Ruling Curbs Net Trademark Protection
In the first major blow to companies seeking to protect their trademarks on the Internet, a federal appeals court held Monday that corporations cannot always prevent others from registering domain names that coincide with their brand names.
The decision clarifies who is entitled to a domain name that bears a company’s trademark. Legal experts said it could shift the balance of power on the Internet away from big companies and toward individuals.
A domain name could be worth several million dollars to companies, as Compaq Computer Corp. learned last year when it paid $3.5 million to acquire the name AltaVista.com from a California technology firm.
Legal experts say the ruling could determine the outcome of similar cases pending in courts across the nation, giving more power to individuals and smaller companies that are being sued by giant corporations.
Disputes over Web addresses have been going on for years as companies recognize the commercial potential of the Internet. As companies try to stake their claims in cyberspace, they often find their prime parcels in the hands of somebody else. Dozens of lawsuits target cybersquatters--people who register domain names based on company names and trademarks and then offer to sell them at inflated prices.
That was the case with Avery Dennison Corp., which last year obtained a court order forcing a Canadian businessman to turn over the domain names “avery.net” and “dennison.net.” The federal judge in Los Angeles deemed businessman Jerry Sumpton and his company FreeView Listings cybersquatters. But a three-member panel of the U.S. 9th Circuit Court of Appeals disagreed. The panel’s decision doesn’t protect cybersquatters. But it places a heavy burden on companies to show that someone who has registered its name did so to cash in on the trademark’s value.
The court’s decision “preserves chunks of the Internet for people who are not trademark holders,” said Elliott Brown, an intellectual property law expert at Irell & Manella in Los Angeles. “It gives the proper balance between the rights of trademark holders and the rights of the public to use words in the English language in legitimate ways without fear of [being sued].”
Sumpton had registered the names “avery.net” and “dennison.net” for Vancouver, Canada-based FreeView. He planned to lease the names to people seeking vanity e-mail addresses that contain their last names. FreeView allows people who share a surname to use the same domain name for e-mail.
But Pasadena-based Avery Dennison, which sells $3 billion worth of labels and office supplies every year, sued to recover the domain names because it feared its customers would be confused.
The appeals court rejected Avery Dennison’s argument, saying that while its trademarks are “distinctive,” they are not “famous” enough to warrant exclusive use. The court noted that “Avery” and “Dennison” are common surnames, and that others have a right to use them.
“Until now a lot of people thought that if you own a trademark you could go to court and [automatically] stop someone else from registering a domain name that matches your trademark,” said Eugene Volokh, a UCLA professor who teaches cyberspace law. “Now, people who register domain names in good faith--not to extort or confuse anyone--may win even if the domain name happens to match somebody else’s trademark.”
David Quinto, the attorney who represented Avery Dennison, said the ruling makes it too hard for companies to protect their trademarks. Only a few very famous names, such as Ford and Coca-Cola, are so closely associated with companies that they would be protected by trademark law, and Avery Dennison didn’t make the cut, he said.
Although he ran up a $300,000 legal bill and was almost ousted by his board of directors, Sumpton said he had no choice but to fight.
“They said we couldn’t afford to fight it on principle,” he said. But if he didn’t resist, “all the big trademark people were going to take a run at us and eventually would run us out of business.”
