The Ninth Circuit has ruled that a Federal cause of action for cybersquatting exists under the Anti-Cybersquatting Consumer Protection Act, even if the the person who originally registered the domain had proper motives in doing so and never explicitly offered to sell the website to the owner of an identical or confusingly similar trademark.
In 1988, Paolo Dorgio founded DSPT, a company that designs, manufactures and imports men’s clothing. It began using the brand name "Equilibrio" in 1988 and, in 1999, created the brand name "EQ" in an attempt to serve a younger market with somewhat “trendier, tighter fitting fashion.” During this period, Dorigo's friend Lucky Nahum began to work for Dorgio. Dorigo lived in Los Angeles and Nahum in Rochester, New York. They decided to set up a web site for the company, www.eq-italy.com/, which was created solely for DSPT for the purpose of showing DSPT clothes.
Nahum was working exclusively for DSPT and registered the site, although he did so in his own name (unbeknownst to Dorgio). Nahum’s brother, who did part-time website design, was asked to prepare the site.
By 2005, the website served as DSPT’s catalog. Customers accessed it 24 hours a day, chose designs from it, and sent in orders through it. DSPT e-mailed customers about new items on the site and salespeople sold the company's clothes to retailers by referring them to pictures on the website and soliciting their orders based on the pictures.
However, Dorigo's and Nahum's friendship soured and in the late Summer of 2005, Nahum advised Dorigo he would not be renewing his contract with the company. A month later, DSPT’s website mysteriously disappeared and users browsing for www.eq-Italy.com no longer found DSPT's site, but instead were advised, “All fashion related questions to be referred to Lucky Nahum at: lnahum@yahoo.com.” (As of the writing of this article, that message still appears.)
Nahum went to work to a competitor and told his new boss that “he had inserted that sentence in order to get Equilibrio [DSPT’s older brand] to pay him funds that were due to him.” DSPT repeatedly asked Nahum to give back the website but Nahum refused.
Without its website, DSPT's sales plummeted. Although the first quarter of 2005 was the best ever, sales were disastrous during the last quarter of 2005 and the full year 2006. DSPT spent more than $30,000 and substantial time replacing its website and stationary and writing to customers to explain the situation.
DSPT sued Nahum for cybersquatting and trademark infringement in violation of the Lanham Act, as well as other causes of action that were not part of the appeal. Nahum filed a counterclaim for additional commissions he claimed he was owed. The case was tried to a jury, which returned a special verdict in favor of DSPT and awarded it $152,000 in damages (and found no breach of contract on the counterclaim).
The Anti-Cybersquatting Consumer Protection Act establishes civil liability for “cyberpiracy”. In a cybersquatting case, the plaintiff is required to prove that (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.” 15 U.S.C. § 1125(d)(1)(A).
Here, the court found, although there was nothing wrong with Nahum originally registering the domain name to himself at the outset, his use of the site to gain leverage in his commission dispute fell within the scope of conduct covered by the act. Moreover, the use of the domain www.eq-Italy.com was confusingly similar to the EQ mark: Only DSPT used the EQ mark for a men's shirt line; the mark had become distinctive by the time Nahum took over the domain, and retailers trying to shop at DSPT's catalog website were confused when they reached it. As for bad faith, Although Nahum never expressly offered to sell the domain to DSPT, the court equated Nahum's use to holding the site for ransom and that the jury could reasonably have found that his actions were designed to convey the message that he would only turn the site over to DSPT if it paid him the disputed commissions he was seeking. In these circumstances, there was sufficient evidence that he acted with bad faith intent to profit from that mark.
Thus, the appellate court affirmed the jury's verdict as well as the trial court's denial of Nahum's subsequent motion for judgment as a matter of law and his motion for new trial and remittitur.
DSPT now operates its site at the domain www.eqshirts.com/.
The Ninth Circuit's opinion in DSPT International, Inc. v. Lucky Nahum, 9th Cir. Case No. 08-55062, is available here.
In 1988, Paolo Dorgio founded DSPT, a company that designs, manufactures and imports men’s clothing. It began using the brand name "Equilibrio" in 1988 and, in 1999, created the brand name "EQ" in an attempt to serve a younger market with somewhat “trendier, tighter fitting fashion.” During this period, Dorigo's friend Lucky Nahum began to work for Dorgio. Dorigo lived in Los Angeles and Nahum in Rochester, New York. They decided to set up a web site for the company, www.eq-italy.com/, which was created solely for DSPT for the purpose of showing DSPT clothes.
Nahum was working exclusively for DSPT and registered the site, although he did so in his own name (unbeknownst to Dorgio). Nahum’s brother, who did part-time website design, was asked to prepare the site.
By 2005, the website served as DSPT’s catalog. Customers accessed it 24 hours a day, chose designs from it, and sent in orders through it. DSPT e-mailed customers about new items on the site and salespeople sold the company's clothes to retailers by referring them to pictures on the website and soliciting their orders based on the pictures.
However, Dorigo's and Nahum's friendship soured and in the late Summer of 2005, Nahum advised Dorigo he would not be renewing his contract with the company. A month later, DSPT’s website mysteriously disappeared and users browsing for www.eq-Italy.com no longer found DSPT's site, but instead were advised, “All fashion related questions to be referred to Lucky Nahum at: lnahum@yahoo.com.” (As of the writing of this article, that message still appears.)
Nahum went to work to a competitor and told his new boss that “he had inserted that sentence in order to get Equilibrio [DSPT’s older brand] to pay him funds that were due to him.” DSPT repeatedly asked Nahum to give back the website but Nahum refused.
Without its website, DSPT's sales plummeted. Although the first quarter of 2005 was the best ever, sales were disastrous during the last quarter of 2005 and the full year 2006. DSPT spent more than $30,000 and substantial time replacing its website and stationary and writing to customers to explain the situation.
DSPT sued Nahum for cybersquatting and trademark infringement in violation of the Lanham Act, as well as other causes of action that were not part of the appeal. Nahum filed a counterclaim for additional commissions he claimed he was owed. The case was tried to a jury, which returned a special verdict in favor of DSPT and awarded it $152,000 in damages (and found no breach of contract on the counterclaim).
The Anti-Cybersquatting Consumer Protection Act establishes civil liability for “cyberpiracy”. In a cybersquatting case, the plaintiff is required to prove that (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.” 15 U.S.C. § 1125(d)(1)(A).
Here, the court found, although there was nothing wrong with Nahum originally registering the domain name to himself at the outset, his use of the site to gain leverage in his commission dispute fell within the scope of conduct covered by the act. Moreover, the use of the domain www.eq-Italy.com was confusingly similar to the EQ mark: Only DSPT used the EQ mark for a men's shirt line; the mark had become distinctive by the time Nahum took over the domain, and retailers trying to shop at DSPT's catalog website were confused when they reached it. As for bad faith, Although Nahum never expressly offered to sell the domain to DSPT, the court equated Nahum's use to holding the site for ransom and that the jury could reasonably have found that his actions were designed to convey the message that he would only turn the site over to DSPT if it paid him the disputed commissions he was seeking. In these circumstances, there was sufficient evidence that he acted with bad faith intent to profit from that mark.
Thus, the appellate court affirmed the jury's verdict as well as the trial court's denial of Nahum's subsequent motion for judgment as a matter of law and his motion for new trial and remittitur.
DSPT now operates its site at the domain www.eqshirts.com/.
The Ninth Circuit's opinion in DSPT International, Inc. v. Lucky Nahum, 9th Cir. Case No. 08-55062, is available here.
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