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Domain registrar not liable for cybersquatting, US court rules

A domain name registrar was not liable for a form of trade mark infringement when a system it operates was used to redirect visitors from allegedly 'cybersquatting' web domain names to a pornographic website, a US court has ruled.10 Jan 2012

Petronas, the national oil company of Malaysia, had argued that Go Daddy was in breach of US trade mark law because it "used" the two domains to re-route visitors to the allegedly infringing sites to the pornography website through its servers in bad faith with the intent of profiting from its actions.

A district court in California dismissed Petronas' claims that Go Daddy was liable for cybersquatting. It also dismissed claims that Go Daddy was liable for contributory cybersquatting and instead granted Go Daddy the right to argue that Petronas' own trade mark for the mark 'Petronas and Design' be invalidated.

Cybersquatting occurs when businesses buy website domain names with the purpose of selling them on to trade mark owners for a profit.

In 2010 Petronas had obtained a court order requiring the websites www.petronastower.net and www.petronastowers.net to be transferred into its name. The two domains were registered with Go Daddy by Heiko Schoenekess who used Go Daddy's automated website forwarding system to redirect visitors to the domains to a website featuring pornography. Petronas itself operates several websites encompassing the word 'petronas' in the domain name, including www.petronastwintowers.com.my, according to the court ruling.

Under part of the US Lanham Act – the Anticybersquatting Consumer Protection Act (ACPA) – damages of up to $100,000 can be awarded against anyone who registered or "used" domains "identical to, confusingly similar or dilutive of" a trade mark in bad faith and with intent to profit.

The court ruled that Go Daddy had not used the domains and was therefore not liable for cybersquatting under the terms of ACPA.

"The forwarding of the disputed domains does not amount to 'use' of the domain names," the district court in the northern district of California ruled.

"Domain name forwarding is a standard service that has been provided by Go Daddy and virtually all registrars for more than a decade. Go Daddy provides forwarding services for millions of domain names under its management, and has provided such service in combination with its other domain name routing services since 2002 or before. Go Daddy does not charge customers for domain forwarding, but rather offers this routing option as part of its registration services. Go Daddy’s registration customers, using Go Daddy’s dashboard, can configure the name server to forward a domain name to an existing website. This automated process is accomplished without any interaction between the registrant and Go Daddy personnel," the ruling said.

"The evidence shows that Go Daddy simply provided the infrastructure to the registrant to route the disputed domains to the website of his choosing. Only the domain name registrant or the registrant’s authorised licensee can 'use' a domain name for purposes of the ACPA," the court ruled.

The court said that there was no evidence that Go Daddy had entered into a licence agreement to authorise it to 'use' the cybersquatting domains.

"GoDaddy's contractual right to terminate service does not equate to a license to use the registrant’s domain names, and the fact that the registrant forwards the domain name through Go Daddy’s systems does not create a reciprocal license for Go Daddy to use the registrant’s domain names," the court said.

Because Go Daddy's forwarding system was free the company did not profit from allowing the registrant of the cybersquatting domains to use the technology to redirect visitors to the pornography site, the court ruled.  It also rejected Petronas' argument that Go Daddy had sought to profit from the activity by "establishing immunity" from liability for infringement under US safe harbor rules.

"There is no evidence that Go Daddy had a bad faith intent to profit from Petronas’ mark," the court ruled.

"The fact that the forwarding service was based on customer demand does not show intent to profit specifically from Petronas’ mark, and, in addition, is based on a flawed premise – that Go Daddy profited from customers using its forwarding service. As Go Daddy did not charge for the forwarding service, it cannot be said to have profited from it. Moreover, Petronas' argument that Go Daddy sought to profit by establishing immunity from liability is entirely untenable," it ruled.

The court also rejected Petronas' claims that Go Daddy was liable for contributory cybersquatting because of established US case law, because the registrar had not exercised "direct control and monitoring over the alleged cybersquatting" and because Petronas had not established that Schoenekess had been guilty of cybersquatting.  

Case law in the US has shown that in order to qualify as a contributory infringer parties must be shown to have had knowledge that infringement was taking place and to have materially assisted in that infringement. Direct infringement must also have been established.

"A claim for contributory cybersquatting does not exist under the circumstances of this case, as a company providing an internet routing service does not exercise the type of direct control and monitoring that would justify recognition of a contributory infringement claim," the court ruled.

"Based on the evidence presented, the court is satisfied that the service at issue here – domain name forwarding – is a form of routing. Permitting a contributory cybersquatting claim based on a forwarding service cannot be squared with the Ninth Circuit’s rejection of such a claim based on the same conduct in the context of traditional trade mark infringement (as opposed to cybersquatting)," the court said. "Further, Go Daddy did not exercise 'direct control and monitoring' over the alleged cybersquatting. Domain name registration and routing are services routinely provided by registrars, and cannot be considered the type of direct control over the use of the mark that is required for the application of secondary liability principles."

"There is no evidence that Go Daddy had any control over the registrant when he registered the disputed domains, or when he used the forwarding service," it said. "What is most significant, however, is that Petronas’ evidence is inadequate to establish cybersquatting by the non-party registrant. In particular, there is no evidence that can establish the registrant’s 'bad faith intent to profit' from Petronas’ mark."

"Arguably, the fact that the registrant arranged to have internet traffic directed from the disputed domains to a pornographic website is sufficient to show some variety of bad faith. However, the record is silent as to the intent of the registrant – that is, there is absolutely no evidence of bad faith intent to profit from Petronas’ mark," it said.

"It is not enough to say that one can 'infer' a bad faith intent to profit, even were such an inference sufficient to establish that element of the claim," said the ruling. "One could just as easily infer a bad faith intent to create mischief, or a bad faith intent to annoy the owner of the Petronas mark. Because Petronas has failed to present evidence sufficient to support all the statutory elements of a claim of direct cybersquatting, it cannot show that Go Daddy engaged in contributory cybersquatting."

The court also rejected Petronas' claims that Go Daddy had been in breach of California state competition laws.

It said that Go Daddy has the right to present a future case that could see Petronas' trade mark for 'Petronas and Design' invalidated. Under the Lanham Act federal courts can invalidate registered trade marks if they have been abandoned or used outwith the scope in which they were registered.

"It appears that Go Daddy has standing to seek cancellation because Petronas is using the registration as a sword against Go Daddy, in that this Lanham Act lawsuit is premised on the registered mark," the court said.

Both parties will be able to argue whether Petronas has abandoned its trade mark or whether it has used it outwith the scope it was registered under at a hearing on 12 January, the court said.

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