Stolen and Infringing Domain Names: The Law of Cybersquatting

As most business owners know, it takes consistent effort to protect the trademark from being infringed by other individuals and businesses.  While trademark law can afford you a set of rules and a mechanism through which to enforce your rights, the impetus is always on you, as the trademark owner, to defend what is yours.  This can be especially difficult in an online word considering (1) the relative anonymity the Internet can afford, and (2) the ease with which domain names can be purchased and registered.

Cybersquatting and cyberpiracy are buzzwords that are becoming more well-known in our day to day lives as business people.  The term cybersquatting originated from the situation where a person or business who knowingly and in bad faith reserves a domain name consisting of the trademark or name of a company with the intent of selling the right to that domain name back to the legitimate owner.”  

The Anticybersquatting Consumer Protection Act, now embodied in 15 USC §1125, is a federal law that took effect in 1999.  This domain name protection law is intended to give trademark and service mark owners a new way to fight cybersquatters.

For example, Nintendo of America Inc. was awarded $560,000 and a recovered 48 Internet domain names in a domain infringement suit in October of 2000.  It was one of the first massive domain name lawsuits that resulted from the 1999 Act.  The Court awarded the company statutory damages ranging from $2,000 to $30,000 per name for 48 names—for a total award of $560,000.  

The major drawback to using the ACPA to enforce your rights, is that you must sue in federal court to do so.  Even with a successful outcome, the process to get there can cost you a lot of time and money.  Fortunately, the Internet Corporation of Assigned Names and Numbers (ICANN) has established a cheaper, faster, and more user-friendly way to enforce your rights in a domain name.  ICANN is a not for profit public benefit corporation that is responsible for administering and overseeing all Internet domain name registrars and their underlying policies.

If someone has taken a domain name similar to your domain name, trademark, or trade name, you may be able to use ICANN’s Uniform Domain-Name Dispute-Resolution Policy (UDRP) to request a binding Administrative Proceeding.  Such a proceeding is initiated by filing a complaint online, and following through with the administrative procedures provided by the UDRP.  If you prevail, the only remedy is transfer of the infringing domain name to you; monetary damages are not allowed under the UDRP’s Administrative Proceeding.

If you think that someone has registered a domain name that may infringe on your trademark or service mark, please contact our law offices to determine if you would be able to file an ACPA or UDRP action to acquire the domain name or avert the domain name registrant from future use of the domain name.

California Passes New Affiliate Nexus Tax

At the end of last month, Governor Jerry Brown signed a bill into law that will establish a sales tax nexus in the State of California for online retailers who use in-state affiliates to market and sell their products.  These marketers are essentially independent contractors who market for the online retail business.  The affiliate nexus tax, or as some call it, the “Amazon Tax,” after the company Amazon.com, which uses quite a number of affiliate marketers, is a way for states to collect taxes on internet transactions from online retailers operating out of state.  This tax is sweeping because it will establish sales-tax nexus in the State of California for non-California businesses based solely on in-state affiliate marketers, who are not employees for the non-California business!

By way of background, the U.S. Supreme ruled in 1992, in the case of Quill vs. North Dakota, that retailers do not have to collect sales tax unless the retailer has a physical presence in the state, known as a “nexus.”  The nexus can be established by a physical office or even a single employee in a state.  What the new tax does is to create another basis for establishing nexus.  The law states that any online merchant must charge sales taxes on any buyer’s purchases, if the purchase occurred through an online California affiliate marketer.  This law is an attempt at creating a level playing field between brick and mortar businesses in California—who must collect sales tax—and out-of-state online retailers who, until now, could sell to California residents and/or through California affiliates while still avoid paying sales tax.  Needless to say, this law has created a huge backlash by online retailers.  For instance, news story report that Amazon.com immediately severed all dealings with its affiliate marketers in California.

What are the consequences of the affiliate nexus tax for your business?  If you are or could be considered an affiliate for a larger website, your contact with California might present negative tax consequences for the business you serve.  As we saw with Amazon, you might be dropped as an affiliate marketer.  Until there are national laws on the books allowing or disallowing an affiliate nexus tax, online businesses will simply forum shop to find affiliates in states that will not tax them.  Please contact our law offices at 530-345-2212 to learn more about this law, how it affects your business, and what you can do to remedy the situation.

2011 Changes to Estate and Gift Taxes: What Does This Mean For Your Will and Trust?

It seems the laws regarding how the IRS will treat your estate keep changing.  Last year, as you may have heard or read, was a “good year to die” because there was no estate tax.  To be more accurate, the estate tax still existed, it was just that the “exemption amount” was unlimited.  The estate tax, as the name suggests, is the tax the IRS applies to transfers on death.  The exemption amount is the amount someone may transfer after death without paying any estate taxes.  An unlimited exemption amount means you could transfer everything; a 1 Million Dollar exemption amount means you could transfer only the first 1 Million tax-free.

Because the unlimited exemption amount was set to expire at the end of 2010, we were all scratching our heads to see what would happen for 2011.  If no new laws were passed, the exemption amount would have reverted back to 1 Million Dollars.  In December of 2010, President Obama signed the 2010 Tax Relief Act.   Because of the changes, certain provisions in your current estate plan might be outdated, or worse, detrimental to your wishes.

The following are highlights of the changes in the Tax Relief Act:

(1) Unified exemptions.  The law unifies the estate tax exemption (discussed above) with the lifetime gift tax exemption.  Currently, you may gift $13,000 per person per year without incurring any gift tax penalties.  If you gift more than this amount, you are allowed a lifetime gift tax exemption amount.  If you use up your lifetime gift tax exemption, you are also using up your estate tax exemption.  For example, if you gift 1 Million Dollars to one person over the $13,000, you have also decreased your estate tax exemption amount by 1 Million Dollars.

(2) Higher exemption.  The estate tax and lifetime gift tax exemption for 2011 and 2012 is increased from $1 million to $5 million.

(3) Portability.  For the first time, a surviving spouse may take the deceased spouses exemption amount, shelve it, and then use it at his or her own death.  In other words, the exemption amount from the first spouse to die is portable to the second spouse.  Before, the spouses would have to plan ahead with a “bypass trust” to ensure that they could take advantage of two exemptions.  The problem was that the surviving spouse was required to use the first exemption at the time of the deceased spouse’s death via the bypass trust.  Furthermore, bypass trusts have tight restrictions on what the surviving spouse can do with the assets inside the bypass trust.  At least for now, spouses have some flexibility in taking the deceased spouse’s exemption amount to be used later.  What this means is that it is possible to transfer 10 Million Dollars tax free.  Some commentators have indicated that this signals the death-knell of the bypass trust.  Such suggestions might be a little premature as Congress could change the law later to dissallow portability.  What this means for you is that you need an estate plan that has the flexibility of allowing you to use the portability if it exists, but to also use a bypass trust if it does not exist.

The new developments with regard to estate and gift taxes make it imperative that you have your current estate plan reviewed.  Our law firm can assist you in making any necessary changes to ensure that your estate plan has the flexibility that is required to adapt to not only the current laws, but any foreseeable changes that may occur.  Please contact our office today!

Estate Planning Basics: Wills and Trusts

Designing an effective estate plan is a very personalized process.  Many of the tools attorneys will use to help you transfer your assets on to your children and heirs have been around for centuries, but the way in which they are arranged can be different for every person or family.  You have probably already heard of and have some familiarity with Wills and Trust.  What follows below is a very basic sketch of these common estate planning tools.

Wills:

A will is a document that has no legal effect until you die.  For that reason, snooty lawyers refer to them as “Testamentary Instruments.”  Wills have been the traditional way in which property is transferred at death.  Increasingly, wills have taken a back seat to revocable living trust as the primary estate planning tool.  One of the reasons for this is that, at least in California, if you have more than $100,000 worth of assets pass via your will, your whole estate becomes “probated.”

Probate is a court-supervised administration of your estate.  This is generally disfavored because it takes a long time, costs more money, and can expose your assets to general public knowledge.  Alternatively, planning through a trust can be quicker and less expensive to administer at death, and is far more private.

This is not to say wills are not necessary.  Many estate planners use what is called a “pour over” will in conjunction with a revocable living trust.  What this means that is although a large portion of your estate is held in the trust; there will always be some assets and accounts you keep outside of the trust.  For instance, it would be too cumbersome to have your personal checking account be held in trust.  That is where the pour over will comes into play.  When you die, all of those miscellaneous assets outside of the trust get poured into the trust to be administered.

Trusts:

A trust is essentially an agreement whereby one person agrees to hold and own property for the benefit of another person.  It is a splitting of the ownership and enjoyment in an asset.  There are three major players in a trust: 1) a Settlor or Grantor; 2) a Trustee; and 3) a Beneficiary.  A Settlor or Grantor is the person who creates the trust, and who funds the assets into it.  The Trustee is the person who owns the assets in the name of the trust, and administers those assets for the benefit of the Beneficiaries.  Although these are legally distinct “offices”, the same person can be all three.

This is commonly the situation with a revocable living trust for a family.  Mom and Pop are the Settlors, who administer the trust during their lifetime as Trustees, for their own benefit as Beneficiaries.  The roles change when one or both of the parents die, but the principals remain the same.

There are many different varieties of trusts that perform a myriad of different functions.  One of the most widely-used trusts is a Revocable Living Trust.  Such trusts are “Living” because they are established by the Settlors during their lifetime, and not at death via a will (this is called a “Testamentary Trust”).  Such trusts are “Revocable” because, unsurprisingly, they can be fully revoked and cancelled by the Settlors (prior to death, at least…zombies cannot revoke trusts).

Revocable living trusts are popular because they can help avoid probate.  Any assets put into such trusts are not valued for probate purposes.  So if you have less than $100,000 outside the trust, even if you have millions inside, your estate can avoid probate.  Living trusts are also desirable for tax-planning.  If drafted properly, they can help you take full advantage of estate tax exemptions (especially if you are married).

All of these benefits of wills and trusts come with a serious element of danger, however.  If drafted incorrectly, or if improperly funded or administered, your estate can become exposed to significant tax liabilities.  Worse still, an improperly drafted estate plan that fails to anticipate contingencies can cause serious family turmoil.

Our law offices represent clients in Chico and Redding and the surrounding Northern California communities for their estate planning and asset protection needs.  If you have any questions or would like a consult, please contact our law firm at 530-345-2212 or info@chicolawfirm.com.