Thursday , March 30 2023

The lawsuit is a doozy

A large investment firm is trying to secure a valuable domain registered well before its matching brand existed.

Picture of scales with the word "lawsuit" imposted on top in a box

Earlier this year, Elliot Silver wrote about a cybersquatting lawsuit against The judge is currently considering a motion to dismiss and it prompted me to look into the case.

This case sets off alarm bells for what I consider the Plaintiff’s ridiculous assertions. Here are the facts:

  1. The owner of the domain ran a business using called Empower Geographics. It acquired the domain no later than 2002.
  2. The plaintiffs, Great-West Life & Annuity Insurance company and Empower Retirement, LLC, started using the Empower brand in 2014.
  3. Empower Geographics stopped using the domain in 2016 and started offering it for sale.

Despite the domain owner acquiring the domain 12 years before Empower started using its brand, the plaintiffs argue this is a case of cybersquatting. They throw every contorted argument they can think of to explain away the dates, including that the domain was renewed in bad faith.

Empower Retirement argues that the domain is no longer being used in good faith. The plaintiffs are upset that the domain is being offered for sale, and the domain owner is using some scare tactics in its approach, such as saying it’s contacting competitors.

But what this case really comes down to is price. The plaintiffs want the domain. They can’t come to terms on price. So they argue that the domain owner is refusing to entertain reasonable offers. It argues,

To that end, at various times, the parties have engaged one another in negotiation for the sale and transfer of the Empower Domain to Plaintiffs. Notwithstanding Plaintiffs’ good faith
efforts, Defendants have refused to entertain reasonable offers.

Reasonable offers? And what might those be? In a motion to dismiss, Empower Geographics’ lawyers John Berryhill and David Berten note:

The Plaintiffs asks this Court to establish a “reasonable” or “fair” price which the Defendants should be required by law to accept, and beyond which the Defendants should be deemed cybersquatters. Great-West initiated this Action as a cynical tactic in an obvious attempt to drive down the price of an asset it covets.

This is a similar argument to the one in a dispute over In that case, the plaintiff PocketBook International SA argues:

For example, Pocketbook has offered to purchase the Domain Name from the Defendants, but Defendants refused to come to an agreement by callously offering to sell the Domain Name for “six figures” despite the Domain Name being used only for infringing and illicit purposes.

Refused to come to an agreement? It seems that PocketBook International refused to come to an agreement.

Empower Retirement suggests that the Anticybersquatting Consumer Protection Act must have been designed to apply when a domain is registered in good faith and later used in bad faith despite the language of the law. In an opposition to the motion to dismiss, the plaintiffs write that the idea that a domain has to be registered after the plaintiff’s brand is created is wrong:

Under Defendants’ interpretation, an owner of a domain name that is similar to a distinctive mark could begin using the domain to redirect traffic to a competitor or engage in fraudulent “phishing” schemes, but be immune from cybersquatting liability—an absurd result.

There are plenty of laws that would address such a situation, including trademark law. But cybersquatting? Both sides make arguments about how the ACPA considers registration dates.

But let’s be clear: the defendant is not using the domain to phish the plaintiff’s brands or redirect traffic to a competitor. It’s merely trying to sell a business asset it used for over a decade.

The domain owner’s reply in support of the motion to dismiss is worth reading in its entirety. Here’s an excerpt:

The ordinary terminal stage of any legitimate business is the selling off of its valuable assets, and not simply the mere abandonment of them. The Defendants, in view of Mr. Machinis’ advancing age and lack of immortality, are as entitled as any other business to decide when to sell the filing cabinets, copy machine, paper clips and, yes, the domain name into which years of hard work and goodwill were invested, and which was registered at a time when .com dictionary words were readily available. Had Defendants been operating a taxi business, it would be laughable to assert they somehow abandon legitimate title to their vehicles by parking them, putting “for sale” signs on them, and enlisting a broker to sell them, instead of continuing to transport passengers. That is all Defendants have effectively done with the domain name at issue here. The ACPA was not intended to grant any party, much less one with a junior nonexclusive claim to arbitrary use of a dictionary word, a “springing interest” in a legitimately registered and held domain name. The ACPA was also not intended to upend basic principles of trademark law embodied in decisions under the Federal Trademark Dilution Act, which was the less specific tool in the anti-cybersquatting kit prior to the ACPA. “Nothing in trademark law requires that title to domain names that incorporate trademarks or portions of trademarks be provided to trademark holders.” HQM, Ltd. v. Hatfield, 71 F. Supp. 2d 500, 508 (D. Md. 1999) (citing Washington Speakers Bur., Inc. v. Leading Auth. Inc., 49 F. Supp. 2d 496, 498 (E.D. Va. 1999)). Indeed, “cyber” was pre-pended to the property concept of “squatting” as an analogy to persons physically occupying property already belonging to another, and not simply remaining on one’s own property.

The Plaintiff argues this proceeding involves a “years-long campaign to create confusion”. The Defendants emphatically agree. The Complaint details how the Plaintiff, knowing full well that the domain name was registered to Defendants, nonetheless launched an impressive years-long campaign to become known as one among many businesses calling itself “EMPOWER”. The Plaintiff generated the confusion of which it complains, but blames it on the Defendants. The Plaintiffs brag that annually they “have spent more than $50 million in the United States alone to promote and advertise the EMPOWER Brand” annually (D.I. 27 at 2), since having made the foolhardy decision to adopt a brand it knew was already registered as a domain name. The Defendants, comprising a solely-owned geographic mapping company and its owner, are simply not able to hold a candle to the Plaintiff’s massive $50M per year campaign of generating confusion. The Defendant is simply not engaged in such things as festooning athletic facilities of national renown with the word “EMPOWER”. That is admitted in the Complaint to be the sole work of the Plaintiffs for which, like the Plaintiffs’ sole choice of how to brand the subsidiary in 2014, the Defendant cannot plausibly be alleged to be responsible.

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About Andrew Allemann

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