There Should Be a Penalty for RDNH | DomainInvesting.com

There Should Be a Penalty for RDNH

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I agree with many in the trademark contingency that cybersquatting is a big problem that plagues big brands. I believe there are many grey areas when it comes to domain names, but similarly, I believe there are a lot of shades of grey in trademark law.

For the most part, I think the UDRP is a fair way for trademark holders to dispute domain names that infringe on their marks. In addition, with egregious cases, United State trademark holders can certainly use the ACPA (Anticybersquatting Consumer Protection Act) to litigate against trademark infringers.

One thing that really, really frustrates me when it comes to UDRP filings is to see cases of Reverse Domain Name Hijacking (RDNH). If you aren’t familiar with RDNH in a UDRP, it’s when “the Panel finds that the complaint was brought in bad faith, for example in an attempt at Reverse Domain Name Hijacking or was brought primarily to harass the domain-name holder, the Panel shall declare in its decision that the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding.”

When a domain owner receives a notice of UDRP for a descriptive domain name, he generally must hire an experienced domain attorney to defend his domain name from being awarded to the complainant. I have heard this can cost anywhere from $5,000 or more depending on certain variables. Some people may opt to file a defense on their own, but that’s a big risk for someone who isn’t experienced.

In addition to the legal fee, the attorney may recommend that the domain owner pay for a 3 person panel for a better shot at winning, and I believe this will cost $2,500 (complainant pays $1,500 and respondent pays an extra $2,500 for the 3 person panel). With these two costs, you are close to spending $7,500+ just to defend your right to own the domain name.

As it stands right now, there is no penalty for companies who are found to have attempted a Reverse Domain Name Hijacking. In essence, a company with a legal staff on retainer can take a gamble and spend $1,500 on a UDRP to get a descriptive domain name, and their only risk is a slap on the hand (if that) for a RDNH finding. Many people/lawyers don’t even seek RDNH findings since there aren’t any repercussions for them.

In my opinion, a company should have some sort of penalty for filing a UDRP that is determined to be RDNH. If a financial penalty can’t be given, perhaps a company found guilty of RDNH should be precluded from filing a UDRP for a year. They have legal recourse if they wish to use it, but they will risk losing the ability to use the UDRP forum for defense of their marks.

I am not a legal expert nor do I have any legal experience. I am just frustrated to see friends have UDRPs filed against them on domain names that are found to be descriptive. It increases the risk and cost of domain ownership.

What are your thoughts?


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (13)

    Mike

    You are absolutely right , Elliot.

    Unfortunately, these panelists are made up largely of trademark attorneys who quite often automatically agree with trademark holders.

    It’s very screwy how they choose “unbiased” panelists.

    This is why we rarely see any RDNH judgments.

    March 9th, 2012 at 12:21 pm

    Elliot Silver

    @ Mike

    It doesn’t seem like all attorneys request RDNH, even on what appear to be egregious cases. I suppose there’s no real reason to request it when there aren’t any penalties for a RDNH finding.

    March 9th, 2012 at 12:27 pm

    Nick

    In all fairness, How about a penalty on those who lose a UDRP too?

    March 9th, 2012 at 12:28 pm

    Elliot Silver

    @ Nick

    They lose the domain name, and of course, the complainant can always file suit for damages.

    March 9th, 2012 at 12:29 pm

    David

    I would like to see more details on how to appeal a lost UDRP. I know you can appeal it on a federal level, but where, and at what cost? This information is not readily available for laymen.

    The UDRP is definately biased and gives too much weight for TM holders. I just witnessed a case that wasn’t violating the trademark class, but it was still awarded to the TM holder. It’s absolutely crazy…

    March 9th, 2012 at 4:27 pm

    L

    A large part of the reason the process is so inherently unfair is because the petitioner has no skin in the game save for $1500, which is a trivial cost of doing business for all but the smallest of businesses.

    There is enormous disequilibrium- favoring the petitioner- in being able to assert ownership rights over a high valued asset for $1500, with that decision arbitrated in a kangaroo-court system that has exhibited zero consistency in its application.

    It would be like if I could spend $1500 to say I owned my neighbors house with the outcome decided by rolling a single six sided die.
    1, 2, 4, 5, 6 he keeps his house.
    3, I win the house.

    Even if the odds are against me, it has such a hugely positive expectation- to win a $400,000 house for $1500 at 1/6- it’s worth it. With RDNH having no teeth whatsoever, what’s the risk?

    A better system would be if UDRP were tiered, Level 1 being blatant cases of TM infringement (easy to define).

    If you file a case that doesn’t meet Level 1 Criteria, it’s then passed onto Level 2 where you must post a $15,000 bond, awardable to the respondent to cover legal fees and expenses should a RDNH finding be entered. Absent RDNH, the bond is refunded.

    March 9th, 2012 at 6:28 pm

    Anthony

    Elliot & L

    I have said the same thing before about this process and how the amount is meaningless. L I agree with everything you say except for the figure you give. £10,000 is nothing more than a lunch to some companies.

    For some companies to even think twice about launching “the dice roll” (like your term L) the cost of losing would need to be around the £250,000 mark.

    There needs to be a weighting system for the level of skin in the game based on a couple of factors of which I would include:

    Type of domain – 2-3 letter .Coms being the highest.
    Turnover of company

    I would also go with the earlier idea that a failed attempt would mean a ban on another UDRP for that company for anywhere between 12-48 months.

    HOWEVER,

    Lets get real here. As much as launching UDRPs just to see where the chips land is a problem this is nothing compared to cybersquatting.

    March 10th, 2012 at 7:07 am

    Paul Keating

    This may surprise you but I believe that there should NOT be a penalty for an RDNH claim. Let me explain.

    1. RDNH is an issue that per the Policy is SUPPOSED to be considered by EVERY PANEL. There is no requirement that it be requested by the respondent.

    2. Panelists seem to be very very very (etc) reluctant to grant such rulings – even in cases that should warrant such a finding. The question is why?

    3. Panelist are largely tm attorneys who work for tm holders. There is the odd retired judge but they are the exception. Most of these same panelists appear as advocates for their own clients – thus arguing to the panelists they know, have shared confidential information with and served on panels with.

    4. Panelists see IMO their role as a carpenter with a hammer. When you hold a hammer, what do you want to do? With a hammer in your hand, everything looks like a nail.

    5. There ARE private rights of action (at least in the US) for abusive filings – particularly when the respondent wins. Among these are: conversion (impermissible taking without permission and refusal to return upon demand) – impermissible taking is the exertion of control – which is what we have when a domain is locked due to a UDRP. Interference. This comes in 2 flavors, interference with economic advantage AND interference with prospective economic advantage – for both you need to show that the interference (the lock) kept you from doing something that was obvious or actually known to the complainant. Breach of contract (more complicated). The Registration Agreement is as between the registrar and registrant. However, there is a third party out there (complainant) who can effectively join into this contract by exerting a UDRP claim. This by definition makes them a party since they are claiming rights (filing the UDRP) and as a consequence becoming a party. For a non-US analysis of this see the recent Emirates.co.uk decision (I will send a copy to anyone asking me at Paul@law.es). Any of these claims could conceivably be undertaken in SMALL CLAIMS COURT provided you are willing to live with the limits of damage awards. Beauty of SMALL CLAIMS is that no attorneys are allowed. Bad thing: Most “judges” are attorneys and they are very busy and may not handle it well. Good thing: you can appeal de novo to the local court (judge). Bad thing. Attorneys are allowed back in at this stage.

    6. So, with the current system there is no penalty (other than perhaps if you get enough “got to the back of the class” notices you get branded by the panels – unlikely. However, very very few RDNH rulings are issued. What makes you think that a panel would be MORE likely to grant an RDNH if there was a damage award related to the finding.

    7. And, if #6 were not enough, what would you have to go through to even get this incorporated within the UDRP? There are a great many other fish to fry Elliott. Thus, while a nice thought, it is “no way”.

    March 10th, 2012 at 11:11 am

    Elliot Silver

    @ Paul

    Thank you for the thorough analysis.

    When I think of suing for interference, I think of the Digimedia case: http://domainnamewire.com/2011/03/29/court-awards-digimedia-100000-for-reverse-domain-name-hijacking/

    March 10th, 2012 at 11:15 am

    Paul Keating

    I agree and feel this should be more highly publicized.

    March 11th, 2012 at 9:14 am

    Elliot Silver

    If a company knows a domain owner will be aggressive when it comes to defending its assets, they might think twice before filing a UDRP.

    March 11th, 2012 at 9:15 am

    Josh

    In cases where you believe a RDNH would apply, simply exit the UDRP system and file suit in Federal Court. If they’re outside the US, that’s even better. Make them come here to spend their first $5k on a jurisdiction motion. Forward the UDRP provider a copy of the lawsuit to dismiss the proceedings. They’re under no obligation to dismiss the proceeding but they usually will since their decision is no longer binding or final.

    The “new rules” Paul Keating blogged about really make the case for just exiting the UDRP system. I came very close to filing suit over the convoy.com complaint. Very, very, very close. I didn’t think I could get a fair shake in the Asian domain name forum, but I actually did, though possibly only because the complainant and absolutely no evidence of any kind of a trademark that superseded by domain registration. But it could have gone the other way just as easily using logic from other badly decided cases.

    $5k will get you a ways into a lawsuit, since little happens at the beginning of lawsuits. But where as UDRP’s are capped at 5-8k in expenses, litigation is potentially unlimited. That’s the downside, of course. Another consideration is do you plan to file suit if you lose? If so, then your playing poker with the UDRP legal fees. Your betting you can win and if not, you’ve lost the UDRP legal fees and now have to pay for the lawsuit startup as well.

    I can think of one large domain holder who self filed lawsuits in response to every UDRP complaint he received. That was interesting.

    March 11th, 2012 at 6:23 pm

      Elliot Silver

      @ Josh

      Thanks for the insightful comment.

      March 11th, 2012 at 6:27 pm

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