A place to make amends

Domain names have become extremely valuable commodities for businesses wishing to attract potential customers to their websites. Existing trade marks have become part of domain names (for example “nike.com”), while popular domain names have also become trade marks (“amazon.com”). A recent controversial dispute between social networking site MySpace, Inc and a small UK internet service provider has highlighted the commercial value of domain names, and the legal minefield which surrounds ownership of them.

Total Web Solutions Ltd (“TWS”) of Stockport registered the domain myspace.co.uk in 1997 and originally used it to offer mini-websites and email services. MySpace was founded in 2003 and acquired by News Corporation Inc in July 2005 for $580m. The resultant publicity meant that MySpace rapidly gained popularity. It was around this time – although the exact date is disputed – that TWS changed its use of myspace.co.uk. The domain no longer offered mini-sites, but instead resolved to a page run by Sedo, a company which provides advert links on unused domains, automatically generated by a standard software package on the basis of search engine results. MySpace’s growth in popularity was reflected in the advertising links on the myspace.co.uk domain.

Controversial challenge

MySpace believed that this change in use of the domain was a direct consequence of the acquisition of MySpace, because TWS hoped that public confusion would lead to an increase in visits to its site. Nominet, the company which administers the United Kingdom’s country code domain “.co.uk”, was approached by MySpace in August 2007 to declare an abusive registration. In February 2008 Nominet’s dispute resolution service (for disputes involving “.co.uk” domain names) considered the dispute, ruled that TWS’s registration had become abusive, and transferred the domain to MySpace (Decision DRS no 04962).

The decision was controversial for a number of reasons. It had previously been believed that knowledge of a complainant’s trade mark (or an intention to take unfair advantage of it) when domain use commenced was a necessary condition to make a prior registration abusive. Earlier decisions also indicated that if a company subsequently adopted a name which was identical to a domain name already legitimately registered, then the registrant had every right to retain the domain or sell it at a commercial price. The overall perception of the decision was that one of the world’s largest media organisations had “bullied” a small UK company. TWS chose to appeal, and at the end of April the domain was transferred back to it by the Nominet appeals panel.

Resolving domain name disputes

Before discussing this unusual dispute in more depth, it is helpful to have a basic understanding of how domain name disputes can be resolved. The starting point is that nobody can actually “own” a domain name, in the same way that nobody can actually “own” a telephone number. Instead, domain names are managed by recognised registrars. The Internet Corporation for Assigned Names and Numbers (“ICANN”) manages generic top level domains (for example .biz, .com, .info, .net, and .org). In the UK, as already explained, the country code top level domain (“.co.uk”) is administered by Nominet. Nominet grants the registrant a licence to use the domain name, with the result that the registrant does not own it, but has a right to use it, allowing a form of quasi-ownership.

Nominet’s dispute resolution service (“DRS”) procedure for allegedly abusive registrations involves various stages. A complaint form can be completed at Nominet’s site, and a non-binding, confidential and without prejudice mediation can be arranged. According to Nominet, 60% of disputes are settled at this stage. If the case fails to settle at mitigation, or if no response is made to the complaint, the complainant can pay £750 to bring the case before an appointed expert who will consider the arguments and issue a binding decision. Under the DRS an abusive registration means a domain name which either:

was registered or otherwise acquired in a manner which, at the time when the registration or acquisition took place, took unfair advantage of or was unfairly detrimental to the complainant’s rights; or  has been used in a manner which took unfair advantage of or was unfairly detrimental to the complainant’s rights.

A domain name is usually transferred if abusive, or left with the current registrant if the complaint is denied. There are no monetary damages applied. DRS resolutions are mandatory in the sense that accredited registrars are bound to take the necessary steps to enforce a decision, such as transferring the name concerned. However, decisions using dispute resolution services are typically not binding on courts, and proceedings can be initiated after the appeals panel has given its judgment. Furthermore, previous decisions under the DRS are not binding, but merely “persuasive”.

Disputes commonly arise when “cybersquatters” exploit the first-come, first-served nature of the domain name registration system to register names of trade marks, famous people or businesses in bad faith for financial gain. These disputes are relatively straightforward to settle. However disputes can also arise over domains to which more than one party appears to hold a legitimate claim, and these are far more difficult to resolve. The battle for myspace.co.uk is a very good example.

Myspace at first instance

The dispute was considered at first instance by independent arbitrator Andrew Gold. MySpace sought to build a case on passing off and argued that www.myspace.co.uk was being used in a way which would be likely to confuse people into believing that the domain name was operated, authorised or in some way connected to MySpace. MySpace also argued that TWS had no rights in the MySpace mark. TWS countered that “myspace” was wholly descriptive of its business of providing internet space to its individual users which they could treat as their own, pointing out that myspace.com, myspace.co.uk and myspace.de were all registered long before MySpace acquired its name. TWS was also using the domain name in connection with a genuine offering of goods or services, and had been legitimately connected with the mark “myspace” before MySpace existed to popularise the term. (Although TWS no longer offered the mini-websites, it still provided email services to 18 subscribers at the domain.)

The case turned on the advert links that appeared on the domain. It transpired that the initial effect of parking the domain with Sedo was that anyone visiting it would be diverted to a webpage entitled “bigspace.co.uk”. However at some point this original service was altered to introduce a parking page specially tailored to the domain name myspace.co.uk. The date on which this change occurred was disputed. MySpace argued that it had occurred in August 2005, following the publicity of the News Corporation acquisition, and that TWS was making substantial “click through” revenue on sponsored links as a result.

In response TWS claimed that the domain was parked in or around July 2004, and that the change to a dedicated domain name parking page had occurred in June 2005, prior to any publicity. TWS stated that in any case, while the nature of the advertising had changed, it had no control over the content of the links because they were determined by algorithms linked to the search terms used by the internet community as a whole.

Mr Gold considered the advertising to be crucial in indicating an abusive registration. He said that it was not relevant that TWS did not select the specific links. It owned the website, was responsible for the adverts, and could not hide behind the automation of the Sedo service. Accordingly he awarded the domain to MySpace.

Final appeal?

On appeal TWS contended that the case had been decided on grounds which MySpace had not pleaded for. More generally TWS claimed that the quasi-legal process of the DRS was not intended to operate where there was a genuine clash of rights demanding a testing of evidence and balancing of interests in court. On consideration of the evidence, the appeals panel concluded that MySpace had failed to discharge its burden of establishing that the date of first use of the dedicated parking page postdated the publicity surrounding the acquisition of MySpace. With regard to MySpace’s more general contention that regardless of the dates, TWS should have assumed responsibility for the content of the advertising links, the panel noted that a court of law might well impose on registrants a duty to exercise control over site content, to avoid trade mark infringement or passing off. Nevertheless:

“The registration of domain names is still a first-come first-served system and the panel is reluctant to place any duty on a registrant, who has merely had the good fortune (or maybe ill-fortune) to register a domain in good faith, which subsequently, through no fault of his own, acquires notoriety, provided that he does nothing actively to exploit his position” (emphasis in original).

The domain was accordingly awarded back to TWS. However, the appeals panel also noted “grave suspicion” in relation to the activities of TWS and suggested that MySpace should consider litigation where full disclosure and tested evidence could be called on to determine whether the changes to the nature of the parked domain were devised in order to benefit from heightened public awareness of MySpace.

At the time of writing the domain currently carries no advert links and appears to be of little practical use to TWS. The links have been removed, presumably because TWS does not wish to be seen to be actively exploiting its position. Prior to the dispute MySpace was prepared to pay TWS £220,000 + VAT for the domain. It remains to be seen whether this offer will go back on the table, or whether the parties will end up in court. 

More generally this saga serves as a clear example that the DRS is currently poorly equipped to resolve a dispute where both parties have a legitimate claim on a domain name.  It is arguable that – clear instances of “cybersquatting” aside – a dispute resolution service should not be empowered to defeat a registrant’s rights in their domain name, particularly given that the registrant is often the party less able to afford legal advice.

Parking charges

Domain parking is an advertising practice used primarily by domain name registrars to generate income from visitors who have speculatively typed their domain name into an internet browser. A parked domain resolves to a page containing advertising listings and links. These links may change dynamically based on the particular adverts that visitors click on. Usually the domain owner is paid based on how many links have been visited (“pay per click”) and on how beneficial those visits have been (e.g. if any sales have been generated). The keyword(s) in the domain name often provide clues as to the intent of the visitor before arriving (for example in www.lawscot.org.uk the keyword would be “law”), meaning that the adverts can be targeted to the predicted interests of the visitor.