HSBC v. Clear Blue Sky – Common UDRP Defenses Debunked

A recent UDRP case, HSBC Finance Corporation v. Clear Blue Sky Inc. and Domain Manager, Case No. D2007-0062 provides a good collection of some typical losing UDRP defenses and shows where the line should be drawn around such defenses.

The Case

In HSBC v. Clear Blue Sky, the disputed domain name (creditkeeper.com) was identical to the highly descriptive mark, CREDITKEEPER.

The domain was initially registered by a Canadian citizen, Peter Bradford. This was three and a half years before the Complainant, HSBC, registered the CREDITKEEPER trademark. Since the UDRP requires that the Complainant prove both bad faith use and bad faith registration, this would have proven problematic for the Complainant, had the Complaint been against Mr. Bradford. However, the registrant changed at some point after HSBC established rights in the CREDITKEEPER mark. (Note, under the Anti-cybersquatting Consumer Protection Act 15 U.S.C. § 1125(d), the plaintiff only needs to prove bad faith registration or bad faith use. Accordingly, it is actually easier to win an ACPA complaint than a UDRP, despite the fact that an ACPA victory could come with a large monetary award).

The Respondent made a few key arguments that are common in UDRP responses. This case serves as a great resource as to how the UDRP will dispense with these responses.

CREDITKEEPER is made up of common dictionary words, and thus the Complainant can not exercise exclusive rights.

I see this argument a lot. Some panelists such as Bernstein and Sorkin seem to buy it more than others. For the most part, this is a good argument as it creates an issue of fact that some Panels will decline to address, and thus reject the complaint. However, I have rarely seen this argument put forth in a context that passes the laugh test. Just because a trademark is not a coined term doesn’t mean that the Complainant has no rights, nor does it mean that the Respondent has a magic good faith argument.

The Panel in HSBC v. Clear Blue Sky summed up this issue with perfection:

Where a respondent registers a domain name consisting of “dictionary” terms because the respondent has a good faith belief that the domain name’s value derives from its generic or descriptive qualities, the use of the domain name consistent with such good faith belief may establish a legitimate interest. See Mobile Communication Service Inc. v. WebReg, RN, WIPO Case No. D2005-1304. But the domain name must have been registered because of, and any use consistent with, its attraction as a dictionary word or descriptive term, and not because of its value as a trademark. Media General Communications, Inc. v. Rarenames, WebReg, WIPO Case No. D2006-0964.

The problem with some UDRP panelists is that they ignore this logic. Some panelists seem to hold the opinion that if a trademark appears in the dictionary, the complaint must fail. The HSBC v. Clear Blue Sky panel drew the line precisely where it belongs. If a registrant registers a generic word, it had better have done so because it is a generic word. Registering a dictionary word that happens to be a trademark, and then raising the dictionary word defense as a pretext will not fly with panels that do their job properly. C.f. Smart Design LLC v. Hughes, D2000-0993. Para. 4(a)(i) does not demand that the complainant show exclusive rights, but just that the complainant has a bona fide basis for bringing the complaint.

How was I supposed to know, I don’t live in the country where the trademark rights exist!

I see this one a lot too. The respondent claims to be a foreign entity or person who stutters bb..b..but, how was I supposed to know about U.S. (or some other country’s) trademark rights? I live in Kreplachistan! See, e.g., Universal Spheres, Inc. d/b/a GoldenPalace.com v BusinessService Ltd., NAF Claim Number: FA0607000746952 (Russian-based respondent registered golden-palace-online-casino.com yet contended that it had never heard of the online casino “Golden Palace.”). See also Alpine Entertainment Group, Inc. v. Walter Alvarez,, Case No. D2007-1082 (Swedish-based respondent claimed that he had never heard of the complainant, but: “the Panel finds it difficult to believe that the Respondent, in light of his evident Internet-savvy (not to mention claimed plans for future use of the disputed domain name), had no knowledge of the Complainant’s website”).

In HSBC v. Clear Blue Sky, the Panel did not say that the “lack of constructive notice” / “no-extraterritorial enforcement of marks” defense could never work, but that its contours were relatively easy to demarcate.

The Respondent argues that as a Bahaman corporation it cannot be presumed to have had notice of the Complainant’s U.S. trademark registrations. While panel precedent does not necessarily embrace the principle of constructive notice in all circumstances, the answer to this question will always depend on the particular circumstances of the case. Here, the Respondent, in view of paragraph 2 of the Policy cannot rely on precedent to shield its conduct by closing its eyes to whether the domain name it is registering is identical or confusingly similar to the trademark of another. See Mobile Communication Service Inc. v. WebReg, RN, WIPO Case No. D2005-1304. See also Media General Communications, Inc. v. Rarenames, WebReg, WIPO Case No. D2006-0964.

Accordingly, constructive notice is not always applied, but there is a difference between constructive notice and willful blindness, and plain old lies.

Other panels have addressed this extraterritoriality principle as well — usually to the detriment of the respondent. The panel in Koninklijke KPN N.V. v. Telepathy Inc., D2001-0217 found that the UDRP does not require that the Complainant have registered rights in the respondent’s country. It is sufficient to show that the complainant has rights in some jurisdiction.

On the other hand in cases like Deutsche Welle v. DiamondWare Limited, Case No. D2000-1202, panels have judged complainants quite harshly (finding reverse domain name hijacking) when the complainant should have realized that there would be no constructive knowledge of any kind. In that case, the panel’s majority held “The Complainant has not produced one shred of evidence to suggest why the Respondent, a company in the United States, should have been aware of the existence of the Complainant, a German broadcasting service, back in 1994 when it registered the Domain Name.” See also Koninklijke KPN N.V. v. Telepathy Inc. Case No. D2001-0217.

Relation-back of Rights

This argument pops up occasionally, but it seems to have gained very little to no traction.

In HSBC v. Clear Blue Sky, the Respondent argued that since the original registrant obtained the domain three and a half years before the Complainant established rights, that he registered it in good faith. Neither the Panel nor the Complainant disputed this claim.

However, the Respondent also argued that when he acquired the domain, he acquired all rights — including the good faith registration — from the initial registrant.

The Panel in HSBC v. Clear Blue Sky noted:

The Respondent, however, fundamentally misperceives the Policy and its objectives in asserting that a previous registrant’s good faith registration of a domain name immunizes one who subsequently acquires the domain name from further scrutiny. The overriding objective of the Policy is to curb the abusive registration of domain names in circumstances where the registrant is seeking to profit from and exploit the trademark of another. Match.com, LP v. Bill Zag and NWLAWS.ORG, WIPO Case No. D2004-0230. The consensus view of WIPO Panelists is that, while a renewal of a domain name does not amount to registration for purposes of determining bad faith, the transfer of a domain name to a third party does amount to a new registration, requiring the issue of bad faith registration to be determined at the time the current registrant took possession of the domain name. See WIPO Overview of WIPO Panel Views on Selected UDRP Questions, § 3.7, and cases cited therein.10

Despite the clarity in the UDRP that each transfer of ownership is a new “registration,” which must be made in good faith, respondents do seem to keep trying this argument. I have only encountered one panel stupid enough to buy it. In Alpine Entertainment Group, Inc. v. Walter Alvarez, Case No. D2006-1392, the panel accepted this argument. However, that case was overturned by Alpine Entertainment Group, Inc. v. Walter Alvarez,, Case No. D2007-1082. Accordingly, I am aware of no standing and valid decisions in which a panel has accepted the transferability of a prior registrant’s good faith registration. Instead, panels uniformly hold that each new registration or transfer of a domain name constitutes a new registration. See, e.g., Dreamgirls, Inc. v. Dreamgirls Entertainment, WIPO Case No. D2006-0609.

Conclusion

When a well-reasoned decision like this is published, it is helpful to trademark owners and domainers alike.

Trademark owners deserve more decisions like this, where the panel does its job properly. Given the limited nature of the UDRP procedure, panels must make inferences draw conclusions, and make findings of fact.

Some panelists prefer to require strict proof of all elements as if it were a motion for summary judgment – and that any issue of fact can not be resolved by the panel. These panelists either fundamentally misunderstand the UDRP or are motivated by a desire to be frequently selected (at $500 a pop) by respondents. One “respondent’s panelist” has garnered more than $100,000 in UDRP panelist fees. Do the math.

Good decisions like this, even when they are ruled against the domainer, actually help domainers in general. The more panel decisions that require strict proof, as might be required in a summary judgment proceeding, the less likely trademark owners will be to undertake a UDRP proceeding, and the more likely they will be to simply file a complaint under the Anti-cybersquatting Consumer Protection Act 15 U.S.C. § 1125(d). The only down side to losing a UDRP decision is loss of the domain name. An ACPA action can mean $100,000 in damages as well as an award of costs and attorneys fees. Also, a UDRP action can be appealed de novo to a district court. An ACPA decision must be appealed to a Court of Appeals – not a desirable proposition for a domainer. Accordingly, the more useful the UDRP remains, the less exposure for domainers.

Finally, this decision seems to suggest that a domainer who purchases a domain in good faith might find the resale value of that domain extinguished by the subsequent rise of a company’s later-established trademark rights. This is partially true. However, a good attorney can help domainers to execute such a transfer – but only if they plan ahead.

Stay tuned for a posting on that!

2 Responses to HSBC v. Clear Blue Sky – Common UDRP Defenses Debunked

  1. [...] Randazza analyzes several common defenses under the ACPA in this post. He also discusses the advantages to the UDRP process versus defending an ACPA claim, at least for [...]

  2. [...] the date of each transfer is considered to be a “new registration” under the UDRP. See this post (and scroll down to “Relation Back of [...]

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