA a 
cause of action for contributory cybersquatting...The circumstances surrounding 
the enactment of the ACPA, however, do not support the inference that Congress 
intended to incorporate theories of secondary liability into that Act. 
Accordingly, we conclude that the ACPA did not incorporate principles of 
secondary liability.
Prior to the enactment of the Lanham Act, the Supreme Court incorporated a 
common law theory of contributory liability into the law of trademarks and 
unfair competition... The Lanham Act then codified the existing common law of 
trademarks...("[T]he Lanham Act's primary, express purpose was to codify the 
existing common law of trademarks and not to create any new trademark 
rights."). In light of the Lanham Act's codification of common law principles, 
including contributory liability, the Supreme Court concluded that a plaintiff 
could recover under the Act for contributory infringement of a trademark.
By contrast, the ACPA did not result from the codification of common law, much 
less common law that included a cause of action for secondary liability. 
Rather, the ACPA created a new statutory cause of action to address a new 
problem: cybersquatting...
Consistent with their distinct purposes, claims under traditional trademark law 
and the ACPA have distinct elements. Traditional trademark law only restricts 
the commercial use of another's protected mark in order to avoid consumer 
confusion as to the source of a particular product. Cybersquatting liability, 
however, does not require commercial use of a domain name involving a protected 
mark. Moreover, to succeed on a claim for cybersquatting, a mark holder must 
prove "bad faith" under a statutory nine factor test. 15 U.S.C. § 1125(d) (1) 
(B). No analogous requirement exists for traditional trademark claims.
These differences highlight the fact that the rights created in the ACPA are 
distinct from the rights contained in other sections of the Lanham Act, and do 
not stem from the common law of trademarks. Accordingly we decline to infer the 
existence of secondary liability into the ACPA based on common law principles. 
(Emphasis added)
The Court also rejected prior District Court rulings that have allowed ACPA 
claims for contributory liability when "exceptional circumstances" were present:
Congress enacted the ACPA in 1999 in order to "protect consumers . . . and to 
provide clarity in the law for trademark owners by prohibiting the bad-faith 
and abusive registration of distinctive marks . . . ." To this end, the statute 
imposes a number of limitations on who can be liable for cybersquatting and in 
what circumstances, including a bad faith requirement, and a narrow definition 
of who "uses" a domain name. Imposing secondary liability on domain name 
registrars would expand the scope of the Act and seriously undermine both these 
limiting provisions.
Recognizing this risk, some of the district courts that have recognized a cause 
of action for contributory liability have required that a plaintiff show 
"exceptional circumstances" in order to hold a registrar liable under that 
theory. This "exceptional circumstances" test has no basis in either the Act, 
or in the common law of trademark. Rather than attempt to cabin a judicially 
discovered cause of action for contributory cybersquatting with a limitation 
created out of whole cloth, we simply decline to recognize such a cause of 
action in the first place.
Limiting claims under the Act to direct liability is also consistent with the 
ACPA's goal of ensuring that trademark holders can acquire and use domain names 
without having to pay ransom money to cybersquatters. Because direct 
cybersquatting requires subjective bad faith, focusing on direct liability also 
spares neutral third party service providers from having to divine the intent 
of their customers. In order for a service provider like GoDaddy, with clients 
holding over 50 million domain names, to avoid contributory liability, it would 
presumably have to analyze its customer's subjective intent with respect to 
each domain name, using the nine factor statutory test. 15 U.S.C. § 
1125(d)(1)(B). Despite that nearly impossible task, service providers would 
then be forced to inject themselves into trademark and domain name disputes.
Moreover, imposing contributory liability for cybersquatting would incentivize 
"false positives," in which the lawful use of a domain name is restricted by a 
risk-averse third party service provider that receives a seemingly valid 
take-down request from a trademark holder. Entities might then be able to 
assert effective control over domain names even when they could not 
successfully bring an ACPA action in court.
While firmly rejecting any grounds for asserting contributory liability under 
the ACPA, the Court's opinion does note that "trademark holders may still bring 
claims for traditional direct or contributory trademark infringement that 
arises from cybersquatting activities."
Our takeaway from the opinion is that, at least within the Ninth Circuit of the 
U.S., domain registrars and other providers of services related to domain names 
cannot be sued for contributory liability in cases brought under the ACPA, even 
when "exceptional circumstances" might exist. While domain registrants can of 
course still be held liable for direct violations of the ACPA, the Court's 
holding that ACPA rights are separate from and did not incorporate the common 
law of trademarks may well become an important factor in deciding some future 
ACPA cases.
The Ninth Circuit is often out of step with the other U.S. Courts of Appeals. 
So there is a possibility that another Circuit will reach the opposite 
conclusion regarding ACPA contributory liability, setting up a conflict that 
can only be resolved by the Supreme Court.
There is also a possibility that representatives of trademark holders may seek 
a legislative resolution by seeking to amend the ACPA to create an explicit 
cause of action for contributory liability. CADNA has already stated that this 
is one of its primary goals for amending the ACPA - as we noted in September 
Their goal is to enact amendments to the U.S. Anti-Cybersquatting Consumer 
Protection Act (ACPA) that would expand the law's coverage beyond domain 
registrants by creating secondary liability for domain system intermediaries 
like registries and registrars, increase statutory damages penalties for all 
targets, and establish a 'loser pays' regime that favors deep-pocket corporate 
litigants. (Emphasis added)
However, no bill has yet been introduced to amend the ACPA in this manner. And 
if one is then we'd expect it to set up a battle royal between domain 
marketplace participants - including major registrars such as GoDaddy -- and 
proponents of ACPA contributory liability.
This Petronas decision has broad implications for future ACPA litigation as 
well as for potential legislative responses. We'll be keeping close watch as 
affected parties digest and react to it.

Philip S. Corwin, Founding Principal
Virtualaw LLC
1155 F Street, NW
Suite 1050
Washington, DC 20004

Twitter: @VlawDC

"Luck is the residue of design" -- Branch Rickey

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