With the advent of the personal computer and the beginning of the Internet age, intellectual properties were exposed to new types of infringements that were not addressed by traditional IP laws. In response, new laws were enacted. The Anticybersquatting Consumer Protection Act (ACPA)[1] was one such law. The ACPA prevents registering trademarks as domain names and then attempting to sell that domain name back to the corporation.

On October 27th, the Court of Appeals for the Ninth Circuit decided an interesting case pertaining to the ACPA.[2] Paolo Dorigo found the company DSPT to design, manufacture, and sell men’s clothing.[3] DSPT created the brand names Equilibrio and EQ.[4] After initial success, Dorigo hired his friend Lucky Nahum. With Nahum’s aid, DSPT created a website, www.eq-Italy.com; however, the website was registered under Nahum’s name.[5] The website quickly grew with the company and became the company’s catalog, order form, primary contact with customers, and major marketing tool.[6]

However, as the company grew, the friendship between Dorigo and Nahum deteriorated. Instead of renewing his contract with DSPT, Nahum signed with a competitor.[7] Shortly thereafter, the DSPT website was taken down and replaced with a message that stated, “All fashion related questions to be referred to Lucky Nahum at: [email protected]”[8] Reportedly, Nahum had taken down the website in order to get DSPT to pay him for previous work he had done.[9] Following the disappearance of the website, DSPT had dismal quarters as sales plummeted. Customers and salesmen were no longer able to refer to the website when purchasing.[10] Requests for return of the site were rejected.[11] Suit was finally filed against Nahum for cybersquatting.[12]

Civil liability for violating the ACPA can be established by satisfying a three part test. The plaintiff must prove, “(1) the defendant registered, trafficked in, or used a domain name; (2) the domain name is identical or confusingly similar to a protected mark owned by the plaintiff; and (3) the defendant acted ‘with bad faith intent to profit from that mark.'”[13] As to the first part, Nahum was clearly using the domain name.[14] Turning to the second part, while DSPT had not registered its Equilibrio and EQ brand names it had used them in commerce resulting in a common law trademark.[15] Therefore, plaintiff did have a protected mark. Additionally, there had been actual confusion by customers about the altered website.[16] The Court found this, in addition to the similarities between the mark and the domain name, to satisfy part two.[17] Finally, as to the third part of the test, the Court held that even though registration of the domain name was in good faith, it had subsequently turned bad.[18] Nahum was holding the website ransom until DSPT paid him. The Court determined that “profit” as required by the act included “simply the intent to get money.”[19] Whether it was money that Nahum may have already been owed was immaterial.[20] In the end, Nahum was found to owe DSPT $152,000 in damages.[21]

While this suit portrays an atypical fact scenario for an ACPA case, the faulty organizational aspects of DSPT including domain name ownership are not uncommon to many companies. The ransoming of a domain name as well as many other problems can be avoided by utilizing systematic e-commerce business planning. While DSPT was awarded damages in the end, the damage to DSPT’s customer relations and future business may never be known.