IP: Anyone know a good lawyer -- NSI Domain Name Dispute

[Dave Farber <farber () central cis upenn edu>]

NSI Domain Name Dispute Policy Puts Owners at Significant Risk


New York Law Journal, May 21, 1996, p. 5


=A9Copyright 1995 Oppedahl & Larson.=20
Disclaimer: This is not legal advice. Click for information on the purpose
of this page.


By Carl Oppedahl. Carl Oppedahl is a member of Oppedahl & Larson
(http://www.patents.com/). Maria Eliseeva, a student at State University of
New York at Buffalo Law School,
contributed to the preparation of this article.


LAST JULY, the government contractor responsible for administering domain
names, Network Solutions Inc., announced a new policy, then revised it
slightly last November. At that
time I wrote a column describing the policy and strategies a domain name
owner might follow to avoid losing its domain name, (NYLJ, Nov. 28, 1995)
but then there had been no public
record of proceedings of any disputes under the policy. It seemed that
obtaining a trademark registration might remove that risk of loss.


Since then, much has been learned about the manner in which NSI carries out
its domain name dispute policy. For trademark owners, the policy has proven
to be a dream come true.
For domain name owners the policy presents a great risk of loss of one's
domain name.


Preliminary Relief


A trademark owner (TMO) who has a gripe with, say, the name of a personal
care product or the alphabetic equivalent of a telephone number (e.g.
1-800-BRAND-NAME) faces
several burdens in obtaining preliminary injunctive relief. The TMO's lawyer
will have to perform a reasonable inquiry prior to filing suit, or face
sanctions under Rule 11. The TMO, to
get the preliminary relief, will have to show likelihood of success and
irreparable harm, and depending on the forum may have to come out on top in
a balancing of hardships.


Finally, the TMO will have to post a bond before the preliminary injunction
will issue, to be paid over to the defendant in the event the injunction
turns out to have been improvidently
granted. The entire proceeding is on a public record.


However, in the special case of a domain name that is administered by NSI
(e.g. an Internet domain name ending in a three-letter suffix such as .com
or .org or .net) the TMO gets to
skip all of these requirements. It need merely spend 32 cents to drop a
letter in the mail to NSI citing the trademark registration, and the domain
name will be taken away from the
domain name owner (DNO) as a matter of course.


There is no need for any showing of likelihood of success, and indeed there
is no requirement for any showing of trademark infringement on the part of
the DNO. There is no requirement
that the TMO show irreparable harm, nor even a requirement that any harm be
shown. Finally, it is irrelevant, under NSI's policy, if loss of the domain
name would cause great harm or
even irreparable harm to the DNO. The proceeding is kept secret by NSI.


30-Day Limit


After the TMO's letter is sent to NSI, the DNO will lose its domain name
after as little as 30 days or as long 90 days, but loss of the domain name
is almost a given.


NSI's first step is to send what is called a "30-day letter" to the DNO,
which sets forth "options," all of which but one lead directly to loss of
the domain name. The only way the DNO
can avert (for a while) the loss of the domain name is to produce, within 30
days, a trademark registration certificate identical to the domain name.


Given this aspect of the NSI policy, it is not surprising that in recent
months, lawyers around the world have been scrambling to find a country
where a trademark registration may be
obtained, and where the all-important registration certificate may be
obtained, within 30 days. Exactly one has been found: Tunisia. So among
domain name owners who are not infringing
a trademark, but who nonetheless are concerned about the risk of losing
their domain names, there has been a push to obtain Tunisian trademark
registrations.


For those who prefer to get their trademarks closer to home, the long
pendency is a problem. A domain name owner who, prompted by the NSI Policy
of July 1995, raced to the U.S.
Patent and Trademark Office to apply for a trademark registration, would not
yet have the registration in hand. This leaves many U.S. companies, no
matter how diligently they might
have acted to try to protect their domain names from loss under the NSI
policy, at risk of loss of their domain names.


In any event, the DNO who does not have a trademark registration, and who
fails to obtain one from Tunisia within the 30-day period, simply loses the
domain name. It is that simple.


Bonding


Suppose, however, that the DNO manages to provide a trademark registration
certificate within the 30 days. Is the domain name safe? On the first
reading of the NSI policy, many came
away thinking the answer was "yes", but it turns out the answer is "no."
When the DNO proffers the trademark certificate, NSI requires the DNO to
post a bond, sign an indemnification
agreement, or both. If the DNO fails to comply within 14 days, the domain
name is taken away; the preliminary relief is granted.


The bond requirement highlights the night-and-day difference between
preliminary relief proceedings before NSI, and such proceedings before a
regular court. In court, the party seeking
to disturb the status quo (the trademark owner) has to post the bond. If the
dispute is being decided by NSI, it is the party seeking to defend the
status quo (the domain name owner)
that has to post the bond.


In the cases I have seen, NSI has not stated a dollar amount of a bond to be
posted, but has instead required that the DNO sign an "indemnification
agreement," the terms of which are
harsh: NSI can spend any amount on legal fees and pass the bill on to the
DNO. If the DNO fails to pay, the domain name is cut off.


someone's domain name, the NSI policy is a dream come true. NSI holds its
preliminary injunction hearings in
secret and no public record is kept, but of the several dozen domain name
disputes of which I am aware, not one has reached its conclusion with the
domain name owner in possession
of the name.


The trademark owner always wins. (Several graduate students at George
Washington University Law School have made a compendium of all publicly
known domain name disputes and
have published it on a Web site at
http://www.law.georgetown.edu/lc/internic/domain1.html. For those who advise
clients regarding trademarks or domain names, the site is a must-read.)


DNO's View


Now took at it from the domain name owner's point of view. It bears emphasis
that for a domain name owner to avoid the loss of its domain name, it is not
enough to avoid infringing
anyone's trademarks.


Under the NSI policy, the lack of trademark liability is no defense, and the
preliminary relief (cutting off the domain name) will be granted as a matter
of course even if no trademark
infringement has occurred.


The usual steps that a business might undertake to avoid trademark trouble
(e.g. getting clearance and freedom-to-use opinions from counsel, and
scrupulously avoiding infringing a
trademarks) are of no help if a 30-day letter arrives.=20


And getting a trademark registration buys only an extra 14 days of use of
the domain name, given that for many small and medium-sized businesses it
would be folly to sign a blank-check
indemnification agreement such as that required by NSI.


Counsel who are advising clients who have domain names should familiarize
themselves with the NSI policy and, in particular, should consider whether
they can advise their clients to sign
the indemnification agreement required in the event of a challenge.


Of course, there are many sound reasons why a business should seek trademark
registrations even if they are not much help in defending domain name
challenges. A U.S. trademark
registration, for example, stands as a possible defense in the face of the
as-yet-unexplored territory of the new Federal Trademark Dilution Act. For a
domain name owner, it may also
be wise to obtain the Tunisian trademark registration, if only to deny it to
the jealous competitor who might otherwise obtain it for use in challenging
one's domain name under the NSI
Policy.


For the domain name owner that is not infringing a trademarks, and who has
received a 30-day challenge letter from NSI, only one other choice seems
possible: suing NSI and asking a
judge to enjoin NSI from taking away the domain name. For an example of
this, see http://www.patents.com/nsi.sht.