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.