Cybersquatters may violate federal law even if they aren’t the original registrants of the challenged domain, according to a ruling from the 4th U.S. Circuit Court of Appeals.
In a matter of first impression, the Fourth Circuit affirmed summary judgment against a Chinese company accused of violating the Anti-Cybersquatting Consumer Protection Act, or ACPA, by re-registering a domain name with a bad faith intent to profit.
“[W]e join the Third and Eleventh Circuits in holding that the term ‘registers’ and its derivatives extend to each registration of a domain, including the initial registration and any subsequent re-registrations,” Judge Stephanie D. Thacker wrote. “Where a successive registration of a disputed domain name postdates the trademark registration of the corresponding mark, the mark owner may show that the successive registration was done in bad faith.”
The judge also concluded that the defendant wasn’t rescued by the ACPA’s “safe harbor” provision.
Thacker was joined by Senior Judge Henry F. Floyd and Judge Albert Diaz in The Prudential Insurance Company of America v. Shenzhen Stone Network Information Ltd. (VLW 023-2-024).
Prudential Insurance Company of America is a worldwide insurance and financial services company. In November 2002, Prudential registered several trademarks on the term PRU and other PRU-formative marks in the U.S., as well as several other countries and territories.
Because an unaffiliated company named “Prudential plc” uses the PRUDENTIAL trademark in China, Prudential agreed not to use its marks on that country’s mainland.
Shenzhen Stone Network Information, or SSN, is a Chinese internet company that distributes financial and economic information to Chinese consumers online and focuses on the foreign exchange industry.
Zhaoyuan Zhang, a Chinese citizen and SSN’s CEO, purchased the PRU.COM domain name for SSN from an unidentified Texas company in October 2017. Zhang registered the domain with GoDaddy and agreed to its dispute resolution policy with jurisdiction in Arizona for most disputes.
Visitors to PRU.COM were routed to a GoDaddy landing page with pay-per-click hyperlinks displaying Prudential’s marks and those of its competitors, as well as the phrase “Would you like to buy this domain?”
Prudential anonymously offered to buy PRU.COM in March 2020. But SSN refused, saying it had already received a “six figure” offer for the domain and demanding the buyer’s location and business before quoting a price.
Shortly after SSN rejected its offer, Prudential filed for administrative dispute resolution, and again tried to buy the domain from SSN, this time offering $50,000. Zhang rejected the offer, explaining that SSN planned to develop PRU.COM into a website covering foreign exchange economic news.
After dispute resolution failed, Prudential sued Zhang, SSN and the PRU.COM domain name in the Eastern District of Virginia. Prudential claimed the defendants violated the ACPA by registering a domain name identical to their distinctive mark with the bad faith intent to profit.
The district court dismissed Zhang as a defendant for lack of personal jurisdiction, but allowed Prudential’s claims against SSN to proceed.
Even though SSN wasn’t the initial registrant of the domain, the district court determined that the ACPA encompassed subsequent re-registrations.
The district court concluded that SSN possessed the bad faith intent to profit from the disputed domain, granted Prudential’s motion for summary judgment and ordered SSN to transfer PRU.COM to Prudential.
Thacker explained that a cybersquatter who registers a domain identical or confusingly similar to a distinctive or famous mark with a bad faith intent to profit from the domain is liable to the trademark owner under the ACPA.
But “registers” isn’t defined in the statute. While other circuits have split on the word “registers” and its derivatives, Thacker said it was an issue of first impression for the court.
She noted that the Merriam-Webster Dictionary defines “registration” as “the act of registering,” and re-register merely means “to register again.”
“Therefore, the ordinary meaning of the word “registers” necessarily includes both the first registration and any subsequent re-registrations,” she wrote. “And because the ACPA does not expressly limit the term registers to only the initial or creation registration, we conclude that the re-registration of a domain name is a registration for purposes of the ACPA.”
SSN relied heavily on a 9th U.S. Circuit Court of Appeals ruling — GoPets Ldt. v. Hise — to bolster its contention that ACPA liability based on re-registration is improper since “[n]othing in the text or structure of the statute indicates that Congress intended that rights in domain names should be inalienable.”
Thacker said this reliance was misplaced.
“Because property interests are generally freely alienable, the Ninth Circuit declined to read the term ‘registration’ to include re-registrations because such an interpretation could frustrate the alienability of domain names,” she wrote. “While this concern is well-taken, it would be ‘nonsensical’ to not include re-registrations within the purview of the ACPA as it would allow for ‘the exact behavior that Congress sought to prevent.’”
Plaintiffs must satisfy two elements to prevail on a cybersquatting claim: the party using the domain had a bad faith intent to profit from it, and the domain name is identical or confusingly similar to or dilutive of a distinctive and famous mark.
“Here, there is no dispute that PRU.COM is confusingly similar to Prudential’s trademarked PRU because the parties agree that the domain name PRU.COM is identical to the trademarked term PRU,” Thacker said.
Thus, the “sole and dispositive issue” is whether SSN had a bad faith intent to profit from using the PRU.COM domain name.
Of the nine non-exclusive factors a court may consider when determining bad faith, Thacker found that eight favored Prudential.
In fact, she noted, SSN doesn’t use the PRU mark to advertise its organization and hasn’t ever actively used PRU.COM.
“It is undisputed that while registered to SSN, PRU.COM resolved to a parked page accessible in the United States, where Prudential uses the PRU and PRU-formative marks,” the judge wrote. “And SSN does not have any valid property rights in the PRU mark in any country, and thus, is not a legitimate concurrent user.”
No safe harbor
Finally, Thacker said SSN failed to satisfy requirements for the ACPA’s safe harbor provision.
“[N]otably, at the bottom of the document SSN submitted as evidence of the purported tutorial videos it launched online at PRU.COM in early March 2020, there is a ‘Notice of Non-Affiliation’ stating, ‘pru.com is not … in any way officially connected with [Prudential],’” the judge wrote. “This statement directly contradicts SSN’s claims that it did not have knowledge of Prudential or Prudential’s trademarks prior to March 2020.”
The district court’s grant of summary judgment to Prudential was affirmed.
Lucy Wheatley, a partner at McGuireWoods, litigates high stakes intellectual property cases.
“The Fourth Circuit is a very important circuit for domain name issues because Verisign is located in Virginia, and they are the registry for .com’ domains,” she told Virginia Lawyers Weekly. “It’s nice to see a clear decision from the Fourth Circuit on the side of registration having a broader meaning than just the initial registration.”
She added that many practitioners have found the Ninth Circuit’s GoPets opinion to be “problematic.”
“We’ve certainly had clients who faced cybersquatting problems and there’s been an issue as to what remedies are available to them,” she said.