In this post, Nat Cohen makes the argument that damage caused by the UDRP outweighs its benefits.
Why are we weakening ownership rights throughout the entire Internet space and subjecting millions of dollars of domains to attempted seizures each year so that mostly low value cybersquatted domains can be removed from circulation?
The UDRP is gaining popularity as a means for companies to seize valuable domains without paying for them. So many companies are now using the UDRP to target valuable domains that it raises the question of whether the primary function of the UDRP today is to combat cybersquatting, or instead to enable companies to seize valuable domains without paying for them. If so, the UDRP, as currently administered, is doing more harm than good.
The UDRP puts every .com, .net. and .org domain in existence at risk of loss through an administrative proceeding. The rationale for undermining the rights of nearly all domain owners is that the UDRP is necessary to combat blatant cybersquatting.
What good does the UDRP do?
Looking at UDRP complaints by total volume, the vast majority of them result in the transfer of a cybersquatted domain. Proponents of the UDRP will point to these numbers to demonstrate that the UDRP is working as intended. They’ll cite recent cases such as the one where Gucci won 182 .org domains in a single dispute, or one where Hermes went after another 182 .org domains.
Yet the volume of complaints doesn’t tell the whole story. Mike Berkens commented about the Gucci cybersquatted domains, “I can safely say there is not one of these .org domain names that is even worth the registration fee”. As for the Hermes complaint, he said it was “a huge waste of money” and “not sure any of these domains are worth the $8 a year to register or renew”. In other words, while these domains are used to pad the stats of those who trumpet the problem of cybersquatting, the domains themselves are worse than worthless – they have negative value.
Some typo domains receive substantial traffic and some cybersquatted domains are developed for bad faith uses. These sorts of domains would certainly be worth going after in a UDRP dispute. Yet a review of UDRP decisions shows that the domains that are targeted in UDRP disputes are rarely ones that are likely to receive a high volume of type-in traffic, for example domains such as Gieco.com or Verzon.com or GoDady.com. Now that the UDRP is in its 15th year, the big brands have had years to go after the highest value typo squats of their domains. Indeed these typos are already owned by Geico, Verizon, and GoDaddy, respectively. Nor are many of the domains that are targeted in UDRP complaints that contain well-known trademarks developed. These domains are primarily inactive or parked.
The domains that are targeted in UDRP disputes tend to be ones that don’t seem to justify the filing fees much less the registration fee. Recent examples are typical – petrobrasnigeria.info, onlineaccutanemall.com, ermenegildo-zegna-2013.com, swarovskischmuck-outlet.com, xenical-without-prescription.com and allover30freepics.com. These disputes are making money for the lawyers bringing these actions but are likely a waste of money for the brand owners. These domains are so obscure that they bring to mind a variation of the question, “If a tree falls in a forest and there is no one near by to hear it, does it make a sound?” If a typo-squatted domain gets no traffic, does it do any harm?
A 2012 Internet Commerce Association analysis found that “for each million domain registrations there are about 41 domains alleged to be cybersquatting in UDRP cases” over the course of a year. Less than 0.01% of registered domains in a given year generate enough concern among brand holders that they will prompt a UDRP complaint.
There are 118 million registered dot-com domains which is not much less than the 129 million people in the combined populations of France and the United Kingdom. On any given day, there are around a dozen new UDRP complaints filed against dot-com domains. Anyone can file a UDRP complaint at any time. The fee is small. The forms are online and easily filled out. You don’t need a court order or a detective. There are no obstacles to file, and yet brand owners file only around a dozen disputes on average each day.
If across France and Britain on an average day a dozen people were charged with misdemeanor offenses, would strong new laws or procedures be required to combat this “crime wave”? Rather, France and Britain would be utopian paradises that would be by far the safest places on earth. (The UN reports annual total crimes in France and the UK at over 10,000,000 per year!) The extreme infrequency of UDRP filings, when compared to the number of registered domains, suggests that the economic harm caused by cybersquatted domains is vastly overstated.
Another indication that brand owners see little harm from cybersquatted domains is that big trademark holders, with large legal staffs who aggressively police their trademarks, are letting blatant trademark domains drop without bothering to pay the $10 fee required to secure them. Mike Berkens has several blog posts about this where he highlights recently dropped domains such as WiiConsoles.com, TheYouTube.com, NikonBinoculars.com, PaywithPayPal.com and many others that the brand holders can’t be bothered to register.
If cybersquatted domains were causing serious harm, one would expect to see hundreds, if not thousands, of UDRP cases brought every day on high priority trademark-infringing domains, and trademark holders aggressively buying up the most obvious domains incorporating their trademarks. Instead, we are seeing a relative trickle of cases on mostly low value domains and many trademark holders declining to purchase blatant cybersquatted domains when available.
What harm does the UDRP do?
In contrast to the relative indifference of brand owners in using the UDRP to go after cybersquatted domains, the UDRP is generating excitement among some companies due to its power to order the transfer of domains without any compensation to the domain owners. For these companies, the primary use of the UDRP is not in going after clear-cut cybersquatted domains. Rather, they see the UDRP as a low-cost way to secure desirable premium domains that are on their acquisition wish list and may even be preferable to their corporate domains.
The key to success in a UDRP complaint is to demonstrate that the current domain owner is acting in “bad faith”. This may seem difficult to do, but it can be quite easy. UDRP panels have accepted as sufficient evidence of bad faith the following- that the domain is parked (even without the owner’s knowledge), that the domain is inactive, the the domain is for sale, that the domain owner refuses to sell, that the domain once was used for a business but is no longer, that a domain is used as a criticism site, that the domain is currently used for an operating business (but one that is alleged to be trying to profit from traffic intended for the Complainant). It used to be that a Complainant had to demonstrate that a domain was registered in bad faith, but now if you get a favorable panelist for a complainant, you can win an aged domain simply by pointing out a recent objectionable link on an auto-generated landing page. Also, if at first you don’t succeed with one panelist you can simply refile the complaint less than a year later, and the next panelist may award you the domain (see the Sport2000.com decision from January 1, 2014 or mothersmilk.com from 2009 or others).
With UDRP panels making it so easy to take domains from their owners, especially if the domain is owned by a domain investor or by a small businessperson who is not currently using the domain, trademark owners are discovering that the UDRP is ideally suited for obtaining valuable domains on the cheap. Why waste the power of UDRP panels to order domain transfers on worthless typo squatted domains, when one can go after valuable premium domains instead? Paying for domains is old school. The UDRP thus sanctions this “snatch and grab” approach to domain acquisition.
What do the following domains have in common – YU.com, D1.com, Upbeat.com, Inshape.com, Opulence.com, lgg.com, Croma.com, Scram.com, Rive.com, Wala.com, SteelBuildings.com, SpaBreaks.com, Quirk.com, Reckon.com, Quebec.com, GoldCoast.com, and Palace.com?
The answer is that all these domains, and dozens of similar ones, were targets of UDRP complaints within the past year.
One of these domains, lgg.com, recently sold for $175,000. Others such as YU.com or Palace.com would fetch hundreds of thousands of dollars from investors and are similar in quality to domains that are selling for millions of dollars to end-users. The total value of the premium domains targeted in UDRP complaints in the past year is easily in the millions of dollars.
The owners of the premium domains targeted by UDRP complaints are forced to spend hundreds of thousands of dollars each year in legal fees and administrative costs — and to devote huge amounts of time, trouble and effort — to defend their domains against the false charges of bad faith behavior leveled against them by covetous companies. When the domain owner prevails, he or she recovers not one penny of these costs – even when the Complainant is found guilty of Reverse Domain Name Hijacking.
Sometimes the owner of a premium domain loses a UDRP dispute, even in the absence of solid evidence of any bad faith intent towards the brand owner. Unjust decisions are not a surprising outcome of the UDRP.
The UDRP has many flaws, as discussed elsewhere. It lacks uniform standards; it has a pervasive pro-complainant bias; decisions rely on widely differing and highly subjective views of what is meant by “bad faith”, and the reasoning of some of the panelists is sloppy and inconsistent with the language of the policy.
What next?
The challenge is to find a policy that strikes the proper balance between fighting the harm caused by cybersquatted domains against the harm caused by implementing a flawed and inconsistent UDRP that undermines the rights of domain owners and that allows companies to use the UDRP as a cheap tool to wrongly seize valuable premium domains.
An analogy may be helpful in thinking about how to find that proper balance. Let’s say you own a stable that boards valuable racehorses but the stable is also home to swarms of mosquitos. You fumigate the stables to try to kill the mosquitos. You discover that the pesticide is only partially successful in eradicating the mosquitos and has the unfortunate side effect of sickening and killing some of your racehorses. What would you do?
The mosquitos in this analogy are the cybersquatted domains, and the racehorses the valuable premium domains. The stable is the Internet and the pesticide is the UDRP. A racehorse is sickened when it is attacked in a UDRP and it is killed when it is wrongly ordered transferred by a UDRP panel.
Common sense would tell you that the highest priority would be to stop sickening and killing the racehorses by switching to a safer version of the pesticide that did not put the racehorses at risk.
To make the analogy more accurate, you’d need to add that some people are intentionally using the pesticide to sicken and to kill the racehorses. The need for a safer pesticide then becomes even more evident.
If you don’t care at all about the fate of the racehorses, and your single-minded focus is to kill as many mosquitos as possible, then you would recommend increasing the potency of the pesticide to make it even more deadly. CADNA, a lobbying group for corporate trademark interests, advocates just that position in pushing for penalties to increase in the Anti-Cybersquatting Protection Act and the UDRP. My view is that such a policy wouldn’t deter cybersquatting, as the UDRP already has a nearly perfect success rate in ordering the transfer of domains that are obvious cyber squatted domains. Instead, increasing penalties would make the ACPA and the UDRP an even more effective club for large companies to bully smaller companies into giving up their domains by threatening them with not only the loss of the domain but also severe monetary penalties if they end up on the wrong side of the outcome.
But what would domain owners have to fear from higher penalties if they are doing nothing wrong?
If the UDRP was properly and impartially implemented, then the domain owners may not have anything to fear from greater penalties. Unfortunately, the UDRP providers are acting without oversight and, left to their own devices, have developed a system that is riddled with bias and relies on panelists that often have, at best, a lack of knowledge of the domain industry and, at worst, are actively hostile towards domain investors.
Let’s not forget that many UDRP panelists earn their living and have spent their careers representing large brand owners. Their perspective on trademark matters comes from decades spent aggressively asserting the rights of trademark owners.
Let’s not forget that many UDRP panelists do double duty and also represent complainants before the UDRP. One day a particular lawyer, let’s call her Anne, will argue on behalf of a complainant before one of her colleagues, let’s call him Bill, who is the Panelist. The next day they can switch roles. Anne will become the Panelist for a different dispute while Bill is now the attorney for the complainant. Bill’s arguments on behalf of his complainant may sound familiar to Anne, as his arguments are likely to be the same ones she made the day earlier when she was representing her complainant. When Anne as a Panelist weighs the arguments made by Bill against the ones made by the respondent, what are the chances that she will reject the arguments made by Bill which are also the same ones she is relying on to win her dispute, in favor of the contrary arguments made by the respondent? It’s a very cozy arrangement. It is not one that leads to fair outcomes for respondents.
Being a UDRP panelists is a privilege that attorneys who specialize in representing domain owners are currently not allowed to enjoy, as none of them have been accredited as UDRP panelists. Only attorneys who specialize in representing trademark holders are apparently seen by WIPO and NAF and the other UDRP providers as sufficiently impartial to be entrusted with the role of UDRP panelist.
Remarkably, the same eagle-eyed Panelist who is so talented at seeing bad faith in circumstances where no one else can, is blind to the evident conflicts of interest that arise from his own behavior in acting as an advocate and as a so-called “neutral” in the same forum.
On such a shaky foundation as what passes for justice in the UDRP do the livelihoods of domain investors rest.
That a very valuable domain can be lost in a poorly decided UDRP decision is not mere speculation. Three recent prominent casualties of the UDRP are Vanity.com, Canary.com and Ovation.com. All were ordered transferred through, in my view, egregiously flawed UDRP decisions. These three domains alone are worth more than thousands of the nearly worthless cybersquatted domains that have been ordered transferred by the UDRP in the past year.
The UDPR has proven effective in transferring predominantly low-value cybersquatted domains. The UDRP has also proven effective, due to its serious flaws, in wrongly ordering the transfer of valuable premium domains and as a result encouraging many more frivolous disputes seeking the transfer of other valuable premium domains.
On balance, the UDRP, as currently administered, is doing more harm than good.
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