The Hidden Perils of Filing a Baseless UDRP Complaint

When properly used, the UDRP enables trademark owners to take control of abusive domain names. Yet sometimes the UDRP itself is misused by trademark owners to try to seize desirable domain names to which they have no legal entitlement. Is there a downside to misusing the UDRP to attempt a domain name hijacking?

Abuse of the UDRP

Unscrupulous companies at times misuse the UDRP by improperly invoking its power to compel a transfer of ownership in order to seize inherently valuable, non-infringing domain names that the companies desire for their own use. Many trademarks are comprised of common words, phrases or acronyms. The registration of common word, phrase or acronym domain names that may be similar to an existing trademark does not necessarily mean, therefore, that the registration was in bad faith, or targeted at that trademark, as there are many possible uses for such a domain name distinct from the use of any particular mark owner. Nevertheless, some mark owners will in effect claim exclusive commercial rights to such everyday terms by launching a complaint against a matching domain name, even in the absence of evidence that the domain name was used to target the complainant's mark.^[1] Examples of such domain names that have recently been targeted by complainants in a UDRP dispute include babyboom.com, cassandra.com, pinksheet.com, cwj.com, fairmarkets.com and weeds.com, amongst many others.^[2]

Would-be domain name hijackers in such cases often use the similarity between their brand and the domain name as the basis for their complaint while concocting the more crucial UDRP allegations, namely that the domain name owner lacks a legitimate interest and that the domain name owner's registration and use of the domain name was in bad faith. These complaints fail to acknowledge that descriptive and generic domain names have inherent value and can be lawfully used in a non-infringing manner.

The hijacking attempts targeting fairmarkets.com and cwj.com, for example, are typical of many similar attempted hijackings. In the fairmarkets.com dispute, a recently formed Australian company filed a UDRP complaint in an attempt to seize the domain name despite having no enforceable trademark rights, despite the domain name registration predating the formation of the company, and despite no evidence that the domain name was targeting the complainant. The panelist in the case found:

The Panel is in agreement with Respondent and finds, on any construction of the facts, that Complainant knew or should have known that it was unable to prove trademark rights. Having regard to the evidence, the Panel also finds that there was material in the public domain to show Respondent's legitimate interest in the domain name and its bona fides more generally. Moreover, even if Complainant had not made those enquiries, the course of correspondence with Respondent made that plain. The fact alone that the Complaint was later filed in that knowledge is in the Panel's assessment evidence of the Complaint being brought in bad faith. Finally, the explicit claims to bad faith registration and use made in the Complaint are groundless and overstated in nature.^[3]

In the cwj.com dispute, the complainant, Crypto World Journal, acknowledged that the domain name registration predated the existence of the company, but asserted that it was nevertheless bad faith to register a desirable domain with the aim of later reselling it:

The very nature of Respondent's registration evidences bad faith. Respondent has owned the Domain Name since 1999 and has never once had a functional page running. This leads to the conclusion that the Respondent registered the name to sell it one day to a company like that of the Complainant who has a real and legitimate use for the name, or just to prevent the owner of a trade mark or service mark from reflecting the mark in a corresponding domain name.^[4]

The proper purpose of the UDRP, however, is to remedy instances where a domain name is registered to target a particular trademark, not to enable a junior mark owner to seize an inherently valuable three-letter dot-com acronym domain name that was registered by the senior registrant, prior to the mark owner acquiring any rights to its mark, or even existing. Crypto World Journal's complaint was found to be an abuse of the Policy compounded by its failure to disclose that it had attempted to purchase the domain name prior to bringing the dispute:

In light of the above, the Panel agrees with the Respondent that the Complainant has filed the Complaint after an unsuccessful attempt to acquire the disputed domain name from the Respondent, and where the legally represented Complainant filed the Complaint without having any plausible basis for establishing, in particular, bad faith registration and use. In all the circumstances, the Panel makes a finding of reverse domain name hijacking against the Complainant.^[5]

The complaints in the fairmarkets.com and cwj.com UDRP disputes were clear attempts to misuse the UDRP to hijack inherently valuable domain names to which the complainants had no legal entitlement and as a consequence they were found by the panelists to be abusive. Yet what penalty do the complainants in the fairmarkets.com and cwj.com disputes, and in other attempted hijackings, face when they are found guilty by the UDRP panel of abusing the process?

Reverse Domain Name Hijacking

The risk to the complainant of attempting a hijacking is that the UDRP panel may find it guilty of Reverse Domain Name Hijacking.^[6] According to the UDRP Rules, "Reverse Domain Name Hijacking means using the Policy in bad faith to attempt to deprive a registered domain-name holder of a domain name".^[7]

RDNH is a sanction that has no obvious consequence beyond the censure itself, although it nevertheless does indeed have consequences, as explained herein. It has no financial penalty, nor does it bar a complainant or his or her attorney from making future UDRP filings. Some trademark owners and their attorneys therefore see little to fear from being found guilty of RDNH.^[8] With relatively "much to gain" and "little to lose", companies at times succumb to the temptation to file meritless complaints in the hopes of gaining a windfall transfer of a desirable domain name for free.

RDNH Findings on the Rise

Certain panelists who are concerned about misuse of the UDRP appear to be increasingly recognizing the importance of calling out such abuse where appropriate. These panelists are not tolerant of ill-founded complaints relying on a mark that was adopted long after the domain name was registered,^[9] or where a complainant has "unreasonably ignored established Policy precedent" or where a complainant bases "a complaint on only the barest of allegations without any supporting evidence."^[10]

While only five RDNH findings were issued in 2003, by 2016, the number of RDNH findings had increased to 37, and increased again in 2017 to 45. 2018 is on pace to see a similar or higher number of RDNH findings.^[11]

Source: RDNH.com, actual through November 2018, projected through year-end 2018.

Although RDNH decisions represent a relatively small portion of the number of UDRP cases filed, the domain names targeted for hijacking are often significantly more valuable than the typically cybersquatted domains that are the subjects of most complaints.

The Ramifications of an RDNH Finding

Although the UDRP does not impose any actual penalty on those found guilty of attempted Reverse Domain Name Hijacking beyond censure, an RDNH finding may nevertheless have significant consequences that result in reputational damage to the complainant and the complainant's counsel, and at times even financial costs to the complainant. A finding of RDNH therefore may indeed play a role in deterring frivolous filings.

An RDNH finding may inflict reputational damage due to the public reprimand delivered in a published decision, for example:

• "[Complainant] took on the guise of a third rate barrack room lawyer and advanced arguments that were tortuously artificial in the extreme"^[12]
• "the Complainant has failed miserably...the Complainant's filing [is] frivolous, abusive"^[13]
• "the Panel deplores the fact that a baseless Complaint of this nature was filed."^[14]
• "The Complainant's blatant and intentional misrepresentation as described above constitutes a clear violation of [its certification of completeness and accuracy]."^[15]
• "a brash and totally unjustifiable attempt to pressure a domain name owner into releasing a legitimately held domain name"^[16]
• "We owe it to this Respondent to chastise the Complainant and its representative for their irresponsible conduct. We owe it to the integrity of the UDRP process to call out patent abuses such as I believe this case to be."^[17]
• "a finding of abuse of the administrative proceeding is beyond obvious...the Complainant's empty rhetoric, mudslinging, and unsupported factual allegations require this Panel to impose the only sanction available to it."^[18]
• "the Panel does not need to make a finding as to whether or not the conduct of the Complainant and/or its representatives was deliberately dishonest, although it is of the view that the nature of the Complaint and the allegations it contains is, at the very least, extremely unsatisfactory."^[19]
• "The Complainant attempted to mislead the Panel on several occasions by presenting information as fact, which at closer examination was misleading or untrue."^[20]
• "The Panel notes that the Complainant, The Procter & Gamble Company, is a premier marketer and advertiser of consumer products in the United States of America and in many other countries… To have filed the Complaint at this relatively late date — more than eleven years after the registration of the disputed domain name and several years after its acquisition by the Respondent — seems a grotesquely unfair attempt to wrest ownership of the disputed domain name from the owner… This Complaint fell very far short of what the Panel was entitled to expect from a Complainant of this stature."^[21]

Decisions finding RDNH are newsworthy, so the complainant and its counsel may find themselves portrayed in a widely read article in an unflattering light, as in the article headlined "Panelist Blasts Credit Europe Bank for 'Flagrant Abuse' of UDRP".^[22] The article titled "WIPO Panel Censures Law Firm for Misleading Panel" cited at length a panel decision critical of the law firm Novagraaf Nederland:

It is lamentable that the Complainant's representative appears to have failed to address these concerns and thus has brought two cases under the Policy within a year in which there is a real prospect that it has either deliberately sought to mislead the panel or has been inexcusably careless in the manner in which it has pled its client's case. The Panel is unanimous that this deserves censure.^[23]

Novagraaf Nederland subsequently filed another complaint that was found guilty of RDNH, bringing it increased notoriety.^[24] This raises the possibility that its future UDRP complaints would be viewed as suspect, such that it would be an ineffective advocate for its clients.

Besides Novagraaf Nederland, other firms and attorneys have brought cases on more than one occasion which resulted in an RDNH finding, including Anand & Anand^[25] (whose managing partner is a WIPO panelist),^[26] Ballard Spahr,^[27] and Stobbs IP,^[28] and attorneys J. Dustin Howell of Workman Nydegger^[29] and Steven Rinehart.^[30] Since UDRP decisions do not always adequately explain each side's position, it may be that these firms and attorneys have a good explanation as to how the RDNH findings came about. Yet as a result of RDNH findings and any publicity related to them, potential clients researching an attorney or a firm prior to entering into an engagement may learn of an attorney's or a firm's involvement in an abusive filing and may choose not to move forward with the engagement.

Domain name owners on the receiving end of abusive complaints have at times publicized the bad behavior of those bringing the complaints. The website at HallofShame.com highlights many well-known complainants, including Land Rover and Procter & Gamble, that have been found guilty of RDNH, as well as the law firms that brought the RDNH complaints. A few domain names targeted by complainants now alert visitors to the complainants' attempted hijacking attempts as with Queen.com, QLP.com and Xpand.com. Such negative references can appear in search results for a complainant or its counsel and may supplant good news such that the company and its counsel appear in an unfavorable light.

Reverse Domain Name Hijacking is a Violation of ACPA

Many complainants, and even some intellectual property attorneys, are not aware that attempted Reverse Domain Name Hijacking is also a violation of the U.S. Anti-Cybersquatting Consumer Protection Act (ACPA).^[31] The ACPA provides recourse for domain registrants improperly accused of cybersquatting in the form of two distinct claims: (1) relief for registrants based a finding of "no bad faith intent"; and (2) relief based on a finding of RDNH.^[32] An aggrieved domain owner can request a judgment from a U.S. federal court for a declaration of no cybersquatting as well as payment of damages and attorney's fees. At least one federal court has found that the ACPA's statutory damages penalty of $100,000 may be assessed against parties who have engaged in RDNH, and numerous courts have awarded actual damages and attorney's fees for RDNH.^[33]

Companies that have filed misleading UDRP complaints have been surprised to find themselves sued in U.S. federal court and forced to defend RDNH claims, including demands for significant monetary payments and attorney's fees. A UDRP complaint filed against airzone.com, for example, resulted in the Spanish complainant being sued in U.S. federal court on multiple claims, including that it violated the RDNH provision of ACPA. The lawsuit concluded with a $40,000 judgment against the UDRP complainant and a court determination that the UDRP respondent would retain the domain name.^[34] Similarly, a UDRP complaint filed against sdt.com led to a federal lawsuit that concluded with a judgment against the Belgian UDRP complainant for $50,000 and a determination that the UDRP respondent would retain the domain name.^[35]

Even if a Complainant gets "lucky" and appears to succeed with its hijacking attempt when it is awarded a domain by a UDRP panel based upon a meritless complaint, the respondent may still file a suit in federal court claiming damages for RDNH as defined under the ACPA. In the AustinPain.com dispute, the complainant obtained a transfer order from the UDRP panel, yet the respondent challenged the transfer in federal court, and counter-claimed against the complainant by alleging RDNH under ACPA. The complainant paid $25,000 to settle the lawsuit despite prevailing in the UDRP.^[36]

Similarly, despite the complainant in the ado.com UDRP dispute prevailing and being awarded the domain name by the UDRP panel in a heavily criticized decision,^[37] the complainant must now defend itself in a federal lawsuit alleging violation of the ACPA that cites RDNH among other claims and includes a request for significant damages and attorney's fees.^[38] The case is still pending as of the date of this article.

Complainant Counsel's Role

The complainant's attorney generally bears responsibility for filing a complaint that results in RDNH, as the client relies on his or her legal advice and agreement to file on a client's behalf. When an attorney recognizes it is possible to make a "colorable" claim under the UDRP to demand the transfer of a desirable domain even in the absence of adequate evidence to support the claim, the temptation to misuse the UDRP can be great.

An attorney who recommends or acquiesces to an ill-advised UDRP complaint may put at risk his or her relationship with the client. An executive from a complainant that was sued in federal court for bringing a misleading UDRP complaint shared: "we were until now very badly advised in this matter by [the law firm]. I fired them and have now to find new advisers to defend our position."^[39] An executive at a different complainant that was sued for RDNH under ACPA stated:

we both are aware of the attorney´s professional interests do not always match our business targets… The truth is, all this mixture of unfortunate events is a nightmare for me and my company and all I want is to close it as soon as possible with minimum damage to our business.^[40]

The complainant's attorney is an important gatekeeper who should remain vigilant in avoiding an embarrassing RDNH ruling which may risk the wrath of his or her client and may result in the loss of the client. A prudent attorney therefore will decline to file a complaint that lacks merit or misrepresents facts to spare the client the risk of reputational damage and potential exposure to substantial legal fees and financial penalties.^[41]

The Importance of the RDNH Finding

RDNH findings play a key role in maintaining the integrity of the UDRP. The RDNH provisions of the UDRP, as well as the possibility of an RDNH finding under the ACPA, should be seen as a disincentive to bring meritless complaints and thereby abuse an otherwise respected procedure. Making RDNH findings, where warranted, is therefore critical to supporting the integrity of the Policy.

It is therefore unfortunate that many panelists decline to even consider RDNH, despite circumstances that call for such a finding and despite the Rules requiring them to consider it.^[42] The excuses some panelists offer for not making a finding of RDNH include:

1. Some panels avoid finding RDNH "in their discretion", when the correct reading of Rule 15(e) establishes that it is not in fact "discretionary" but rather is "peremptory";^[43]
2. Some panelists will refuse to make an RDNH finding "because the complainant has a valid trademark",^[44] when it is precisely the fact that the complainant misused its valid trademark in an abusive complaint which ought to lead to a RDNH finding;^[45]
3. Some panels will fail to consider RDNH at all;^[46]
4. Some panelists will too readily excuse blatant hijacking attempts as merely "misconceived" or the result of "misapprehension" on the part of the "misguided" complainant,^[47] or because the complainant was self-represented and had first "made a reasonable offer of USD 3,000 to purchase the domain name".^[48]

While calling out abuse of the Policy is an important responsibility of a UDRP panelist, making and supporting an RDNH finding requires extra time and effort for which the panelist receives no additional compensation. An RDNH finding may also come at a social cost to the panelist, for the complainant's counsel may be an acquaintance of the panelist, or at other times a fellow UDRP panelist.^[49]

Those UDRP panelists who nevertheless admirably fulfill their duty to consider and to make, when appropriate, an RDNH finding, deserve particular commendation. The integrity of the UDRP depends on calling out abuse both of the cybersquatting variety and of the RDNH variety. Those panelists who make RDNH findings when deserved help bolster the UDRP's reputation as a generally effective dispenser of justice. Even when an RDNH finding appears relatively inconsequential, it may lead to serious repercussions, and may perhaps even serve as a deterrent to further abuse of the UDRP.

This article is the product of collaboration between ICA Board Member, Nat Cohen and Zak Muscovitch.

[1] See http://iplegalcorner.com/overreaching-trademark-owners...
[2] See https://www.rdnh.com/
[3] http://www.adrforum.com/domaindecisions/1790689.htm
[4] https://www.wipo.int/amc/en/domains/search/text.jsp?case=D2018-1207
[5] Ibid
[6] Pursuant to Rule 15(e) of the Rules, "if after considering the submissions the Panel finds that the complaint was brought in bad faith, for example in an attempt at Reverse Domain Name Hijacking or was brought primarily to harass the domain-name holder, the Panel shall declare in its decision that the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding"
[7] Ibid
[8] "Section 15(e) [the RDNH provision] of the UDRP has no deterrence value.", Froomkin, ICANN's 'Uniform Dispute Resolution Policy' — Causes and (Partial) Cures (2002). Brooklyn Law Review, Vol. 67, No. 605, 2002, page 667
[9] See for example; TOBAM v. M. Thestrup / Best Identity, WIPO Case No. D2016-1990
[10] See WIPO Jurisprudential Overview 3.0 (https://www.wipo.int/amc/en/domains/search/overview3.0/#item416). WIPO's updated overview released in 2017 provides a more robust treatment of RDNH than previous versions.
[11] As identified at RDNH.com.
[12] http://www.wipo.int/amc/en/domains/decisions/html/2000/d2000-0993.html
[13] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2014-0594
[14] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2016-0534
[15] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2018-1683
[16] http://www.wipo.int/amc/en/domains/decisions/html/2006/d2006-0905.html
[17] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2013-1691
[18] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2016-0653
[19] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2017-2549
[20] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2017-1961
[21] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2012-2179
[22] https://domainnamewire.com/2010/08/02/panelist-blasts-credit-europe...
[23] See: https://domainnamewire.com/2011/07/14/wipo-panel-censures-law-firm...
[24] See: https://domainnamewire.com/2018/08/03/fertilizer-company-tries...; and also see: http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2017-2045, http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2011-0636, and http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2018-1112
[25] See https://domainnamewire.com/2014/01/13/rpg-life-sciences-ltd-guilty... and https://domainnamewire.com/2013/09/12/indian-electronics-retailer-croma...
[26] See https://www.wipo.int/export/sites/www/amc/en/domains/panel/profiles/anand-pravin.pdf and http://www.anandandanand.com/pravin-anand.html
[27] See https://www.wipo.int/amc/en/domains/search/text.jsp?case=D2017-0777 and https://www.wipo.int/amc/en/domains/search/text.jsp?case=D2017-1930
[28] https://domainnamewire.com/2017/12/21/stobbs-ip-gets-two-reverse...
[29] See http://www.adrforum.com/domaindecisions/1784459.htm and http://www.adrforum.com/domaindecisions/1784458.htm
[30] See http://www.adrforum.com/domaindecisions/1447322.htm and http://www.adrforum.com/domaindecisions/1759845.htm
[31] The criteria for RDNH under ACPA are different than the guidelines for finding RDNH under the UDRP. For instance, intentional misrepresentation is an element of an RDNH finding under ACPA, but is not required for an RDNH finding under the UDRP.
[32] 15 U.S.C. § 1114(2)(D)(iv) and (v); see https://www.law.cornell.edu/uscode/text/15/1114
[33] Walter v. Ville de Paris, 09-cv-3939 [Doc. 31] (S.D. Tex. Sept. 14, 2012) (awarding $100,000 in statutory damages for RDNH after the filing of a baseless UDRP complaint); AIRFX.com v. AirFX LLC, 2:11-cv-01064 [Doc. 121] (D. Ariz. Mar. 7, 2013) (awarding $103,972.50 in attorney's fees for RDNH); GoForIt Ent. LLC v. Digimedia.com, 3:08-cv-02011 [Doc. 147] (N.D. Tex. Mar. 22, 2011) (awarding $55,000 in damages and $48,000 in attorney's fees for reverse domain name hijacking).
[34] Telepathy, Inc. v. Corporacion Empresarial Altra S.L., No. 1:17-cv-1030 [Dkt. No. 10] (D.D.C. Nov. 28, 2017).
[35] See Telepathy, Inc. v. SDT Int'l SA-NV, No. 1:14-cv-1912 [Dkt. No. 12] (D.D.C. July 9, 2015).
[36] HugeDomains.com, LLC v. Robert P. Wills, M.D., P.A., 14-cv-00946-BNB [Doc. 23] (D. Colo. July 21, 2014).
[37] See http://www.circleid.com/posts/20180301_ica_statement_on_adocom_udrp_decision... and http://iplegalcorner.com/whats-so-outrageous-asking...
[38] http://www.ipsectioncolorado.org/wp-content/uploads/2018/03/here-2.pdf
[39] Private correspondence, not publicly available.
[40] Private correspondence, not publicly available.
[41] https://www.domainsherpa.com/john-berryhill-udrp-interview/
[42] See: https://domainnamewire.com/2016/05/26/udrp-reverse-domain-name-hijacking/, https://domainnamewire.com/2017/06/12/cant-believe-not-rdnh-gloo-com/, https://domainnamewire.com/2017/06/02/cant-believe-not-rdnh-2/, https://domainnamewire.com/2017/04/27/cant-believe-not-rdnh/, https://domainnamewire.com/2015/11/11/movius/, https://domainnamewire.com/2014/11/14/bespoke-udrp/, https://domainnamewire.com/2008/08/21/arbitrator-firedcom-complainant-sorely-misguided/, https://domainnamewire.com/2015/05/12/major-com-udrp-denied-but-no-rdnh/, https://domainnamewire.com/2018/11/13/wipo-panelist-not-necessary-to-make....
[43] See http://www.circleid.com/posts/20181125_abusive_conduct_domain_name_registrants...
[44] See Shoeland.com - http://www.adrforum.com/domaindecisions/1255365.htm, "The Panel is of the opinion that Complainant has satisfied Policy ¶ 4(a)(i). Therefore, the Panel finds that Complainant has not engaged in reverse domain name hijacking." and see Panelist Neil Brown's dissent.
[45] See https://www.domainarts.com/2013/11/25/naf-embarrassment-with-sloppy-and...
[46] For one instance, see https://domainnamewire.com/2014/06/12/egton-loses-patient-com-udrp...
[47] See soti.com - https://domainnamewire.com/2017/06/02/cant-believe-not-rdnh-2/, inw.com - http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2012-0454, america.com - http://www.adrforum.com/domaindecisions/96784.htm, zija.com - http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2013-0107, cqc.com - http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2017-0129, lightsout.com - http://www.adrforum.com/domaindecisions/1795430.htm
[48] See for example, WEDIA SA v. Office Yui Asia Limited, WIPO Case No. D2018-2083
[49] See https://domainnamewire.com/2018/04/04/guess-what-clothing-company-guess... and https://www.domainarts.com/2011/10/21/my-personal-trainer-registers-sofitdc-com...

Written by Zak Muscovitch, General Counsel, Internet Commerce Association