Things could be about to get real for Filipino cybersquatters. The Filipino Senate recently passed the Cybercrime Prevention Act of 2012. While still awaiting passage in the Filipino House of Representatives, the proposed legislation criminalizes cybersquatting, making it a "punishable act." Those found guilty could face six to twelve years in prison, a fine of up to 500,000 Philippine pesos (the equivalent of about $11,600), or both.

That's quite a contrast to the U.S.'s Anti-Cybersquatting Consumer Protection Act (ACPA) of 1999. Although ACPA allows for the awarding of damages between $1,000 and $100,000 for cases involving willful cybersquatting, research by FairWinds in 2008 revealed that courts have rarely assessed damages at the upper end of this range. Accordingly, trademark holders prefer the relative ease and lower cost of recovering cybersquatted domains through the Uniform Domain-Name Dispute-Resolution Policy (UDRP), which only has the power to transfer or cancel domains, and therefore provides little deterrent to cybersquatters. The result? Just about anybody can register a domain that is identical or confusingly similar to a registered trademark with relative impunity.

If the Cybercrime Prevention Act passes, it will be interesting to see what happens to cybersquatting in the Philippines. As for the U.S., I suspect that the risk of twelve years behind bars would be enough to deter all but the boldest of cybersquatters.

“Bad faith” can some times be the trickiest element to prove when trying to demonstrate that a registrant has cybersquatted a domain name. Many times, whether a domain owner has acted in bad faith comes down to timing, specifically when he or she first registered the domain name. This principle was called into question during a recent cybersquatting lawsuit in a Los Angeles federal court.

Erik Bethke, the founder of the virtual pet game and social network GoPets Ltd., had attempted to purchase the domain name GoPets.com from its owner, Edward Hise. Bethke initially offered Hise $750 for the domain, but when Hise rejected the offer, Bethke filed a UDRP arbitration with the World Intellectual Property Organization (WIPO). Unfortunately for Bethke, because Hise had registered GoPets.com five years before Bethke created GoPets Ltd., the complaint lacked evidence of bad faith and the WIPO Panel denied Bethke’s request to transfer the domain.

After the failed UDRP, Bethke again offered to purchase the domain, this time for $40,000. Hise responded asking for $5 million and threatening to add metatags to the code of GoPets.com in order to redirect visitors to Bethke’s site back to Hise’s domain. After sending that demand, Hise transferred ownership of the GoPets.com domain to Digital Overture, the company that he co-owns with his brother. Through Digital Overture, the Hise brothers have registered over 1,000 domain names.

After Hise transferred the domain, Bethke took legal action, suing him in a Los Angeles federal court for cybersquatting and trademark infringement. He attempted to circumvent the issue of when the domain had originally been registered by arguing that Hise’s renewing the domain name registration and then transferring it to Digital Overture amounted to a new registration. The Los Angeles judge sided with Bethke, awarding him $100,000 in damages as well as the domain name GoPets.com.

However, a three-judge panel of the 9th Circuit judges partially reversed this ruling, on the grounds that the Anitcybersquatting Consumer Protection Act (ACPA) is very clear about its definition of “registration” as referring to the initial domain name registration. In the decision, Judge William Fletcher wrote, “We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner.”

The judges did agree that both Hise and his brother had shown bad faith after the UDRP proceedings, and had also violated unfair competition laws during their negotiations with Bethke. The Los Angeles judge is now left to decide what relief might be appropriate for these offenses. Whether this decision will have any impact on the way domain transfers are regarded under UDRP precedent has yet to be seen.

Aside from highlighting how complex domain name-related matters can be, this case opens up the question of whether or not ACPA needs to be adjusted to more adequately cover scenarios of domain name transfers, as well as other issues.

Readers of FairWinds’ Weekly News Brief will have already learned about Go Daddy’s announcement about its pricing structure for domain name registrations in the .XXX TLD. In the Sunrise A period, each domain will cost $209.99 the first year, which includes the application fee and the first year registration, and renewals will cost $99.99 per year. For Sunrise B, trademark owners will pay a one-time fee of $199.99 to block their trademarks for ten years. Those who participate in the .XXX landrush will be charged $199.99 the first year, which includes the application fee and the first year registration, and $99.99 per year for renewals. After that, General Availability domains will cost $99.99 for both the first year registration, and for yearly renewals.

We’ve already discussed on this blog the great lengths ICM Registry, which operates .XXX, is going to in order to provide resources for trademark owners to protect their marks. The fact that Go Daddy, one of the most widely recognized domain name registrars, is pricing .XXX domain names at $100 a pop is also likely to further deter cybersquatting in the TLD. Normally, cybersquatters squat on domain names because it is a quick, easy and, most importantly, cheap way to earn money. Setting the price to register .XXX domain names so high is likely going to discourage many cybersquatters who do not want to pay the registration fee.

While new schemes could evolve that make cybersquatting in .XXX profitable, many small-time cybersquatters are unlikely to have the stomach to pay to play this game.

Over the past few months, the topic of reforming the Uniform Domain Name Dispute Resolution Procedure (UDRP) has garnered discussion and debate among the intellectual property community and within ICANN. In May of last year, ICANN’s Registration Abuse Policies Working Group (RAPWG), a division of the Generic Names Supporting Organization (GNSO), recommended that a Policy Development Process be initiated by requesting an Issues Report to investigate the current state of the UDRP. Specifically, the RAPWG advised that the investigation should focus on two issues (direct quote): 
 
1. How the UDRP has addressed the problem of cybersquatting to date, and any inefficiencies/inequalities associated with the process
2. Whether the definition of cybersquatting inherent within the existing UDRP language needs to be reviewed or updated
 
It’s worth pointing out that nowhere in the text of the UDRP is the term “cybersquatting” explicitly stated, let alone defined. By “inherent within the…language,” the RAPWG is likely referring to the three conditions that must be met in order for the Panel to order the transfer of the domain name(s) in question from the respondent to the complainant. Those three conditions are:
 
1. The domain name is identical or confusingly similar to a trademark or service mark in which the   complainant has rights
2. The registrant has no rights or legitimate interests in respect of the domain name
3. The registrant registered and is using the domain name in "bad faith"
 
These have been the three parameters by which UDRP decisions have been arbitrated since ICANN adopted the UDRP from the World Intellectual Property Organization (WIPO) in 1999. In February, the RAPWG began its investigation, and earlier this month it decided to consult with UDRP providers, panelists and lawyers for insight. According to Managing IP, the group plans to release its findings in an Issues Report during the next ICANN Public Meeting in Singapore in June; this Report will then be open to public comments, the feedback of which will be integrated into a Final Report. That Final Report could identify the need for a Policy Development Process, which could then lead to changes in the UDRP.

The push for UDRP review has been driven, at least within the ICANN community, by the RAPWG, which consists of multiple representatives from registrars and registries, as well as some from the intellectual property constituency. For the most part, the motivation behind this push has been a belief that some aspects of the UDRP unfairly favor complainants, i.e., trademark owners, at the expense of registrants. Proponents of UDRP reform call for sanctions against Reverse Domain Name Hijacking, and believe that trademark owners should be prohibited from filing complaints against domain name owners when the domain registration clearly predates their trademark registration.

Another possible factor behind this push may lie in ICANN’s new gTLD program, through which different organizations will be able to apply for any domain name extension they like. Certain registrars and registries have expressed interest in applying for new gTLDs of their own. Language in the Draft Applicant Guidebook for New gTLDs (which lists the rules and regulations governing the application procedure) prohibits registrars that have lost UDRP decisions on multiple occasions from applying for new gTLDs. While this is not explicitly stated in any ICANN documents as a reason behind registrars’ push for UDRP reform, it does not take a great stretch of the imagination to consider it as a possible motivating factor.

On the other hand, those who support the UDRP as it currently exists stress the need for complementary mechanisms that work in coordination with the UDRP to help address the cybersquatting problem. Erik Wilbers, Director of the WIPO Arbitration and Mediation Center, argued in a letter to ICANN that many UDRP-related issues “tend not to be rooted in the UDRP itself, but rather in its, often profit-driven, application by certain providers and their constituents.” He points to the tried-and-true dependency of the UDRP, saying that any process that jeopardizes the principles and practices of the UDRP would seriously limit its effectiveness.

In my experience, the UDRP has been an invaluable tool from trademark owners. It will be interesting to see how the RAPWG’s investigation progresses. Hopefully, if reform is eventually deemed necessary, it will proceed in a balanced way that ensures that the UDRP is fair to both complainants and respondents.