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A move to protect older domain registrations in the UDRP?

2013 May 15
by Nat

One of the headaches of being a domain investor is that none of your domains, no matter how long you have owned them, is safe from being attacked through a UDRP complaint.  As a result, domain owners can never be secure in the ownership of their domains.  My last concluded UDRP was on SHA.com, a domain that I had registered 13 years prior to the filing of the Complaint.  I am currently in a dispute over a domain I registered 15 years ago.

A recent move by some panelists to deny complaints because the Complainant delayed too long in asserting their rights may provide relief to domain owners from facing complaints on domains registered long ago.  The principle that a party who ‘sits on their rights’ for too long loses the ability to assert those rights is known as ‘laches’.  Laches is defined as an “unreasonable delay in pursuing a right or claim… in a way that prejudices the [opposing] party”.  Laches is an equitable defense available in U.S. courts, but until recently it was uniformly rejected by panelists as a defense in UDRP cases.

The newly published upiphoto.com dispute (as written up by Mike Berkens) is a notable decision in support of the laches defense. The upiphoto.com case is notable for many reasons.  The primary one is that it is the first case (to my knowledge) where laches was found when the respondent defaulted, meaning there was no response submitted to argue the respondent’s side of the dispute.

Also remarkable is that the panelist found that the Complainant’s case was barred by laches because the domain was registered FOUR years earlier.

Respondent has apparently been using the disputed domain name to sell/license photographs since 2008 without complaint…for more than four full years.  During that time, Respondent has undoubtedly acquired rights to the disputed domain name.  Complainant’s late claim is barred by laches.

If a four year delay in bringing a complaint is widely accepted by panelists as being barred by laches, then it would protect many domains that would otherwise be ordered to be transferred.  But that is unlikely to happen for the reasons discussed below.

Also notable is the background of the sole panelist who issued the decision, Houston Putnam Lowry.  Mr. Lowry has been a panelist since the early days of the UDRP, issuing over 300 decisions since 2000.  Although he is a practicing attorney, according to UDRPsearch.com he has only ever appeared in the UDRP process as a panelist, never as a representative for either a Complainant or Respondent.

It is no accident that Mr. Lowry is not an advocate for Complainants, as I don’t believe that any active Complainant’s attorney would have found that laches barred any complaints on domains that were four years old.  Any Complainant’s attorney that took that position as a panelist would be cutting his own throat.  His clients might want him to file a Complaint against a domain that was registered several years earlier, and if he was on record stating that laches prevented complaints on four year old domains, he would lose his client.

The upiphoto.com case highlights an example of the conflict of interest that can arise when UDRP providers accredit active Complainant attorneys as “neutral” panelists – as they often do – because those attorneys cannot be neutral as to legal positions that disadvantage their clients.   I view those attorneys who concurrently act as an advocate before the UDRP and act as a UDRP panelist as having an inherent conflict of interest, and I have devoted a blog post to this issue.

While it is not surprising that a decision invoking laches was issued by a panelist who is not an active Complainant’s attorney, it is quite surprising that Mr. Lowry issued this decision since many of his earlier cases indicated a hostile view towards domain investing and until recently he rejected laches as a valid defense in UDRP cases.

In the shoemart.com decision from June 2005, the majority of the panelists denied the complaint yet Mr. Lowry issued a dissent stating that he would have ordered the transfer of the shoemart.com domain in large part because he saw domain resellers as cybersquatters and domain reselling as violating the UDRP:

I believe the UDRP was designed to regulate a scarce resource (domain names) rather than to provide a mechanism to protect registered trademarks.

There is no doubt Respondent is in the business of being a reseller of domain names that consist of common English words.  The fundamental question before the Panel is whether or not such a business should be allowed under the UDRP…

(i)         circumstances indicating that Respondent registered or acquired the domain name primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the complainant who is the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of Respondent’s documented out-of-pocket costs directly related to the domain name; or

Being in the business of reselling domain names seems to fit pretty clearly into this category.

(ii)        Respondent registered the domain name in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name, provided that Respondent engaged in a pattern of such conduct; or

Being in the business of reselling domain names seems to fit pretty clearly into this category.  While this Panel would not claim Respondent did this to specifically block Complainant, Respondent did this to block someone in Complainant’s position.  In fact, Respondent’s entire business model assumes the existence of someone in Complainant’s position.

Mr. Lowry’s position here in shoemart.com is a clear articulation of the view of those panelists who believe that reselling domains is inherently bad faith because, in their view, any value in the resold domain must come from another company’s commercial use of a term similar to the domain.  This view is quite dangerous and misguided both because it ignores that generic domains have substantial inherent value due to the widespread accepted meaning of the domain and because this attitude allows panelists who share similar views to order transfers of domains even in circumstances where there is no evidence that the domain owner targeted the Complainant.

Fortunately Mr. Lowry’s views as expressed in the shoemart.com case are both minority views, as most panelists require evidence that a domain owner specifically targeted the Complainant in order to find bad faith, and most panelists recognize that reselling domain names can be a legitimate business activity.  Indeed, the majority in the shoemart.com case took the trouble to clearly express how they differed from Mr. Lowry:

For the sake of completeness, it should be noted that the Panel Majority also disagrees philosophically with our dissenting brother [Mr. Lowry] on what he deems to be the key issue here — whether it is illegal to register domain names for the purpose of selling them later, as he seems to suggest is the case.

Yet in the case of woodensoldier.com, Mr. Lowry found a like-minded panelist and together they ordered the transfer of the domain over the strong dissent of panelist David Sorkin.  Mr. Sorkin argued that woodensoldier.com was a generic domain used in its generic meaning.  Yet Mr. Lowry and his fellow panelist found that RareNames had a duty to search for other users:

This case turns on the question of bad faith.  Respondent contends that it was not aware of Complainant’s trademark rights in THE WOODEN SOLDIER.  This Panel finds it very improbable that Respondent, a savvy purchaser of “hundreds of thousands” of domain names, would not have done a search and quickly found Complainant on the Internet

They also argued that Mr. Sorkin’s reasoning was wrong:

We respectfully disagree with our brother Panelist’s dissent below.  If it were adopted, any registered trademark which consisted of a misapplied description (such as Scotch® tape) would be without a remedy under the UDRP.  Such a restrictive reading of the UDRP is unnecessary and unwise.

In my view, it is Mr. Lowry who gets it wrong here.  Scotch® tape can be protected if evidence shows that the use of scotch.com was targeted towards the owner of the trademark, for instance if the domain was used to sell tape.  But if the scotch.com domain is used to sell scotch whiskey, then the owner of Scotch® tape should not prevail.

In another questionable decision from 2000, Mr. Lowry ordered the transfer of host.com despite never specifically addressing whether the Complainant had trademark rights to the generic word ‘host’ used in its generic sense by the Complainant.  In the host.com case, Mr. Lowry appears convinced that it was a stolen domain and in the absence of a response seemed willing to have the purpose of the UDRP bent to allow the recovery of a stolen domain.

Mr. Lowry also appears to be inconsistent in his views towards laches.

In the recent enterptise.com decision of June 14, 2012, he specifically rejects the laches defense on that nine-year-old domain.  The same day he ordered the transfer of nationalcarleasing.com and rejected the laches defense on that 12 year-old domain using almost identical language as in the enterptise.com decision.   And in the Enterprize.com decision from 2007, Mr. Lowry states unequivocally that “laches is not a defense under the Policy.”

Given these inconsistencies, it is unclear how much weight other panelists will give to Mr. Lowry’s reliance on the laches defense in the uniphoto.com decision.  His application of laches seems sloppy to me, as his main argument is that the domain owner has a legitimate interest in the domain, and he simply tacks on a brief statement about laches at the end of that section without developing his argument or addressing the conflicting views held by panelists on the topic of laches.

In contrast to Mr. Lowry’s brief reference to laches in the uniphoto.com decision, panelist Richard Lyon in the alimakelevator.com decision of September 8, 2011 gives a lengthy and well-reasoned explanation as to why he does not view laches as an appropriate defense in UDRP cases and views those decisions that rely on laches as an aberration:

D. Delay. The only circumstance in this case that might alter the rather perfunctory resolution of the merits above is that Complainant commenced this proceeding more than ten years after Respondent’s registration of the disputed domain name, and seven years after Respondent’s first use of it. Under settled Policy precedent, however, this delay avails Respondent naught. The WIPO Overview 2.0, paragraph 4.10, makes clear:

“Panels have recognized that the doctrine or defense of laches as such does not generally apply under the UDRP, and that delay (by reference to the time of the relevant registration of the disputed domain name) in bringing a complaint does not of itself prevent a complainant from filing under the UDRP, or from being able to succeed under the UDRP, where a complainant can establish a case on the merits under the requisite three elements. Panels have noted that the remedies under the UDRP are injunctive rather than compensatory in nature, and that a principal concern is to avoid ongoing or future confusion as to the source of communications, goods, or services.

However: Panels have also noted that a delay in bringing a complaint under the UDRP may make it more difficult for a complainant to establish its case on the merits, particularly in relation to the second and third elements requiring the complainant to establish that the respondent lacks rights and legitimate interests and that the respondent registered and used the domain name in bad faith. A small number of panels have also begun to acknowledge the possible applicability, in appropriate and limited circumstances, of a defense of laches under the UDRP where the facts so warrant.”

This Panel is aware of only one decision that would allow a defense of laches without significant qualification: The New York Times Company v. Name Administration Inc. (BVI), NAF Claim Number 1349045 (2010), in which the three-member panel stated:

“The Panel believes that the doctrine of laches should be expressly recognized as a valid defense in any domain dispute where the facts so warrant. Prior decisions rejecting the applicability of the doctrine due to the failure of its express recognition in the UDRP Policies appear to be an unsound basis for ignoring the potential defense.”

Though perhaps not strictly necessary to resolution of this case, the Panel sets out his views on laches in UDRP proceedings in the hope of advancing uniformity of decision on this subject, which, in his view, is faithfully summarized in the WIPO Overview 2.0.

All panelists owe each other, and the entire UDRP process, deference to the consensus views that have developed over the twelve years since this process began. As the WIPO Overview 2.0, paragraph 4.1, recognizes, the Policy’s “operat[ion] in a fair, effective and predictable manner for all parties” promotes the Policy’s use in proper cases as an alternative to litigation and discourages its misuse merely in the hopes of drawing a panel whose members might sympathize with an argument that the consensus has declined to follow.

Nevertheless it can be wise from time to time to re-evaluate even settled rules of decision.3 Particularly is that so if circumstances change in the domain name world. For example, increased use of proxy registrations and privacy services, a circumstance not in existence when the Policy was adopted, has generated a number of rules of decision that have developed somewhat from the single respondent recognized in the Policy and Rules. See WIPO Overview 2.0, paragraph 4.9. Those consensus changes, as is true of most changes in precedent-based systems, were developed through case-by-case determinations made in appropriate factual settings, until they garnered general acceptance among UDRP panelists.

The proper approach to delay-based defenses, now reflected in paragraph 4.10 of the Overview, has come about in this way. Quite appropriately it is not a bright line rule; rather it turns on the circumstances of the particular case. Procedurally it is sound, rejecting a standalone equitable defense based only upon the passage of time in favor of considering delay in light of the Policy’s latter two express requirements. As aptly stated by the three-member panel in Mile, Inc. v. Michael BurgWIPO Case No. D2010-2011: “the Panel observes that lengthy delays in seeking legal or administrative remedies can often have the effect of eroding or undermining the complainant’s arguments with respect to the respondent’s rights or legitimate interests in the disputed domain name, or the respondent’s alleged bad faith in registering and using the domain name. The Panel considers it more appropriate to address such issues squarely within the terms of paragraphs 4(a)(ii) and (iii) of the Policy, rather than analyzing them under the equitable doctrine of laches.”

This proceeding well illustrates the advantages of this approach. No facts in the record here indicate any basis for altering the Panel’s analysis simply because of the time that elapsed between registration of the disputed domain name and commencement of this proceeding. Respondent here never used the disputed domain on its own at all. Any business value or association with Respondent accrued not to the disputed domain name, which Internet users never saw, but to the Internet address of Respondent’s website to which Internet users were automatically redirected.4 All use of the disputed domain name was intended to mislead Internet users.

In this Panel’s opinion, the New York Times panel gives no sound reason for its holding quoted above; its only apparent rationale is its members’ contrary opinion. As reported in that proceeding there was no extraordinary factual setting justifying departure from the established rule of decision, and application of laches was unnecessary to that panel’s decision, as the complaint was denied on other grounds. This Panel will therefore treat the New York Times case as an aberration and continue to follow the Overview’s consensus approach on time-based defenses.

 

I think it is too soon to conclude that the upiphoto.com decision marks the beginning of the acceptance of laches as a valid defense in UDRP cases.  The most that the majority of panelists seem willing to say is that a delay in bringing a complaint can weaken a Complainant’s case but is not necessarily fatal to it.

While I would like to see laches widely accepted as a defense, or a similar safe harbor requirement that a Complaint must be brought within a certain number of years of the domain owner acquiring the domain, it seems that domain owners will continue for the foreseeable future having all of their domains, even those registered a decade or more ago, still vulnerable to UDRP complaints.

7 Responses leave one →
  1. Jeff permalink
    May 15, 2013

    Welcome back Nat! Enjoy your blog!

    Jeff

  2. May 15, 2013

    Great post. Good to see you back after almost a year.
    The Respondent was Greek so I am following this up…

    • Nat permalink*
      May 16, 2013

      Hi Konstantinos, Thanks for the comment. I’d be interested in hearing if you learn any more about this case. Nat

  3. May 16, 2013

    I suspect the result in this case would have been different if the domain was parked rather than “actively used”.

    • Nat permalink*
      May 16, 2013

      Andrew,

      I think you are right, which is why I don’t think the upiphoto.com decision sets a strong precedent for other cases in its use of laches. If the delay in bringing the complaint was truly the controlling factor then it wouldn’t matter whether the domain was parked or ‘actively used’.

      My sense is that Lowry based his decision mainly on his finding that the domain owner had a legitimate right to the domain, and then tacked on the laches determination almost as an afterthought.

      Nat

  4. Gaurav permalink
    May 17, 2013

    Great post Nat,
    Thank you for bringing this to light!

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