Friday , June 2 2023

Domain Investors “Have a Duty to Research” Trademarks

Performing due diligence before buying a domain name is an essential task for domain investors. This due diligence is not limited to the ownership history and provenance of a domain name. Domain investors must also do trademark research to avoid running afoul of anti-cybersquatting laws and regulations.

According to a recent UDRP decision at the National Arbitration Forum (NAF), domain investors are expected to perform trademark research before acquiring domain names. In fact, people who buy domain names as investments “have a duty” to do trademark research.

Here’s an excerpt from the UDRP that was won by the complainant:

Respondent says he is in the business of acquiring and selling generic domain names to sell or rent to prospective start-up or operating businesses; the two-word domain name fits into the pattern of domain names in which Respondent’s company invests; and that Respondent registered the domain name without knowledge of Complainant’s mark. He contends that the phrase “action ship” is generic and as such has a right or legitimate interest in it.

This raises a fundamental question: did Respondent, a professional domain name reseller, have a duty to research any trademark database? The consensus of Panel views is that it does. See WIPO Overview section 3.2.3: “Noting registrant obligations under UDRP paragraph 2, panels have however found that respondents who (deliberately) fail to search and/or screen registrations against available online databases would be responsible for any resulting abusive registrations under the concept of willful blindness; depending on the facts and circumstances of a case, this concept has been applied irrespective of whether the registrant is a professional domainer.”

In these circumstances the Panel considers the following passage from Fundación EOI v. Kamil Gaede, D2021-3934 (WIPO December 21, 2021) to be applicable:

“…as a person who is in the business of buying and selling domain names, the Respondent has a heightened obligation to comply with Paragraph 2 of the Policy, which requires the Respondent to “represent and warrant to us that . . . (b) to your knowledge, the registration of the domain name will not infringe upon or otherwise violate the rights of any third party.” Further, the Policy makes clear that “It is [the Respondent’s] responsibility to determine whether your domain name registration infringes or violates someone else’s rights.” The Respondent does not appear to have done anything to comply with its obligations under the Policy. Even if the Respondent was not actually aware of the Complainant and its trademark rights, the Respondent is charged with knowledge if it was wilfully blind to the Complainant’s rights. See generally WIPO Overview, Sections 3.2.2 and 3.2.3.”

To what extent a registrant is expected to perform a search to ensure that it is not infringing on the rights of others depends on the linguistic elements of the mark. If a mark is generic without doubt, that is one set of facts, but as a phrase moves to the other end of the continuum, that is another set of facts. Here, Respondent labels “ACTIONSHIP” as a generic phrase, but offers no evidence that the phrase has any widespread usage in any linguistic community. A search by the Panel of the United States trademark database, where both parties are located, would have revealed Complainant as the sole user of the term. This is evidence that although the words “action” and “ship”, taken separately, are generic, the combined phrase “ACTIONSHIP” is not generic but rather one-of-a-kind. Panels have generally found “willful blindness” in cases of famous or well-known marks. It cannot be said that ACTIONSHIP is in either category. Does this make a difference? In the Panel’s view, marks that are neither famous nor well-known but are one-of-a-kind cannot be ignored by professional domain resellers even if their failure to conduct research is less than willful.

The response to Respondent’s “generic” argument is that a professional domain name reseller has a duty, greater or lesser depending on the distinctiveness of the mark, to assure itself that it is not infringing the rights of others. See Fragrance Foundation, Inc. v. Texas International Property Associates, D2008-0982 (WIPO August 28, 2008). (“[i]t seems to this Panel and others that people who make a living from registering vast numbers of domain names must make a reasonable effort…to ensure that they are not infringing on the rights of others.”). See also Citigroup Inc. v. Andrew Robert Wilson, Andrew Robert Wilson, D2021-1058 (WIPO June 1, 2021). “Nor indeed will mere ignorance of the existence of the trade mark be sufficient to bring the adoption and use of the name within the fold of honest practice. Honest practice in the choice of a name to be used in trade must imply reasonable diligence in ascertaining that the name chosen does not conflict with, inter alia, an existing trade mark, and thus in verifying the existence of any such mark.”).

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