Under the newly enacted section 43(d) of the Lanham Act, trademark holders now have a cause of action against anyone who, with a bad faith intent to profit from the goodwill of another's trademark, registers, traffics in, or uses a domain name that is identical to, or confusingly similar to a distinctive mark, or dilutive of a famous mark, without regard to the goods or services of the parties.  As with the UDRP, the legislation outlines indicators of bad faith and legitimate use defenses.

The following factors will be considered in determining whether a domain name has been registered in bad faith.  The first four would count against a determination of bad faith while the remainder would weigh in favor of a bad faith determination.

1. If registrant has any trademark or other intellectual property rights in the name.

2. If this is the legal or nickname of the registrant.

3. The registrant's prior use of the domain name in connection with the good faith offering of goods and services.
According to the legislative history the defendant will have the burden of introducing evidence of lawful use. Note that while the UDRP provides a defense if the domain name registrant has made demonstrable preparations to use the domain name in a bona fide offering of goods or services, the legislation only provides a defense if there is prior use - not simply preparation to use.


4. Lawful noncommercial or fair use of the mark in a web site under the domain name.
According to the legislative history fair use includes comparative advertising, comment, criticism, or parody - even where done for profit.   However, simply establishing a web site with a fair use, if the actual intent is to sell, will not allow a cybersquatter to avoid a bad faith determination.



5. Intent to divert to a site that could harm the trademark owner's goodwill - either for commercial gain or with intent to tarnish by creating likelihood of confusion as to source, sponsorship or affiliation, or endorsement of the site.

6. Offer to sell the domain name without having used, or having an intent to use, it in the bona fide offering of goods or services, or a prior pattern of such conduct.
Language in the legislative history specifically indicates that this section is not supposed to apply to a party who registers a name with the bona fide intent to launch a new product or company but then abandons that plan and sells the name to a trademark holder.



7. Intentional provision of misleading contact information in the domain name registration application or the history of such conduct.

8. Warehousing of multiple domain names known to be identical or confusingly similar to distinctive marks or dilutive of famous marks, without regard to the goods or services of the parties.
According to the legislative history, cybersquatters have been able to avoid liability by not being the one to initiate or offer to sell.  Now, sitting on such marks is sufficient evidence of bad faith and an offer to sell is not required.


9. The extent to which a mark is distinctive or famous.
Under the legislative history, the more distinctive or famous a mark is, the more likely the Trademark owner will deserve relief.

In addition to traditional trademark remedies, plaintiffs may elect statutory damages ranging from $1,000 to $100,000 per domain name.  The bill also establishes in rem jurisdiction which allows the trademark owner to file an action against the domain name itself in some cases.  See the Jurisdiction module for additional information.

Another important aspect of the legislation is hidden in the legislative history.  The way the bill is currently written, the factors for determining bad faith can be applied by the domain name registrar.  Thus, in an effort to provide less expensive and timely legal remedies, the legislation allows the registrar to fill the shoes of a court in determining bad faith and exempts them from liability if they do so.  If the registrar decides against the domain name holder, the domain name holder will have no recourse against the registrar.  Why this provision is necessary given the existence of the UDRP is unclear.  As is whether registrars will choose to engage in this balancing.

In a small effort to prevent reverse domain name hijacking, the bill makes a trademark owner who knowingly misrepresents a domain name to be infringing, liable to the domain name holder for damages and attorneys fees resulting from cancellation. A trademark holder who engages in reverse domain name hijacking is not, however, subject to civil penalties.

Three lawsuits were filed within two weeks of the enactment of the bill.  New Zealand's America's Cup team won a temporary injunction preventing the owners of the <americascup.com> domain from using it for a Web site.  Harvard filed suit against the registrants of a variety of domain names incorporating the Harvard trademark including <Harvard-lawschool.com>.  The NFL filed suit against the registrants of <NFLtoday.com>.

In the first appellate application of the new legislation, the Second Circuit applied the ACPA to a case initially brought under the Federal Trademark Dilution Act.  The court determined that the ACPA could be used prospectively to require transfer of a domain name that was registered in bad faith.  Damages, however, will not be available for domain names registered prior to the enactment of the new legislation.  In Sporty's Farm v. Sportsman's Market, the Second Circuit found bad faith in a situation where "[a] competitor X of Company Y has registered Y's trademark as a domain name and then transferred that name to Subsidiary Z, which operates a business wholly unrelated to Y."

If you wish, you can read the full text text of the bill.  The legislation was initially drafted as a stand-alone bill, but was later incorporated into another piece of legislation in order to prevent a Presidential veto.  Thus to access the legislative history you must look at the legislative history of the prior bill H.R. 3018  and not S.1908.  The legislative history is available in the Congressional Record via the Thomas web site.