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News from BuildWebsite.com affiliates -- What does the U.S. Court say about Domain Name Dispute Resolution? Trumps it.

Originally published in the Los Angeles Daily Journal, Thursday, March 7, 2002.

A classic conflict played out recently: The duly enacted laws of a sovereign nation, the United States, squared off against an international dispute-resolution policy, of which the United States was a founding member and leading adherent. The 1st U.S. Circuit Court of Appeals was asked to decide whether the Anti- Cybersquatting Consumer Protection Act prevails over the decision of an arbitrator construing the rules of the dispute- resolution policy of the Internet Corporation for Assigned Names and Numbers.

In Sallen v. Corinthians Licenciamentos LTDA, 01-1197 (1st Cir. Dec. 5, 2001), the 1st Circuit concluded that Congress, in enacting the Anti-Cybersquatting Consumer Protection Act, understood that the act and the dispute-resolution policy existed in parallel worlds. In event of a conflict, since both the act and the dispute-resolution policy require similar proof in order to compel transfer of a domain name, interpretation of U.S. statutes by U.S. courts will prevail.

The case is the first bright light for domain owners, who have complained of forum shopping by counsel for trademark owners and of the apparent bias of arbitrators in dispute-resolution proceedings. The Sallen decision now has firmly established that an American domain-name owner may contest the decision of an arbitrator interpreting dispute-resolution policy rules when cybersquatting is at issue.

The Sallen case focused upon the concept of "reverse domain name hijacking," which was defined by the court as an act "whereby trademark owners abusively assert their trademark rights to strip domain names from rightful owners." In 1998, Jay D. Sallen registered the domain name "corinthians.com." The defendants are a soccer organization from Brazil whose name in Portuguese is the same as "Corinthians."

The Brazilian counterpart of the U.S. Patent and Trademark Office is the Institute of Industrial Property, with which the team had registered the name "Corinthiao." The team instituted an action with the Internet Corporation for Assigned Names and Numbers to have the name transferred to them under that organization's dispute- resolution policy.

The World Intellectual Property Organization formed the Internet Corporation for Assigned Names and Numbers to manage the policy and technical aspects of the Internet domain-name system. This new organization developed the Uniform Dispute Resolution Policy.

The policy provides a quick and relatively inexpensive forum for parties to challenge domain-name holders' rights to a name. To prevail, the complainant must prove all of the following three elements: The domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; the domain-name holder has no rights or legitimate interests in respect of the domain name; and the domain name has been registered and is being used in bad faith.

Sallen had placed quotes from the Bible on the Web site. However, other facts cast doubt on whether he was actually using it for commendable purposes or merely intending to exploit the name and sell it back to the team.

From this background, the arbitrator determined that Sallen had, in fact, registered the domain in bad faith and was not entitled to it. The arbitrator ordered the domain name transferred to the Brazilian team. It was from this administrative decision that Sallen appealed to the U.S. District Court in Massachusetts.

The District Court reviewed Sallen's contentions that under the Anti-Cybersquatting Consumer Protection Act he was entitled to a declaratory judgment and injunctive relief prohibiting the transfer of the domain name to the Brazilians. The soccer team argued that the trial court could not decide these kinds of disputes because subject- matter jurisdiction was lacking.

The team claimed that they had no interest in bringing a lawsuit against Sallen for damages under the federal anti-cybersquatting law. They merely wanted the domain name, the transfer of which had been accomplished by the decision of the arbitrator. The district judge agreed and dismissed Sallen's complaint.

Subject-matter jurisdiction resides with a federal court when a "case or controversy" exists under Article III of the Constitution. The team may have alleged that they did not intend to sue Sallen. However, according to the 1st Circuit, when the District Court was asked to intervene, the possibility of a lawsuit had progressed past the point of potential and had reached actuality in light of the decision of the arbitrator.

Furthermore, Sallen alleged that under 15 U.S.C. Section 1114(2)(D)(v) he was entitled, if successful, to a declaratory judgment and injunctive relief regaining the domain name. By pleading rights under this statute, the 1st Circuit held, he conferred jurisdiction on the federal courts. "Congress has provided registrants such as Sallen with an affirmative cause of action to recover domain names lost in UDRP proceedings. The statute clearly states that a registrant whose domain name has been 'suspended, disabled, or transferred' may sue for a declaration that the registrant is not in violation of the Act and for an injunction returning the domain name."

In fact, Sallen's recourse to the federal courts is contemplated in dispute-resolution policy rules. A recognition that these rules may conflict with national statutes and, thus, promote resistance to international arbitration led the World Intellectual Property Organization to a compromise: Under dispute-resolution policy Section 4 (k) , parties are entitled to de novo review of arbitration awards in national courts.

Both the team and Sallen acknowledged that the rules used under the dispute-resolution policy to determine whether a domain name is confusingly similar to a trademark "overlap" the provisions of the federal anti-cybersquatting statute. As such, the team was walking on thin ice when it argued that the arbitrator determined only compliance with dispute-resolution policy rules, not a violation of U.S. law, in deciding in favor of the Brazilians.

In response, the 1st Circuit pointed out that in some instances, federal law impacts a decision by a dispute- resolution policy arbitrator. For instance, the issue of a legitimate right to the domain name or whether it is being used in bad faith may be in conflict with the same determinations of a U.S. court interpreting the Anti- Cybersquatting act. In such cases, a district judge's determination that Sallen was not a Cybersquatter may nullify the decision of the arbitrator.

When one registers a domain name with an accredited registrar, one agrees through a registration statement to abide by the rules of the Internet Corporation for Assigned Names and Numbers in the event of a domain-name dispute. Taking this premise to its logical conclusion, the team alleged that Sallen waived any recourse to federal court to decide the issue under the anti-cybersquatting statute when he agreed to abide to different standards under the dispute-resolution policy.

But the 1st Circuit disagreed. Congress has permitted losing arbitration participants to petition for a hearing under the federal act and, in so doing, contradict and undercut the provisions of the dispute-resolution policy. Absent from this argument is the obvious point that the registration agreement, which incorporates the terms of the policy, is mandatory and imposes an adhesion contract on the domain-name holder. By this device, the Internet Corporation for Assigned Names and Numbers is able to exercise its control over the domain-name system. In short, one either agrees to the terms of the dispute-resolution policy or one is not able to register the domain name.

Thus, irrespective of its title, the Anti-Cybersquatting Consumer Protection Act is not entirely favorable to trademark holders. Under Section 1114(2)(D)(v), a domain owner may act against "reverse domain name hijacking." Sallen is a prime example of one who took advantage of this statute. Certainly, the mere presence of this statutory language does not confer a successful result.

Moreover, the domain owner will have to be persistent and unafraid of incurring the costs of federal litigation. However, it may slow down an overzealous, abusive trademark owner, compel a better presentation of evidence and eliminate the benefit of forum shopping or bias from the presiding judicial officer.

Of course, one must consider the circumstances of the above case being reversed. For example, what if the trademark holder were an American company and the alleged domain-name infringer resided in a third-world country? If the arbitration panel ruled in favor of the American company, a court in the third-world country, at the request of its citizen, may decide to reverse the panel in light of local law.

The American company has now exhausted its remedies. It is without its domain name, and its trademark suffers from infringement or is diluted by a confusingly similar name. At the moment, there is no answer in sight to this potential problem.

The dilemma outlined above reveals the flaws inherent in any international agreement. The dispute- resolution policy rules are merely recitations of existing law and, by necessity, are applied across a broad international spectrum. They must appeal to the "lowest common denominator" to be effective. That is their strength and their weakness.