Why Registering Unowned Trademarks in New gTLD Domains is a Bad Idea

CyberSquatting in New gTLDs

Cybersquatting is the illegal practice of trading in or abusing trademarks in domain names, with potentially serious civil and criminal penalties. It is rarely profitable to register well known brands and trademarks in New Top-Level Domains. Registering trademarked domain names is almost always more trouble than it’s worth.

 

(This article is not professional legal advice.)

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It might sound tempting to use New gTLD launches as an opportunity to acquire some extremely undervalued web real estate–that could appreciate quickly. One category of online property to avoid “investing in” is domain names containing trademarked names or brands. It might seem like a great idea to register Facebook.APP, Gucci.Fashion, or Chevy.AUTO. But be aware, just because the trademark holder doesn’t (or doesn’t yet) have rights to a particular web address that matches their brand name, doesn’t mean you’ll be able to profit from buying and reselling it. This particular type of virtual real estate speculation could lead to legal prosecution, instead of profits.

Beware the Earlier Bird

You may feel that since you got there first, too bad for the trademark-holder who didn’t think far enough ahead (or wasn’t creative enough or savvy enough) to quickly grab their own brand name online. The early bird gets the profits, right? Nope, not in this case. Staking out web property with the sole intention of forcing the true owner to buy you out is illegal. In a way, it’s seen as being akin to blackmail, and it can cost you big time.

Avoid Becoming a Cybersquatter — It’s Illegal

Whether brands are well known or not, by trademarking their name they have established legal rights to use it exclusively. In essence, they’ve proved that they own that piece of virtual real estate. So if you’re thinking of holding a brand name (or a permutation or misspelling thereof) hostage, there’s a serious flaw in your logic—the legal rights of trademark holders. Cybersquatting means attempting to profit from the goodwill (or good name) already established by another.

jailguy If you set up a site to resell a trademarked web address (sometimes also called a domain or URL) or one that contains a trademark, expect big trouble. (In other words, if your address is identical or confusingly similar to a trademark.) When someone clicks over to your suspected web address and sees a page with a note that it’s for sale—or if they see products similar to the trademark owners’ — you may be asking for trouble.

Potential Cybersquatting Consequences

  • Legal fines up to $100,000
  • Civil Lawsuits
  • Trademark owners can now get any infringing website taken down immediately by the Uniform Rapid Suspension act. (URS)
  • Trademark owners can get the website address taken from you in a Uniform Domain Resolution Policy. (UDRP)
  • And more

Bottom line: Online trespassing is a serious issue, unlike in the real world where it is often no big deal. If your business model includes buying up Web addresses like ‘facebook.app’ or ‘McDonalds.Food’—don’t do it. If you want to operate successfully online, be sure to stake out your very own territory.

Legitimate use of Trademarks

If you wanted to use a trademark without penalty, you would have to obtain the rights from the legal owner before going forward. This is a big part of how brands, like Disney and others, make money: by licensing the use of their name to third parties. If the company feels that your planned use will not affect their image negatively, they might grant rights in exchange for a percentage of your profits, for example. Or they might grant you rights just for the pleasure of being associated with your brand, for the good PR it might bring. But if getting permission in advance isn’t part of your plan—stop–because you’re heading for trouble.

Protecting Brand Value and Online Real Estate

Big brands, and even those not yet household names, have invested time and money into acquiring and building their online reputation. Trademark holders protect this investment by legally registering the trademark. If brands can show that they were the first to use the name, or that they purchased rights to it from the first owner, future cybersquatters are out of luck. It’s a good idea to avoid becoming a cybersquatter at all costs. If found legally liable, whether you did the deed intentionally or not, you could face fines and/or be forced to give up your profits.

Preventing Accidental Cybersquatting

First of all, you’d likely only be penalized or forced to give up your virtual real estate if you’re in the same business as the original trademark owner. (You’d probably be safe if you innocently established the business name or web address in a completely different marketplace. A restaurant named Macy’s could likely peacefully co-exist with Macy’s department stores.) If your family name is Macy, you’d be even better protected from any legal issues. But you could still be challenged about the name. It might be a good idea to avoid the name if it is not important to you, to avoid any trouble (or possibly just inconvenience) down the line.

However, if you accidentally purchase a domain name that’s close to a trademarked name, you can still be in trouble. Imagine if the owner didn’t notice right away that you had started a same-sector business with a similar name/address to theirs, until after you’d built up your own business under that web address. (That’s often the case these days if you’re so small the big brand doesn’t know you exist.) Then, after all your hard work, when your existence is finally noticed, you’d be legally forced to give it up. Even if you were not found legally liable and your infringement wasn’t intentional, you would have lost your investment in the domain name. In the eyes of the law, your products or services might be seen as “counterfeits” of the trademark holders products/services.

Help to avoid problems by searching your proposed domain address online. Check out any similar addresses and see if any are in your proposed line of business. You can also check TESS (the Trademark Electronic Search System of the US Patent Office) and state trademark databases. In addition, there’s a new international database being constructed, called the Trade Mark Clearing House (TMCH).

It’s a good idea to think twice before starting down the path of cybersquatting.