Stopping cybersquatters

Editor's Note: With the fast growth of the Internet comes rising number of Internet domain name disputes. The failure of some enterprises to protect their rights by timely registering their domain names opens the door for so-called "cybersquatters" to register the unprotected domain names.

Fu Haiying, partner of King & Wood's Trademark Group in Beijing, and Xu Ming, an associate of King & Wood's Trademark Group in Beijing, talk about the reasons behind cybersquatting cases and measures to prevent them.

China Business Weekly will run the article in two issues. Below is the first part of the article. The views expressed here are the authors' own.

The rise of Internet domain name disputes has been matched by a rise in preemptive registration of domain names.

The failure of some enterprises to protect their rights by timely registering their domain name opens the door for cybersquatters to step in and register the unprotected domain names.

Currently, dozens of domain name suffixes and keywords are available for registration in China, including traditional domain name suffixes such as ".com", newly emerged domain names ".info", ".mobi", Chinese domain name suffixes ".network", ".corporation", as well as Internet keywords and wireless keywords. In addition, the number of available domain names and keywords continues to grow, such as the recently emerged ".asia".

Since there are so many domain name suffixes and keywords, enterprises cannot completely avoid the risk of preemptive registration of domain names even if they apply for registrations for all their trademarks, trade names, and other prior rights bearing certain market reputation with different domain name suffixes.

For example, even if the trademark owner of ABC has obtained domain name registrations for the mark, the cybersquatters can still register an endless list of domain names containing the mark, such as ABC1, ABC2, even ABCABC. Does the existence of such a phenomenon require enterprises which possess the prior rights to constantly challenge the cybersquatters at the courts or domain name dispute resolution organizations to regain their preempted domain names or keywords? This article will explore the issue from two perspectives, and hopes to uncover the veil of domain name preemption and to suggest some solutions against cybersquatting.

External motives for cybersquatting

Rapid growth of domain name suffixes in numbers and categories

The increasing number of domain name suffixes have enriched and expanded the platform for spreading Internet information. However, this also inevitably opens the door for cybersquatting activities. Whenever the Chinese domain name administrative authorities, such as the Internet Corporation for Assigned Names and Numbers ("ICANN") and the China Internet Network Information Center ("CNNIC"), issue a new domain name suffix, a wave of cybersquatting will follow.

To address this, DotAsia Organization Ltd. has developed corresponding measures to prevent cybersquatting when issuing the domain name suffix .asia.

DotAsia Organization is the sponsoring organization and registry operator for the .Asia Sponsored Generic Top Level Domain. DotAsia is a not-for-profit, community-based organization, which is incorporated in Hong Kong by the domain name registration operators from China, Japan, South Korea, Vietnam and other countries.

DotAsia set up a pre-registration period ("Sunrise Period") before .asia was opened to the public. The Sunrise Period was classified into three stages: (1) domain name registrations were available for government-related organizations; (2) domain name registrations for trademark owners who own trademark rights in Asian countries; and (3) domain name registrations of company names for companies with a physical presence in Asian countries. The public registrations were only available after the Sunrise Period. The establishment of pre-registration periods has somewhat curbed cybersquatting.

Weaknesses in the domain name pre-registration protection mechanism

Article 24 of the Measures for the Administration of Internet Domain Names of China ("Measures") provides that "domain name registration shall follow the First-to-File Principle." Article 28 of the Measures provides that "the applicants must submit valid, accurate and complete information for domain name registration". In addition, Article 29 of the Measures provides that "domain name holders must abide by relevant laws, regulations and rules. The domain name holders must bear legal liabilities in case the possession or use of the domain names have infringed upon others' legitimate rights and interests."

However, the measures requires the applicant for registration of a domain name to provide valid, accurate and complete information and it does not clearly require that the domain name registration not infringe upon the third parties' rights and interests.

In addition, the measures does not require CNNIC to conduct substantial examination, but only states in principle that the domain name holders shall be liable for infringement of any third party rights and interests resulting from their possession or use of domain names. In practice, CNNIC only performs a preliminary examination of proposed domain names; it does not conduct substantial examination to determine whether a proposed domain name has infringed upon others' prior rights.

Low cost for domain name registrations

Currently the official fee for one domain name registration is only 100 yuan or 200 yuan and the fees for domain names with .cn suffixes is only 1 yuan. The official fees for registering Internet keywords and wireless keywords are slightly higher - 500 yuan and 1,000 yuan, respectively.

However, if cybersquatters register a domain name and sell it successfully, they will probably earn a profit of at least a few thousand to tens of thousands RMB. Therefore, the disproportionate cost-benefit ratio is another driving factor behind increased cybersquatting activities.

Lack of penalties imposed on cybersquatters

Under the Chinese legal framework, the parties can resort to judicial litigation or file dispute applications with the domain name dispute resolution organizations to seek administrative remedy. To be successful in a domain name dispute, the complaint must satisfy the following three requirements:

(a) the disputed domain name is identical with or confusingly similar to the complainant's name or mark in which the complaint has civil rights or interests; and;

(b) the disputed domain name holder has no right or legitimate interests over the domain name; and,

(c) the disputed domain name holder has registered and/or used the domain name in bad faith.

Even if the complainant obtains a favorable decision and the "bad faith" argument against the registrant is established, the registrant will not bear any civil or administrative liabilities for its malicious domain name registration. In this respect, compared with the administrative domain name dispute resolution mechanism, civil procedures will ensure the cybersquatters bear civil liabilities.

However, the monetary compensation is usually low, and the time and monetary cost of judicial litigation are higher than those of the administrative dispute resolution mechanism. Therefore, normally, the purpose for filing a domain name dispute is to regain a domain name, rather than receive monetary compensation. As a result, the financial disincentive to cybersquat is outweighed by potential economic gains. This is the key cause for the prosperity of cybersquatting activities.

From the above analysis, we can see that there are foundations for the existence of cybersquatting in China and the fundamental reason for that lies in the fact that cybersquatting has not been clearly addressed in Chinese laws, and there is no clear definition of the legal nature of cybersquatting activities.

To be continued

(China Daily 10/20/2008 page9)