a dispute resolution mechanism for cybersquatting

A Dispute Resolution Mechanism for Cybersquatting

Yun ZHAO*

I. INTRODUCTION

One of the most important technological developments of the twentieth century has been the increasing use of the Internet. This has had a fundamental influence on modern society. This phenomenon was not apparent before the end of the twentieth century, and it is still in a period of rapid development which will extend further into the new millennium. The wide use of the Internet has changed normal life substantially. People can do business through the Internet, and communicate in a more rapid and like manner than anyone had ever imagined even ten years before.

The use of the Internet is mostly demonstrated through the World Wide Web. AU kinds of information is able to be put on the Web site and people all over the world are able to read information &om various sources outside their territory. Thus, the conception of territory has been eroded to a certain extent; this really means a stern challenge to the basis of traditional international law. A rigorous revolution has been under way since then. But this is only a start, and a further onslaught is coming. Thus, it is even more urgent to research further into the ensuing problem and make theoretical and practical preparations for the imminent challenge.

The Internet was originally developed for sharing information among as many people as possible, through whom the information would achieve the value it deserved.' With its rapid transfer of commercial transactions, electronic commerce was figured out as a means to realize the maximization of resources. The first step to setting up such a business is for the business to have a Web site of its own. Accordmgly, domain names come within the reach of any interested party.

Anyone who uses the Internet will be familiar with domain names. Even though you may not know the exact meaning of the term, you are truly applying it. A domain name is the name or address of a Web site which identifies a computer or network

* LL.M., LL.B., China University of Political Science and Law, Beijing, the People's Republic of China; LL.M., Leiden University, The Netherlands; Researcher, Glodis Institute, Erzsmus University, Rotterdam, The Netherlands.

The author may be contacted at (<[email protected]. I More specifically, the Internet began as a product of Cold War military technology, linking together

researchen involved in a research program sponsored by the U.S. Department of Defense. See further D.P. Dem, The Internet Guidefor New Urerr, McGraw-Hill, New York, 1994, pp. 8-11.

850 THE JOURNAL OF WORLD INTELLECTUAL PROPERTY

connected to the Internet.2In the very begmning, the Internet Protocol (IP) was applied to the Web site. When you press the keyboard, you are sendmg out your request to the host and a set of numbers represents the host. This kind of system is just like a telephone number. However, a set of numbers means nothing to the requester and is difificult to remember.

For market growth, it is vital for a business to have a recognizable name so that consumers will find it easy to reach the Web site. Thus, it is necessary to have some codes which will be meaningful to the consumer-that means, when a consumer reads the code, he will have a basic understanding ofwhat this Web site contains or represents; and what is more, he will be able to identifj a Web site when he wants to get some information on a specific subject. Accordmgly, a new type of system was developed and this is what we are now talkmg about-the domain name. This system serves as the famibar and easy-to-remember names for Internet users. And each domain name corresponds to one set of unique IP numbers that are used to address computers and route traffic on the Internet.3

Domain names are divided into hierarchies. Top level domains (TLDS) have been developed for registration. For example, when you see “.corn” you will know it is a commercial site and “.org” means an organization; “.gov” as government, etc. Up until now, there are two sets ofTLDs, generic TLUS (gTLDs) and country code TLDS (CCTLDS). We have shown the former in the examples above; as to the latter, it means the short form of the name of a country, for example, “.cn” represents China, and “.au” Australia.4 When it comes to specific business, only second level domains (SLDS) count. For example, in the Web site ccwww.law.nyu.edun, “.nyu” belongs to the SLD. This is unique to the relevant company or institution.

This system has been very important for the development and administration of the Internet. An interested party could register one domain name and develop one Web site. On his own site, while sending out information, he has been able to gain profits through advertising and commercial events. He could publicize and carry out his business through his own Web site; the domain name could help to locate his connection, which would constitute an invaluable asset. Thus, the profitability of the domain name system is clear.

The registrant could put some distinct words in his domain name that other users could easily identifj. Present practice shows that registrants use their publicly recognized trademarks or names or some other sign to signifj their identifies. To a certain extent, we could say that a domain name is a business address on the information super highway.

2 See further, Your Gun Domain Name, at (<http://www.pharamond.cornn. 3 See further, Testimony of Larry Irving, Assistant Secretary of Commerce& Communicatiorzs and Infomation before

the House Committee on the Science Subcommittee on Basic Research, at <(http://www.ntia.doc.gov>), viewed on 25 September 1997.

4 However, it should be noted that now CCTLDS do not really represent the nationality of the stated country, it only means the service provider in that specific country.

A DISPUTE RESOLUTION MECHANISM FOR CYBERSQUATTING 85 1

In many cases, it is part of a company’s image.5 It can serve as the fice of the business and can produce the same result as a trademark.6

Ironically enough, domain names are only articles which link numbers, or IP addresses, to more meaningfd names. While the numbers are potentially infinite, there is only a limited pool of meanin@ words. In a specific line of business, this pool gets even smaller.’ In realizing the character and the profitability of the domain name, a new form of activity has accordingly arisen. Business signs are being registered with the domain-name holder having no intention of using it, but with the idea of negotiating with the business to sell or transfer to it the domain name in order to gain profits. Thus, this has caused a new problem, which is arousing widespread concern.* Is this activity legal? If not, how is this activity to be dealt with?

In this article, we shall first figure out the border of disputes that might arise regarding the domain-name system, and then claritjr why the author would single out cybersquatting; in the third part, trahtional means of dispute mechanisms shall be discussed and we shall see the necessity of developing a new mechanism for disputes of this lund; in the fourth part, the newly developed mechanism administered by the World Intellectual Property Organization Arbitration and Mehation Center (the WIPO Center) shall be dealt with in detail and some evaluation shall be given; lastly, a simple conclusion for the present new mechanism and further meaning to electronic commerce in general shall be pursued.

11. BASIC UNDERSTANDING OF CYBERSQUATTING

A. DISPUTES IN DOMAIN NAMES V. CVBERSQUATTING

Some literature has been dealing intensively with disputes regardmg domain names. However, when we look hrther into the literature, much of it is simplifjrlng domain- name disputes in cybersquat disputes or, even worse, is simply mistaken in tahng domain-name disputes as cybersquats. It is true that cybersquatting is the most important and most common form of dispute to do with domain names. Most mechanisms dealing with domain-name disputes have made it clear that only cybersquatting shall be dealt

5 See further B.J.E. van Gils, Avoid Domain Name Conjicts from the Start, at cchttp://www. ideasiteforbusiness. corn).

6 For the relationshp between trademark and domain name, see further D.L. Burk, Trademarks Along the Infbahn: A First Look at the Emerging Law ofcybemrarks, 1 The Richmond Journal of Law & Technology, 1995, at cchttp://www.richmond.edu)). As included in the article, the fit between trademark law as developed in real space and domain names used in cyberspace may, to some extent, depend on the ability to classify domain names as either names or addresses. However, domain names can not be equated to trademarks or brand names, since the sole domain name cannot be used by multiple participants to serve their various non-infiinging functions. See hrther Electronic Frontier Foundation, EFF Comments on WrPo)s DNS Intellectual Property Proposal, at cchttp://www. eff.org), viewed on 6 November 1998.

7 S . Niyogi, The Future ofDomain Names, at ((http://www.siliconindia.corn,,, viewed on 24 May 2000. 8 For the emergence of disputes, see further C. Oppedahl, Internet Domain Names that Infinge Trademarks, at

cchttp://www.patents.corn), viewed on 14 February 1995. See also, The Internet is Running out ofAddresses, at cchttp://www.economist.comn, viewed on 4 March 2000.


with. Thus, it is the purpose of this study to dstinguish cybersquatting from domain- name dsputes in general.

It is irrefutable that the cybersquat belongs to domain-name disputes. As generally recognized, cybersquatting refers to the practice of stockpiling domain registrations in bulk for future resale to the general public.9 Before elaborating on the meaning of cybersquatting, we should note that cybersquatting happens to the SLDS only, as this part alone forms a dlstinct characteristic of a business. According to the WIPO Final Report,'') for determining a cybersquat, there are three pre-conhtions which should be met.

First of all, the domain name is identical or confusingly similar to a trade or service mark in which the complainant has rights, includmg being confusingly similar to those activities in which the complainant intends to pursue. The domain name can effectively represents a business, the distinctiveness can be comparable to the requirement of a trademark or service mark, however, it is more demanding than a trade or service mark. The same mark is allowed in different categories of goods or services for the latter, it is not the case in the former-the same domain name can never exist in the Internet for different businesses. However, this is an external requirement for cybersquatting; the key conditions lie in the following two.

Secondly, the registrant has no rights or legitimate interests in respect of the domain name. To assert the rights or legitimate interests, the registrant must be able to show that he/she:

-

-

is commonly known by the name; or

has made prior use in connection with a good faith offer of goods/services (or prior demonstrable preparations for such use) of the name; or

is malung a legitimate non-commercial or fair use of the domain name without intent for commercial gain or to misleadingly divert consumers or tarnish the mark.11

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Thirdly, the domain name has been registered and is being used in bad faith. This is the substantial factor in determining the act of cybersquatting. Any kind of use in good faith shall not be deemed as cybersquatting. And it shall provide the borderline for this specific act. Thus, it is very important to clari@ what exactly constitutes bad faith. This has been defined in the Internet Corporation for Assigned Names and Numbers Uniform Domain-Name Dispute Resolution Policy (the ICANN UDRP), and later was

9 D. Cabell, Name Conjicts in Cyberspace, at c(http://www.mama-tech.com)), viewed on 3 September 1999. lo See further, Final Report of the WIPO Internet Domain-Name Process: The Management .f Internet Names and

Addresses: Intellectual Property Issues (hereinafter WIPO Final Report), at <http://www.ecommerce.wipo.intn, viewed on 30 April 1999.

'1 See further Section 4(c) of the UDRP accepted by the ICA" at its Annual Meeting in Los Angeles on 4 November 1999, at <(http://www.icann.org)>. According to the Network Solutions, Inc. (NsI) Policy, two defences are singled out: domain registration prior to the effective date of the complainant's trademark; or the ownership by the domain holder of a federal or national trademark for the identical name.

A DISPUTE RESOLUTION MECHANISM FOR CVBERSQUATTING 853

further elaborated in the first case dealt with by the WIPO Center.12 Bad faith requires a showing that both the registration and the use of the domain name have been misdeeds. 13

To clarifjr this, the UDRP further gives a list of evidence of a bad fiith registration, without limitation, that is:

- circumstances indicating that the domain name was registered primarily for the purpose of selling, renting, or otherwise transferring the domain name to the complainant who is the owner of the trademark or service mark, or to a competitor of that complainant, for valuable consideration in excess of the costs related to registering the domain name;

the domain name was regstered in order to prevent the complainant from reflecting the mark in a corresponding domain name, provided that there is a pattern of such conduct;

the domain name was registered primanly for the purpose of disrupting the business of the complainant;

the registrant intentionally attempted to attract, for commercial gain, Internet users to his Web site or other o d n e location, by creating the likelihood of confusion with the complainant’s mark.14

-

-

-

Obviously, this is not an exclusive list. Intensive analysis will still be needed to clari6 what indeed constitutes bad faith. There is nothng in the UDRP concerning what constitutes bad-faith use; however, the analysis employed in the first case decided in the WIPO Center provides a good start.

Only when the above three conditions are met, can the act be defined as cybersquatting. This has also been confirmed by the wording of the ICANN UDRP: Section 4(a) directs that the complainant must prove each of these three conditions. Actually, the three conditions are interlocking. While internal requirements are essential for the determination of a cybersquat, it should be combined with external requirements; positive requirements should be complemented by negative requirements. For instance, cybersquatting is made in bad faith; however, for a defence against bad hith, the respondent should be able to show that he has rights or legitimate interests. Thus, the second condition is complementary to the third conhtion.

12 The first case, World Wrestling Federation Entertainment, lnc. v. Michael Bosman, was submitted electronically to the WPO Arbitration and Mediation Center on 2 December 1999. The Administrative Panel Decision has a nice elaboration of bad faith.

13 D. Cabell, Trademark Dispufes Onlit%e--fCANN’r New Unifomt Dispute Resolution Policy, at (<http://wWw. mama-tech.com), viewed on 18 November 1999.

14 See further the ICANN UDRP, Section 4(b), supra, footnote 11. A new Bill passed by the U.S. S e n a t e S.1255-provides bad-faith intent could be determined &om a number of factors, including intent to divert customers, offers to sell domain names for a substantial consideration, and multiple domain registrations using others’ trademarks. See further, New Bill Would Provide Remedies for Domain-Name Hijacking, at <<http://wWw. mbc.comn.


Furthermore, standards for proof of actual intent are left to the approved resolution provider.15 Thus, for a fair and complete judgment of cybersquatting the three condltions each form part of a whole.

When we talk about disputes in domain names in general, most of the time many people might have the wrong idea of equating it with cybersquatting. However, this is not the case. Cybersquatting is only one category of domain-name disputes. There are other categories of dispute: parasites, and twins/poachers. Although all these three categories are closely connected and, to a certain extent, similar to each other, there is a clear line dviding them.

Like cybersquatters, parasites also expect to gain profits; however, the profits to be gained are through the use of the domain name. A fimous name or a similar name could be registered and thus disputes may arise between those in similar lines of business, or between those who simply wish to trade off the name's fame. With twins, the domain- name registrant and the complainant may have the same or nearly identical name; what is more, they both have a legitimate claim to the name.16 Ths type of dispute is hfficult to resolve as both parties have legitimate rights and, thus, it is hard to decide on who inhnges whom. Maybe the only way out is to add new categories of gTLDs as suggested in the Final Report of the WIPO Internet Domain-Name Process. Leaving this aside, we can see that the factor of bad faith is not obligatory in the latter two categories. The methods and guidelines for dealing with the disputes in the latter two categories should, accordingly, be dfferent from those for cybersquatting.

Nevertheless, we have witnessed the prevalence of cybersquatting over two other categories, and thus attention has mostly been focused on the former. Another reason for emphasis on cybersquatting might also reside in the fact that cybersquatting is a serious illegal action-the characteristic of bad faith has further justified the urgency of resolution. However, the resolutions of the three disputes in domain names have all helped shed some light on the proprietary rights that trademark owners have in the domain-name version of their trademarks. It is on t h s point that an efficient resolution mechanism is urgently needed to protect domain names in general.

B. CIVIL V. CRIMINAL

As analysed above, cybersquatting can bring about serious social disturbances. To curb such an act, it is necessary to determine in the first place whether it could be categorized as a civil offence or a criminal one, and then provide the correspondmg measures.

'5 Section 4(b) of the UDRP, supra, footnote 11. 16 See further I.S. Nathenson, Showdown at the Domain-Name Corral: Property Rights and Personallurisdiction over

Squatters, Poachers and Other Parasites, 58 University of Pittsburgh Law Review 991, 1997, at c(http://www.pitt. edu)).

A DISPUTE RESOLUTION MECHANISM FOR CYBERSQUATTING 855

It has become common that a cybersquatter can be subjected to ciml procedures. The path is still being trod as to whether it is appropriate to subject cybersquatting to criminal jurisdiction. But one new trend has recently been displayed. The U.S. House Judciary Committee unanimously approved to outlaw cybersquatting.l7 Moreover, it has proposed one Bill,18 which would make the wilful dilution of famous marks or trade on the owner’s reputation a crime for whoever knowingly and fraudulently or in bad faith registers or uses the trademark of another. Although the White House has indicated that it would not pass this legislation,lg the proposal has brought further reflection on the possible means to curb cybersquatting. As shown in the proposal, the cornerstone for satisfjnng criminal requirements (more specifically, the requirement for bad faith) is more than for the three conditions discussed above.20 Maybe this also implies that if the act is to a certain extent serious enough, it shall qualifj. as criminal in nature.

Meanwhile, it is necessary to note that some States have passed legislation on crimes connected with computers. Thus, the consideration of the criminal nature of cybersquatting could provide an instructive suggestion for further action to curb cybersquatting.

However, it is necessary to declare that it is not the intention of this article to look into the criminal aspects of cybersquatting. For the discussion here, we shall mostly deal with the civil aspects.

111. TRADITIONAL MECHANISMS FOR CYBERSQUAT DISPUTES

Various efforts have been made to deal with disputes in general. Firstly, litigation in national courts has been the universal way applied so far. It is supported by State power and thus is one safe way to secure personal rights. However, the high cost and the long period of time employed in litigation have driven jurists to devise the so-called alternative dispute resolution (ADR) mechanism. Mediation and negotiation are two means to realize efficiency. Nevertheless, the effectiveness of these two means depends largely on the attitude of parties and may even involve several other factors, such as the power of each party. Litigation can be a powerful tool for parties in dspute to use;

17 O n 29 November 1999, President Clinton signed into law the “Intellectual Property And Communications Omnibus Reform Act of 1999” which resulted in the amendment of the Federal Trademark Act. The new provisions of the Trademark Act target the cybersquat. See further S.D. Littlepage, Anti-Cybersquatting Act: Federal Protectionfor Trademarkr and Personal Names on the Internet, at cchttp://www.dickinson-wright.com)>.

‘ 8 For the draft version of this Bill, see further, cchttp://www.senate.govu. l9 See further I.J. Kauhan, The Domain Name System: Dispute Resolution and the Nice Class$cation System,

28 International Business Lawyer, No.l,39,2000. 20 According to the proposal, the following condltions (requirement of bad faith) shall be met to quahfy as

criminal in nature: (a) the defendant registered or used an identifier to cause confusion or mistake, deceive, or cause dilution of the distinctive quality of a famous trademark; or with the intention of dwerting consumers from the trademark owner to the defendant; (b) the defendant provided false information in its application to register the identifier or offered to transfer the identifier’s registration to the trademark owner or other person or entity for something of value; and (c) the identlfier is not the defendant’s legal first name or surname or the defendant had not used the identifier in legitimate commerce before the earlier of either the first use of the registered trademark or the effective date of the registration.


however, the final effect is not settled. Arbitration is another adju&cative process and can have the same effect as litigation. However, its private nature and the findty shall depend on the arbitration agreement, which does not seem to fit well into the Internet area.

Accordingly, a more amicable and creative mechanism-administrative arbitration-was proposed and finally came into the arena. Up until now, it has been the most widely used mechanism in resolving domain-name disputes. The advantages it sustains have further made it fit for disputes in this field. For cybersquat disputes, we can see that various mechanisms have been employed and even in the present stage, these mechanisms exist concurrently. It is thus helpful to first discuss these mechanisms and to bring out the justifications for, and possible modifications to, the present situation.

A. LITIGATION

When cybersquatting occurs the parties can, naturally, turn to the courts; and indeed many cases have been resolved in this way. The current trend in litigation has been to treat domain names in much the same way as trademarks.21 In general, the justifications used are the likelihood of confusion or ddution of trademarks.22 However, regarding the universality of the Internet, it is difficult to define the judicial jurisdction of a national court. The issue of personal jurisdction has been dealt with by several authors, although the literature was not directly connected with cybersquatting.23 Three theories have thus been found to accommodate this need, i.e. totality of contacts, nature of the Web site, and the effects t e ~ t . ~ 4 However, the determination ofjurisdiction with the guidance of these three theories still depends upon the specific situation, and the potential conflicts in jurisdiction are not yet resolved which shows the shortcomings of

21 See hrther IJ. Kauhan, Resolution ofDomain-Name Disputes in the Context ofthe New Internet Governance, at ((http://www.ladas.com)). Also see, Report and Recommendation of Case Data Conctpts, Inc., Plaint$, v. Digital Consulting, lnc.; Defendant and nhird-Party Plaint$, v. Network Solutions, Inc., Third-Party Defendant in the United States District Court for the Middle District o j Tennessee Nashville Division, No. 3-96-0429, by Judge Higgins, at ((http://www.bna.comv,. An analysis ofthe case can also be found in articles by M. Voorhees, CAN Network Solutions Escape Ruling on its Internet Name Policy? at c(http://www.eff)), viewed on 14 June 1996; Network Solutions Says Name Policy is “not Sitbjecf to Review” b y Courts, at cchttp://www.effj), viewed on 17 May 1996; Network Solutions to Rework Policy Governing Internet Domain Names, at c<http://www.ef&, viewed on 19 April 1996.

zz This is most clearly demonstrated in the American litigation practices. The Lanham Act provides a nice basis in dealing with cybersquatting. See, for example, S . Littlepage, Trademark Dilution v. Internet Cyberrquatting, at ((http://dickhson-wright.com)). For the analysis of the application of trademark law and dilution law, see further M. Leaffer, Domain Names, Globalization, and Internet Governance, at cchttp://www.law.indiana.edu)). Also see R. Margiano, T h e Ninth Circuit Holds that Internet Domain-Name E-Mail and Web Sewice Provider is not a Cybersquatter

for Trademark Dilution Purposes, Avery Dennirion COT. v. Sumpton, 40 The Journal of Law and Technology, 1999, at c(http://www.law.warwick.ac.ulo,.

*3 See for example A. Kur, Identical Marks Belonging to DiJerent Oumers in Dgerent Counfries--(How) C a n they Coexist in Cyberspace, WIPO/EC/CONF/99/SPK/17-B, September 1999.

24 Concerning the three theories, see further S. Tita and G. Scamby, n e “EJects Test”: Unhing Personal Jurisdiction Case-Law in Internet Defamation Cases, 33 Law/Technology, World Jurist Association, No. 1, 2000. Under the fust theory, courts look at the totahty of both the defendant’s electronic and non-electronic contacts with the forum State; with the second theory, the courts focused on whether the Web site can be categorized as passive or interactive or one that clearly constitutes doing business; and the last theory provides that if a non-resident defendant deliberately directs activity toward the forum in a calculated effort to cause a plaintiff harm there, the forum shall obtain jurisdiction thereon.


conflict-of-laws rules. Furthermore, they are often ineffective given that so many CCTLDS exist, which means that proceedings may have to be commenced in several j urisd~tions.25

We are happy to see that thls issue was hrther elaborated in the WIPO Final Report: i.e. the domain-name applicant shall be required, in the domain-name registration agreement, to submit, without prejudice to other potentially applicable juris&ctions,26 to the jurisdiction of the courts of the country of domicile of the domain-name applicant, and the country where the registrar is located.27 This is the first time ever that the jurisdiction has been clearly defined. Even so, the problem of applicable law still remains to be resolved. Thus, for proper litigation, much effort is still needed to clarifj. several of the issues.

B. THE NETWORK SOLUTIONS INC. (NSI) MECHANISM2*

The most efficient and cheapest way to realize dispute resolution could be to bring the case directly to the attention of the registrar. Each cybersquat case necessarily involves three parties: the domain-name owner, the trademark owner, and the registrar.29 And the final effect of the decision largely depends upon the implementation by the registrar. Thus, the most straightforward way to resolve the problem is through the registrar. NSI had been the monopoly domain-name registrar of “.corn”, “.net” and “.org” gTLDs before the introduction of competition into registration. During that period, for the resolution of disputes endemic to the domain-name registration and for the convenience and efficiency of the whole registration process, besides litigation the only other dispute resolution mechanism available was the NSI mechanism.

Under this much-maligned policy, NSI created a procedure under which a third party can challenge the rights of a domain-name owner to use a particular domain name.30 The most spectacular characteristic of the mechanism has been the “on hold” procedure: the owner of a registered trademark that is identical to a later-registered domain name can apply to have the domain name placed “on hold” so that no one can use the domain name until the dispute is resolved, either amicably or jud1cially.31 It is understandable that the registrar would not be ready to get involved in domain-name

25 T. Gole and S . Pollard, The WIPO Proposed Internet Domain-Name Process, at ((http://www.wipoproposed

Zh This shall mean that the situs of the tort shall also be included. See further I.J. Kauhan, 7’be Domain Name

27 See further Wrpo Final Report, supra, footnote 10. 28 For Network Solutions’ Domain-Name Dispute Resolution Policy, see c(http://www.netlawyer.cOm,).

The NSI Domain-Name Dispute Resolution Policy Statement can be found at ((http://www.efKorg). 29 For the analysis of the triangle relationship, see further C. Oppedahl, Analysis and Suggestions Regarding Nsr

Domain-Name Trademark Dispute Policy, 7 Fordham Intellectual Property, Media & Entertainment Law Journal, No. 1, 74, 1996, at c(http://www.patents.corm,.

domainnameprocess.htmlv, viewed in July 1999.

System-Act Now or Regret Later, at (chttp://www.icanndomainnamesn.

30 See further, Domain-Name Disputes, at ((http://www.bitlaw.corn)). 31 For the Network Solutions Domain-Name Dispute Resolution Policy, Revision 03 (effective 25 February

I998), see c(http://www.networksolutions.com,,.


disputes. However, it is ready to afford support for the effective use of domain names. The trademark owner is simply required to send a letter of complaint to the domain- name holder and then send the NSI a copy of that complaint with evidence of delivery plus a copy of the trademark registration certificate. NSI will then contact the domain- name holder and ask for evidence of federal mark protection that predates the complaint. If none is provided, NSI will put the domain name on hold until the dispute is resolved.32

This mechanism has been working effectively for protecting the owners of federal or national trademarks.33 However, several criticisms have been voiced.34 Its protection is rather limited and the passive action of NSI has caused rather than curbed cybersquatting. Nevertheless, the NSI mechanism has provided a forerunner for mspute resolution at the registrar’s leve1.35

c. CALL FOR A MORE EFFECTIVE MECHANISM

NSI’S dispute policy has been very important in the area of cybersquatting; however, in many situations, parties d have to turn to the courts-the only other way to go. As mscussed above, litigation can be costly and time-consuming, and its final decision still relies on the performance of the registrar. With the rapid development of technology and the valuable nature of domain names in commercial transactions, litigation seems not the best option for parties involved in disputes. Turning to the NSI mechanism, its limited possibilities and passive nature have been an obstruction for the effective protection of the whole domain-name system, in particular as a deterrent for cybersquatting.

When new liberalization trends came out, the competitive mechanism of domain- name registration was introduced. The problem is whether competitiveness in registration would naturally mean competitiveness in hspute mechanisms. This is not proving to be a good idea. Several concurrent mechanisms from competitive regstrars only causes confusion for the parties in dispute, and there is also the possibility of forum shopping. A uniform mechanism would be preferable.

Based on the rapid development of technology and the wide use of the Internet, it is unquestionable that disputes could be resolved with the full use of modern

32 For the NSI Dispute Resolution Policy, Revision 02 (effective 9 September 1996), see <<http://www. netsol.comn.

33 It is thus understandable that to register a federal trademark is the only way to protect domain names. See further C. Clough, The Only W a y to Fully Protect your Domain Name under our Current “Dispute Policy” is with a Federal Trademark! at ((http://blaze.net/search/internic.htnL). See also C . Oppedabl, Changes in Domain-Name Rules Could Result in Ownership Loss, at c(http://www.patents.comn, viewed on 28 November 1995.

34 See, for example, C . Oppedahl, NSI Domain-Name Dispute Policy Puts h e r s at Sign@ant Risk, at <(http://www.patents.com>), viewed on 21 May 1996.

35 However, as claimed by some authors, NSI does not act as arbiter or provide resolution of disputes. Nor does the NSI policy confer any rights on third-party complainants. See further A. Orange, Developments in the Domain-Name System: For Better or For Worse? The Journal of Information Law and Technology, at (chttp://www.law.wamick.ac.ulo,.


technology. This should keep pace with the modern society and remain consistent with the Internet world. Thus, the online dspute resolution mechanism was devised to accommodate the demand.

Iv. THE ICANN DISPUTE POLICY AND THE WIPO CENTER

To accommodate the trend of liberalization in the Internet sphere, a new not-for- profit corporation-the Internet Corporation for Assigned Names and Numbers-was created to take over the management of the Domain-Name System @NS).36 Following the ICANN request for opinions and suggestions from interested parties, and from the WIPO in particular, the ICANN Uniform Domain-Name Dispute Resolution Policy and Rules were adopted. The ICANN designated several bodies as dspute resolution service providers. Based on its experience with intellectual property rights and dspute resolution, the WIPO was the first one to be designated.37 A supplemental rule was later implemented by the WIPO Center for the resolution of disputes. Just one day after the entering into force of the UDRP rules, a case was brought to the Center and was subsequently resolved. To date, almost seven hundred cases have been brought forward for resolution.38 It is necessary to emphasize here that the WIPO mechanism is reserved for so-called abusive registration of domain names-cybersquatting.39 Thus, it is most instructive to discuss this new mechanism and figure out hrther development in this field, and even further application in electronic commerce in general.

A. THE NATURE OF THE MECHANISM

It has been clearly defined that the WIPO mechanism shall be administrative. This is interesting from the structural point of view. The Center, as an admmistrative part of the WIPO, was established to offer arbitration and mediation services for international commercial disputes between private parties.40 Generally speaking, the services provided by the Center are legal or adjudicative in nature. However, as far as this

36 The formation of a not-for-profit corporation presents a unique challenge and opportunity for the Internet community. For the formation of the IcA", see further, Domain-Name Resolutions: CPSR PrOpOsdsfor the N e w Corporation, at shttp://www.cpsr.vacia.is.tohoku.ac.jpu. For analysis of the IcA", see K. Perine, Throwing Rocks at ICANN, at uhttp://www.thestandard.net/article/displayu, viewed on 27 March 2000.

37 Two others have been approved, namely, the National Arbitration Forum (Minneapolis, Minnesota) and the Disputes.org/eResolution Consortium (Amherst, Massachusetts, and Montreal, Canada). Additional centres might be approved at a later date. It is noted that the two new providers take differing approaches on the background of their panellists. See further, Providers Take Diferent Approaches, 2 World Telecom Law Report, No. 2, 23, 2000; see also, E-ConJicfi Find an eResoZution! Creation Ofa Camdian Virtual Tribunal to Settle Domain- Name Disputes, at ((http://www.newswire.ca).

38 See further, c(http://arbiter.wipo.inw. 39 After due consideration of the views expressed on the subject, the WIPO elected to limit its mandatory

general administrative procedure for the resolution of domain-name disputes to instances involving deliberate, bad faith and abusive domain-name registration. These limitations were made in light of the weight of opinion against mandatory submission to such a procedure in respect of disputes over competing, good-faith rights to the use of the name in question. See further, M. Scott Donahey, Resolving Certain Domain-Name Disputes: The WIPO Recommendationr, Journal of Internet Law, at ((http://www.gcwf.com)>.

40 See further, The WJPO Arbitration and Mediation Center, at cchttp://www.arbiter.wipo.int)).

8 60 THE JOURNAL OF WORLD INTELLECTUAL PROPERTY

mechanism is concerned, it is contrary to the normal practice. The Administrative Panel established by the Center does not constitute a legal authority. Rather, it has an admmistrative hnction which evaluates the conformance of domain names.41

This can be explained by the initiation of the mechanism. As stated in the ICANN dispute policy, disputes over the registration and use of an Internet domain name shall be required to be submitted to a mandatory administrative body. This was incorporated by reference into the Registration Agreement. When a complaint is filed against a registrant, he shall be obliged to obey the relevant procedures therein. This obligation does not arise out of agreements reached by parties in dsputes, but from the implicit consent in the Registration Agreement. Domain-name holders that are deemed to be cybersquatters are subject to mandatory and binding arbitration, possibly resulting in loss of the domain name, and a fee to cover the arbitration expenses. This defers from the normal arbitration practice, which attains jurisdiction from the agreement to arbitrate by both parties. Thus, it is not dfficult to see the logic for the administrative nature of the mechanism. On the other hand, the passive role a registrar plays in the dispute wdl be shown and discussed later.

B. CHARACTER OF THE MECHANISM4Z

1. Pvimacy .f Litigation (M~ttialJurisdictio~)43

It is vital to note that litigation is not excluded in the new mechanism. While emphasizing the importance of the administrative procedure, it recognizes the final effect of litigation. No decision of an admmistrative domain-name challenge panel would affect the power of the appropriate national or regional sovereign court to hear cases interpreting and enforcing intellectual property rights that fall within its jurisdiction.44 This is proper as litigation is governed by the civil law of a State and the decision shall be enforceable based on the power of a State. Furthermore, it is claimed that under the new mechanism, the panels appointed by the Center are to apply streamlined, quick and cost-effective procedures to review multiple claims and eliminate cases of clear abuse of trademark holders' rights, leaving the more complex cases to the courts.45 This shall serve as a safety valve for the administrative procedure.

However, it is possible that some registrants would take advantage of this in bad faith, to delay the final decision through d f u l litigation, which would add to the

41 See further, Substantive Guidelines Concerning Administrative Domain-Name Challenfe Panels, Interim Policy

For detailed procedures in the Center, see WIPO Guide to the Unfofom Domain-Name Dispute Resolution Policy, Oversight Committee, at c(http://www.gtld-mou.orp, viewed on 23 May 1997.

at rchttp://arbiter.wipo.intn. 43 For the definition of Mutual Jurisdiction, see Article 1 of the UDKP Rules, at ((http://www.icann,orgr,. 44 Final Report ofthe International Ad Hoc Committee: Recommendationsfor Administration and Management uJgi",ms,

at (http://www.iahc.org>, viewed on 4 February 1997. Likewise, ths procedure would not prevent any party from initiating arbitration or mediation procedures that are otherwise available.

45 W~PO Processes First Case under New Dispute Resolution Procedure, 3 World Telecom Law Report, No. 1, 23, 2000.

A DISPUTE RESOLUTION MECHANISM FOR CVBERSQUATTING 861

uncertainty of the result and maliciously prolong the resolving period. Considering the swiftly changing technology and the value entailed by a domain name, it would be most detrimental to the justified party. Accordngly, it would be helpful if a greater certainty of the jurisdlction of the courts were created by limiting the choices of the malicious party. Under t h s consideration, the so-called mutual jurismction came into being: the two types of courts, civil and criminal (hscussed in Section ILB, above) would have jurisdiction in relation to cybersquatting.

2. Online Mechanism to Accommodate Lower Cost and Efficiency

The most significant characteristic of the new mechanism is the extensive use of online facilities, which also shows the trend for future dlspute resolution mechanisms. Most communications during the administrative procedure take place through the Web site. The complaint and response shall be filed through electronic mail and later the relevant evidence shall also be exchanged online through secure channels. Once a case is brought to the Center, a special space on the Internet shall be created for this purpose and al l the relevant communications shall take place in this imaginative space which is forbidden to outsiders. Hearings shall also be available using an electronic chat room, if deemed necessary by the Pane1.46

This mechanism should effectively reduce the time and costs entailed in tradltional mechanisms. The goals of efficiency in dispute resolution mechanisms could thus be easily achieved through online connections. This is further affirmed by the time-limit and fee set for a case. As inhcated, the whole procedure shall be terminated within forty-five days, which is rather fast, compared to the period needed for litigation and most arbitrations. Many people have argued that the low fee for registration serves as one reason for the proliferation of cybersquatting and that the relatively high fee for combating cybersquatting through litigation and arbitration has further deterred the effective resolution of potential cybersquat dlsputes. In the new mechanism, the fee for each case is reasonably affordable for most complainants. Thus, this system is expected to be able to effectively curb cybersquatting.

3. Higher Requirements for Panellists

Up until now, there has still been a lot of doubt about the effectiveness of resolving dlsputes online. It is stdl doubdul whether the charged atmosphere of a real courtroom would be alleviated without a real court. However, for those who are more technologically equipped, it is much easier for them to understand the possible convenience and efficiency online mechanism would bring about. For the present, it is

46 As provided in Article 27(a) of the WIPO Rules for Administrative Procedure Concerning Domain Name Registrations (the complete text is available at (chttp://www.wipo2.wipo.int~), the hearing can be in the form of a physical meeting, a telephone or video conference, or a simultaneous exchange of electronic communications that allows the parties and the panel to exchange information in real time.


beyond doubt that the online mechanism d be more and more widely used in the future-more and more experts are coming round to this point of view. Thus, it is not enough for panellists to have only legal or economic knowledge.

As the present mechanism will make full use of modern technology, it is essential that panellists be well equipped with the relevant technology, besides knowledge in their own particular field. The selected panellist should be able to communicate with parties in a modem way and pick up speed as circumstances require. Furthermore, as indicated in the ICANN Rules, the panel shall have very broad powers over the manner in which the proceeding is to be handled.47 This implies that the panel should have considerable knowledge and expertise in controlling the whole procedure, during which any abuse of power by the panel should be avoided to the maximum. The high requirements demanded of panellists has been demonstrated by the qualifications of panellists on the list maintained by the WIPO Center. Although the Center is able to provide administrative support to the panellists during the whole procedure, it is the panellists themselves who are to control matters. Thus, a demand for highly qualified panellists is called upon for this mechanism.

4. 7%e Passive Role Played by the Registrars

With the introduction of competition into the Internet world, more registrars are to play an important role in the registration of domain names. However, it is generally acknowledged that the registrars shall not bear liability for the mere job of registration, and the registration agreements48 invariably provide as such.@ Nevertheless, instead of an “on hold” action, registran in the new mechanism shall not do anything for the disputed domain name-the status quo prevails pendmg the dispute and the domain name is not put on hold or otherwise blocked until a decision is rendered.50 Meanwhile, the registrant is not allowed to transfer the domain name during the procedure. Thus, we can see that the registrar has a more passive position in this mechanism. Its most important role is to implement the decision while providing support, such as verification of the relevant registration, for the panel when necessary.51

5. No Damages Awarded

Different from litigation, the remedies available under the online procedure shall

47 Section 10 of the ICANN Rules. For further analysis, see D. Cabell, Domain Names: World Standard Setfor

48 See for example Network Solutions, Inc. Domain-Name Registration Agreement, Article G, at ((http://

49 See further M. Barry, Is the InterNIC’s Dispute Poiicy Unconstitutional? at c(http://www.rnids.org,), viewed on

50 See further Cabell, supra, footnote 13. 5’ During the procedure, the registrar shall be required to confirm relevant information about the disputed

domain name. For typical interactions between WIPO and a registrar during the administrative procedure, see <<http://arbiter.wipo.intn.

Key Inrernet Disputes, 6 Dispute Resolution Magazine, No. 2, 2000, at <~http://www.mama-tech.comn.

quickstart.rccis.comn.

1 August 1997.


be limited to the cancellation or transfer of the domain-name registration, and no damages shall be awarded. This is reasonable. The mechanism is intended to be a simple and efficient one, and the determination of monetary damages would add uncertainty and complexity to the mechanism. More importantly, the whole procedure is an administrative arbitration in nature.-a third, neutral party to make a decision on the dispute, which differs &om litigation or arbitration in judicial nature. The finahty of litigation in the mechanism implies that the mechanism is complementary to other mechanisms. Thus, it is more appropriate to limit the remedial measures.

C . EVALUATION OF THE NEW MECHANISM

The new mechanism got to its feet on 8 December 1999. The advantages over former mechanisms are well demonstrated. Lawyers are coming to accept the novel online mechanism, which is expected, and has been shown, to be able to reduce the need for other potentially time-consuming and expensive means of communications and in-person meetings and hearings; what is more, the mechanism can speed up the procedures while reducing costs.52

However, with implementation, criticisms are coming out.53 Some are reasonable, some are not. It is true that its scope of application is rather limited as it is applicable only for cybersquatting in three gTms and a few C C T L D S . ~ ~ However, it is understandable that the whole procedure is at the beginning stage and its application could be extended once proven operable.

For the claim of possibility of anti-trust, t h s is not justified based on what was dscussed above (in Section 11) for a uniform mechanism. Furthermore, it is claimed that the mechanism is balanced towards the complainant since he shall have enough time to prepare for the case before initiating it, while the respondent will have a very limited time to prepare for the case. However, as far as cybersquatting is concerned, t h s should not be a big problem. When registering the domain name the respondent should have the necessary knowledge of the possible results of his action and should have the basic preparation for it.

It is true that basic privacy must be procured for the Internet. However, the disclosure of the background information of the domain-name registrant is also important for locating the potential infringing party. It is thus advisable to keep the file of the registrant confidential, except when justified requests arise, such as for the

52 See further C. Gibson and J. Fullton, A Legal Technical Frameworkfor the Online Resolution $Domain-Name Disputes, at cchttp://www.ibm.nsysu.edu)).

53 See for example A. Michael Froomkin, Major Flaws in the WPO Domain-Name ProposaCA Quick Guide, at cchttp://www.law.miami. edw). Also see Domain-Name System Information and News, at cchttp://www.isoc.org>.

54 The three gTLDs covered are: “.corn”, “.net” and “.Org,’; the CCTLDS covered are: “.ac” (Ascension Island), “io” (BriFh Indian Ocean Territory), “.nu” (Niue), “.sh” (St Helena), “.tt” (Trinidad and Tabago), “.N” (Tuvalu), .ws” (Western Samoa).

864 THE JOURNAL. OF WORLD INTELLECTUAL PROPERTY

purpose of filing a complaint or determining the validity of the details of the registrant. However, this job shall rely on the attitude of the relevant registrar.

The mechanism is fast and inexpensive compared to litigation, but monetary damages cannot be obtained there and there wdl be no discovery on the other side. Litigation could provide all the discovery and protection of party’s rights which one would expect, but at a much higher cost and in not so nearly an expedtious proceedmg.55 Thus, both methods have their shortcomings. It is up to the person to decide which part is more important to them and to choose therefrom.

Still, there has been some concern about the potential bias in favour of trademark holders.56 Up until the end of May 2000, 175 cases had been resolved. Among these cases, 143 have resulted in the transfer of a domain name to the complainant, and only 32 complaints have been decided in favour of the respondents.57 This could show the one sidedness of the system; the claim of bias, however, remains to be proven.

All in all, the author wholeheartedly approves of the progress the new mechanism has brought about, and also welcomes the possible modification of it. For the time being, it is urgent for the WIPO Center to be able to provide the necessary technical support for the whole mechanism. As almost the whole procedure shall take place through the Web site, it is important for the Center to be equipped with the necessary staff and fachties. The technical infrastructure is vital to the success of the mechanism. Meanwhile, there is as yet no complete legal guide for the processing of cases. The new mechanism is not legal in nature, it does not have the power of legislation or formation of case-law. However, considering the primary position of the WIPO Center as a leadmg dispute resolution service provider for hsputes arising out of the registration and use of Internet domain names, it should be able to exert an important influence on the formation of new laws in this area. Thus, it would be good for the Center to undertake the task of promoting the clarification of relevant rules in this area.

V. CONCLUSION

Since the end of the last century, we have all witnessed the rapid development and application of the Internet in daily life. One of the most important phenomena has been the development of electronic commerce-doing business through the Internet. To initiate this new means of business, the first step is to have one’s own Web site, where the merchant shall advertise and propagandize h s goods or services. He shall need to regster one domain name for this purpose with a selected registrar. It is general practice for the merchant to use his well-recognized mark in the domain name so that the customers shall find it easy to locate him.

is See further, Infomation About Trademark and Domain Names, at cchttp://www.ladas.conu). s6 R. O’Keefe, Alternative Resolrctionfor Domain-Name Disputes, at (<http://infoeagle.br.edun. s7 See, <(http://arbiter.wipo.intn.


However, many businesses were late to realize the commercial Salue of having an Internet domain name that corresponded to their well-known trademarks.58 Cybersquatting has been the most spectacular activity for this reason. Reahzing the potential detrimental effects, national and international efforts have been attempting to combat this type of dlegal action. From traditional litigation to the present admmistrative arbitration, it seems this combat has been going smoothly. Many commentators have suggested means to alleviate, or more exactly, to avoid, the occurrence of cybersquatting through introducing new gTLDs. However, we can never be overoptimistic, as cybersquatting will not easily become extinct no matter how effective any measures could be.59 It is thus still necessary to develop one efficient mechanism to deal with cybersquatting.

Indeed, in this new era, with the wide use of the Internet, trahtional mechanisms seem to fall behind and do not meet the customers’ demands. New phenomena bring with them new demands. It is thus wise to have an online mechanism to accommodate hsputes arising out of online business. It is normal that new phenomena shall meet with opposition at the beginning stage; however, this one proves to have provided new thoughts and a bright way ahead for a future mechanism for disputes in general. Although we would not advocate a complete substitution of the arbitral process by online procedures, which is also unrealistic, it does seem that there are certain elements, at least in the ordinary arbitral process, that can be conducted with the use of these technologies.60

All in all, the WIPO mechanism provides a very nice start, although much still needs to be done to perfect it. While still in its infancy, for its healthy development the mechanism needs to be given more support. What we can do now is to try and identify and make such improvements.

~

58 L.M. Hertz, The Top Ten Cyber-Commandments .f Web Site Domain Names, at (chttp://www.hedgero.com,,, viewed on 31 October 1997.

59 Technological developments wdl make current domain naming debates “obsolete and, undoubtedly, hstorically quaint”. However, at present, these controversies are anything but anachronistic. See further A. Chase, A Primer on Recent Domain-Name Disputes, 3 Virginia Journal of Law and Technology, 1998, at (chttp://jolt. student.virginia.edun. Also see K.S. Dueker, Trademarks LAW Lost in Cyberspace: Trademark Protection for Internet Addresses, 9 Harvard Journal ofLaw & Technology, 496, 1996.

60 F. Gurry, The Dispute Resolution Services .f the World Intellectual Property Organization, 2 Journal of International Economic Law, No. 2,397,1999.

a dispute resolution mechanism for cybersquatting

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