Can Lack Of Bad Faith Be Transferred?

Steve Levy ⬥ 28 September

“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 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 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 in order to redirect visitors to Bethke’s site back to Hise’s domain. After sending that demand, Hise transferred ownership of the 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

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. 

Tags: ACPA, cybersquatting, Digital Overture, domain name transfers, Edward Hise, Erik Bethke, GoPets Ltd., lawsuit, Los Angeles federal court, social network, trademark infringement, UDRP, virtual pet game, William Fletcher, WIPO

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