The Internet Domain Name Game

April 23, 2002

Over the past several years, businesses have become increasingly creative in using the Internet and engaging in electronic commerce. Businesses of all sizes, from multi-national corporations to start-ups owned by young entrepreneurs working out of a spare room, use the Internet to sell goods internationally 24 hours a day, seven days a week, design on-line catalogues and brochures providing customers and potential customers with accurate and timely inventory information, and communicate quickly and effectively via e-mail.

Despite the benefits and efficiencies the Internet provides, a variety of issues, including legal issues, must be navigated before a business goes “on-line.” One of the more significant challenges is choosing and obtaining an appropriate “domain name” or “Internet address” (the “www….”). Businesses should choose a domain name that will (i) attract users to the business’ web site, (ii) provide some association between the business’ name and the domain name and (iii) be easy enough to remember so a repeat user could locate the web site a second time without undue effort.

Domain names are registered with a domain name registrar; until recently, the sole registrar in the United States was Network Solutions, Inc. (www.networksolutions.com). Registering is straightforward – a potential registrant goes to the registrar’s website and in the appropriate box types in the name he or she wishes to use. The interactive site informs the user whether the name is available and, if so, will guide the registrant through a series of questions and answers. If the desired domain name is not available, the potential registrant will be informed and then led through a series of prompts that will identify who already registered the name.

Although the registration process is straightforward, choosing an effective domain name is complicated. Marketing principles come into play, as do legal factors unique to the Internet.

Similar names, different companies: Unlike trademark law generally, which permits companies in different industries to hold similar trademarks (such as United Airlines and United Van Lines), a domain name can be registered to only one user. United Airlines’ web address is www.ual.com; United Van Lines’ website is found at www.unitedvanlines.com. The domain name “www.united.com”, which both the airline and the moving company reportedly wished to register, is registered to Net Marketing, Inc., of Quebec, Canada. A company with a name similar to other companies in different industries should determine if its most natural domain name has already been taken. If not and the company wishes to register the name, it should do so as soon as possible. Businesses are well advised to check not only names similar to their legal name, but also ones similar to trade or product names.

Cybersquatters: The Internet’s growth has spawned a new mischievous entrepreneur, the “domain name grabber” or “cybersquatter.” Cybersquatters register hundreds of domain names (the fee is currently $70 for two years) and hold them for lease or purchase for thousands or tens of thousands of dollars. Often the registered domain names simply are generic; on occasion, however, they will be legitimate businesses’ names. Unless certain precautions have been taken, purchasing a name from a domain name grabber can be the least expensive, although most distasteful, option for a company which wishes to develop an Internet presence under the domain name of its choice.

The most effective legal measure that a company can take to avoid “paying ransom” to a domain name grabber is to register its business and tradenames as trademarks with the federal Patent and Trademark Office. Network Solutions, Inc., the principal domain name registrar, will transfer registration of a name from a domain name grabber to a trademark owner if the trademark registration preceded the domain name registration and other domain name dispute resolution steps are followed.

Businesses should register their trademarks for several reasons; effectively preventing cybersquatting is an additional one. Even businesses that are not currently “on-line” might someday develop an Internet presence. Registering trademarks is an easy and cost-effective way to avoid a potential domain name problem.

Derogatory sites: Disgruntled consumers have established web sites which disparage companies, especially large, well-known companies. These sites complain about poor quality goods or services or suggest that potential customers take their business elsewhere. On occasion, a well-known company’s name has been registered by a pornographer seeking to direct Internet traffic to his or her commercial web site.

Disparaging sites often use domain names that mock the target company, e.g., www.targetcompanyisnogood.com. (To preempt this, several companies have themselves registered disparaging variants of their own names.) Using disparaging domain names sometimes can be enjoined when the target company holds a registered trademark which is “famous.” For example, Hasbro, Inc. successfully argued that a pornographer’s use of the domain name www.candyland.com unlawfully tarnished Hasbro’s trademark in its CandyLand children’s game. “Famous” in the trademark context is a legal term of art; however, in part to stop wrongful use of the Internet, the definition has broadened considerably recently.

Internet law will unfold over the next several years. To date, proper registration and use of domain names and related trademark issues have received the most attention. The best way to obtain desired domain names and protect against their wrongful use is to register the names as soon as practicable and register trademarks and tradenames with the Patent and Trademark Office.

For more information, please contact nsiegel@cohenlaw.com.