An issue that sometimes pits individuals against corporations is cybersquatting. Cybersquatting occurs when someone who does not hold a trademark registers the name as a domain name, in hopes of selling the domain name to the trademark owners. While cybersquatters may argue that they have a free-speech right to obtain and then sell domain names to a trademark holder, courts have not agreed.

When Web sites are created, they are given an Internet Protocol, or IP, address, which is a string of numbers. In order to make “surfing” the Internet easier, these IP addresses then receive “domain names,” or alphanumeric Web addresses that are easier for Internet users to identify and remember (such as http://www.firstamendmentcenter.org). A person who wants to select a domain name must register it with a domain-name registration service, or registrar. These registrars scan the Internet to make sure that the desired domain name is not being used by another site. Once a domain name is set, the holder can go online with it, and promote the site on search engines.

When a cybersquatter registers a domain name using a trademarked company name, the result is a combination of identity theft and extortion. A company that owns the trademark on the word being used as the squatter’s domain name will discover that it cannot use that term as the address for its site. The squatter says she will agree to give the company the rights to the domain name, but for a hefty price.

For example, if XYZ Co. were a multibillion-dollar industry with a vast consumer following, a cybersquatter might register www.xyz.com, www.xyzco.com, or whatever variation he could think of. When XYZ Co. decided to become a part of the information superhighway, it would discover its potential domain names taken, with the cybersquatter more or less holding them ransom.

In 1999, Congress passed the Anti-Cybersquatting Consumer Protection Act, or ACPA, which addressed online corporate identity piracy.

The ACPA makes a person liable to a civil lawsuit if he or she uses the domain name of a trademarked entity without the trademark holder’s permission, and does so with the "bad faith intent to profit from that mark" by registering, trafficking or using a domain name that incorporates a trademark in its address that is "identical or confusingly similar to that mark."

In order to determine whether someone has acted in "bad faith," courts can consider, among other things:

1. The intellectual-property rights of the copyright/trademark holder.
2. The extent to which the domain name incorporates the copyright/trademark.
3. The alleged cybersquatter's prior use of the domain name "in connection with bona fide offering of any goods or services."
4. The alleged squatter's bona fide, noncommercial or fair use of a mark in a site accessible under the domain name.
5. Any intent "to divert customers from the mark owner's online location" or to harm the goodwill represented by the mark, "[e]ither for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation or endorsement of the site."
6. Any offer by the alleged squatter to transfer or sell the domain name to the mark owner for financial gain.
7. Any false and misleading contact information given when the alleged squatter registered the domain name.
8. Any "registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive."
9. The extent to which the mark incorporated in the squatter's domain name registration is or is not distinctive and famous.

"Bad faith," however, will not be found when the person who unlawfully uses the copyright/trademark "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful." Aside from monetary damages, a court may also order the cybersquatter to forfeit his domain name to the copyright holder.

Name game
Some cybersquatters have defended their actions on free-speech grounds, but without success.

In a 3rd U.S. Circuit Court of Appeals case, Shields v. Zuccarini (2001), the court held that the First Amendment does not protect online "protest pages" criticizing trademark owners’ corporations when a cybersquatting arrangement is knowingly used. The defendant in this case used a First Amendment defense drawing on the ACPA provision that says no “bad faith” exists if the accused person reasonably believed that using the domain name was fair use. This defense failed not because the site was created as a protest but because of the cybersquatting aspect.

Another cybersquatting case decided in 2001 was Harrods Ltd. v. Sixty Internet Domain Names. In this case, the owner of the trademarks of the famous London department store brought suit under the ACPA against an Argentinian man who registered nearly 300 domain names incorporating the plaintiff's trademarks. A U.S. District Court in Virginia held that registrant had a bad-faith intent to profit from use of "confusingly similar marks."

"To ensure that speech protected by the First Amendment is not jeopardized by the ACPA, a court should consider a registrant's 'legitimate noncommercial or fair use of the mark in a website that is accessible under the domain name at issue,'” the court wrote. In crafting ACPA, it said, “Congress envisioned that the interests of trademark owners would be balanced with the interests of registrants engaged in comparative advertising, comment, criticism, parody, news, reporting, etc.” But as for the free-speech issue raised in this case, the court held that since the registrant used the trademarks (i.e., erected the sites) for commercial purposes, the free-speech issue was inapplicable.

However, in a March 2004 ruling, Lucas v. Grosse, the U.S. 6th Circuit Court of Appeals in Cincinnati upheld a lower court's ruling that an aggrieved Michigan consumer, Michelle Grosse, was not acting in bad faith when she created the Web site www.lucasnursery.com to complain about Lucas Nursery and Landscaping Inc. of Canton, Mich. The U.S. District Court in Detroit had said Grosse was neither acting in bad faith nor trying to make a profit from the site.

Tag: You’re it
An additional problem with cybersquatting is whether Company A is allowed to pirate competitor Company B’s identity by using B’s name in A’s Web site so many times that A’s site appears as a “hit” in an online search for B.

Although the APCA is silent about this, a Northern California U.S. District Court addressed this issue in J.K. Harris & Co. v. Kassel (2002), ruling such tactics unacceptable. In this lawsuit, the two parties, J.K. Harris & Co. and Firse Tax Inc., had Web sites promoting their respective tax representation and negotiation services, www.jkharris.com and www.taxes.com. Firse Tax included in its site many articles criticizing J.K. Harris, and employed the “J.K. Harris” name in the header and “metatags” that search engines use to identify Web sites.

Such strategic placement of the Harris name allowed the Firse address to be a “hit” when someone searched for “J.K. Harris.” The court held that Firse Tax’s use of Harris’ name was a transparent attempt to manipulate search engines, and although Firse Tax is allowed by the First Amendment to post information about and use the name of J.K. Harris, it ordered Firse Tax to remove excessive references. The court also ordered Firse Tax to remove Harris’ name from some header and metatags, concluding that building keyword density (what all the “Harris” references amounted to) resulted in confusion and could be seen as a type of cybersquatting.