PASSIVE HOLDING IN UDRP ACTIONS

IVAN HOFFMAN, B.A., J.D.


        The provisions of the Uniform Domain Dispute Resolution Policy (UDRP) initially govern all disputes between domain name registrants (“Registrant”) and owners of trademarks or rights in trademark (“Complainant”).  In order to prevail and obtain the cancellation of a domain or its transfer to the Complainant, a Complainant must prove, among many other elements, that a Registrant acted with “bad faith” in the “registration and use of the domain.” (Read “Burden of Proof in UDRP Actions”).

        I have written extensively about some other aspects of the UDRP and would now like to focus on the issues surrounding the concept of “use” as it applies above.  The issue then is whether merely reserving a domain that is otherwise a violation of the provisions of the UDRP is sufficient to constitute “use” as required.  “Passive use” (which appears an oxymoron at first glance) refers to a practice whereby a Registrant has merely reserved a domain but has not either created a web site using that domain or is not actively seeking offers to sell the domain.  In other words, for whatever the reason, the Registrant is merely sitting with the domain but is not actually “using” it.  Motives and intention here are often key elements in deciding whether such actions violate the Policy.

        Given the large number of domain name brokers and speculators, these issues become legally and economically important.  Again, keep in mind that for the purposes of this article, I am assuming that the many other elements required to be proven by a Complainant have been so proven and the sole issue is whether or not such “passive holding” is a “use.”

        There are a number of cases dealing with the issue as presented here.  Two recent ones are of particular interest, irrespective of whether you agree with the ultimate outcome.

The “3M” Case

        In Minnesota Mining and Manufacturing Company v. Mark Overbey, WIPO Case No. D2001-0727, the Registrant (referred to as “Respondent” in the case) Overbey, had reserved a series of domains that were found by the Panel to be confusingly similar to and therefore likely infringements of a number of trademarks owned by 3M.  These included 3mtapes.com, 3mabrasives.com and 3madhesives.com.

        3M’s position in regard to the “passive holding” issue was stated thusly:

The Complainant further contends that the Respondent registered and is using the disputed domain names in bad faith. The Respondent’s registration of the domain names has been made with the purpose of preventing the Complainant from reflecting the mark in corresponding domain names [emphasis added]– in order to force 3M into transfer-for-price negotiations. The Respondent is alleged to have engaged in a “pattern of such conduct” and the Complainant draws attention to two Decisions by Panels under the Policy which allegedly held that prevention of reflecting the mark of the Complainant in a domain name is evidence of bad faith, even if there is no evidence that the Respondent has engaged in a “pattern of such conduct.” [Pharmacia & Upjohn Company v. Moreonline, D2000-0134 (WIPO April 19, 2000); Banco do Brasil S.A. v. Sync Technology, D2000-0727 (WIPO September 1, 2000)]. The Complainant contends that these decisions state that the passive holding of a confusingly similar domain name by a party without any legitimate interest is evidence of bad faith. In this case, the Respondent has acted more egregiously than required by the above decisions, because he engaged in a “pattern of such conduct” as is evidenced by the fact that he registered not only one confusingly similar domain name, but three and that this type of abusive registrations is referred to as vertically abusive registrations. The Complainant goes on to allege that vertically abusive registrations indicate a “pattern” of preventing the Complainant from reflecting the mark in corresponding domain names, evidencing bad faith….
        As to this contention, the Panel stated:
Less clear is whether Respondent’s purpose in registering the domain names was to prevent 3M from reflecting the mark in a corresponding domain name. He gives a plausible reason for his registration of the Domain Names (to use them in connection with the sale or distribution of 3M products). Indeed, considering that 3M registered and uses the domain name <3m.com>, the Panel does not find that it has been deprived of its ability to register or use the mark as a domain name. Paragraph 4(b)(ii) therefore does not apply.
        Frankly, the reasoning of the Panel seems flawed here since the domains in contention all reflected products produced by 3M under their trademark and thus would, it appears, serve to prevent 3M from reflecting their mark with regard to those products.  That the Panel chose to see 3M’s rights related only to the 3m.com domain seems far too restrictive.

        Moreover, the Panel found that although the Respondent failed to prove that he was in fact a distributor of 3M products, the Panel stated that it was Complainant’s burden to show that he was acting in bad faith.  While the Complainant does have such a burden, an allegation and proof that a particular Respondent was not such a distributor then switches the burden of rebuttal to the Respondent to show that he was.

        As to the “passive holding” issue, the Panel stated:

To be sure, passive holding can in appropriate circumstances be found to constitute “bad faith.” See, e.g., Telstra Corp. v. Nuclear Marshmallows, Case No. D2000-0003 (WIPO February 18, 2000). [discussed below]  But Respondent has provided a plausible explanation for his delay in establishing a web site that uses the disputed Domain Names, namely the fact (at least assuming Respondent’s contention to be true — he offers no evidence for it) that the web site in connection with which his employer intended to use the Domain Names was not created until September 2000, and Complainant first contacted Respondent in connection with the present dispute in August 2000, thereby leaving Respondent with an understandable concern that any alteration of his use of the Domain Names prior to a resolution of this dispute could be misinterpreted or used against him. Respondent does not appear to be represented by counsel or to have any particular expertise in trademark law, and such a concern, in light of Complainant’s correspondence, does not seem implausible, regardless of whether it is in fact justified as a matter of trademark law or ICANN policy.
        It strikes me again that the reasoning is flawed.  The Panel appeared to give little if any probative value to the reservation by the Registrant of the multiple domains discussed above.  This “pattern of conduct,” which is referred to specifically as examples of “bad faith” under the UDRP, adds a dimension to what might otherwise be “passive holding” that seems to help define the motivations of the Registrant.

        Section 4 b. of the UDRP states:

you [a Registrant] have 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 you have engaged in a pattern of such conduct;
        As a result, the Panel ruled against 3M in this matter.  Thus, taken as a whole, it appears the 3M Panel failed to see the entire picture.  See the “Telstra” case below.

The “Telstra” Case

        Telstra Corporation Limited v. Nuclear Marshmallows, WIPO Case No. D2000-0003, dealt with the domain “telstra.org.”  The Complainant a large Australian company and the owner of trademarks under the name “Telstra.”  Among other domains, it owned “telstra.com.”  (Recall in this instance the similarity to the 3M case above).

        The Panel discussed the requirement that a Registrant both reserve and use a domain in bad faith.

The significance of the use of the conjunction "and" is that paragraph 4(a)(iii) requires the Complainant to prove use in bad faith as well as registration in bad faith. That is to say, bad faith registration alone is an insufficient ground for obtaining a remedy under the Uniform Policy.
        The Panel had no problem in finding that the registration was in bad faith.  As to use in bad faith, the Panel stated the issues thusly:
Has the Complainant proved the additional requirement that the domain name "is being used in bad faith" by the Respondent? The domain name <telstra.org> does not resolve to a web site or other on-line presence. There is no evidence that a web site or other on-line presence is in the process of being established which will use the domain name. There is no evidence of advertising, promotion or display to the public of the domain name. Finally, there is no evidence that the Respondent has offered to sell, rent or otherwise transfer the domain name to the Complainant, a competitor of the Complainant, or any other person. In short, there is no positive action being undertaken by the Respondent in relation to the domain name.
        The Panel continued:
This fact [the above recitation] does not, however, resolve the question. As discussed in paragraph 7.6, the relevant issue is not whether the Respondent is undertaking a positive action in bad faith in relation to the domain name, but instead whether, in all the circumstances of the case, [emphasis added] it can be said that the Respondent is acting in bad faith. The distinction between undertaking a positive action in bad faith and acting in bad faith may seem a rather fine distinction, but it is an important one. The significance of the distinction is that the concept of a domain name “being used in bad faith” is not limited to positive action; inaction is within the concept. That is to say, it is possible, in certain circumstances, for inactivity by the Respondent to amount to the domain name being used in bad faith.
        It continued:
That is to say, the circumstances identified in paragraphs 4(b)(i), (ii) and (iii) can be found in a situation involving a passive holding of the domain name registration. Of course, these three paragraphs require additional facts (an intention to sell, rent or transfer the registration, for paragraph 4(b)(i); a pattern of conduct preventing a trade mark owner’s use of the registration, for paragraph 4(b)(ii); the primary purpose of disrupting the business of a competitor, for paragraph 4(b)(iii)). Nevertheless, the point is that paragraph 4(b) recognises that inaction (eg. passive holding) in relation to a domain name registration can, in certain circumstances, constitute a domain name being used in bad faith. Furthermore, it must be recalled that the circumstances identified in paragraph 4(b) are “without limitation” - that is, paragraph 4(b) expressly recognises that other circumstances can be evidence that a domain name was registered and is being used in bad faith.
        The Panel then widened its lens to see the entirety of the situation and stated:
The Administrative Panel has considered whether, in the circumstances of this particular Complaint, the passive holding of the domain name by the Respondent amounts to the Respondent acting in bad faith. It concludes that it does. The particular circumstances of this case which lead to this conclusion are:
(i) the Complainant’s trademark has a strong reputation and is widely known, as evidenced by its substantial use in Australia and in other countries,
(ii) the Respondent has provided no evidence whatsoever of any actual or contemplated good faith use by it of the domain name,
(iii) the Respondent has taken active steps to conceal its true identity, by operating under a name that is not a registered business name,
(iv) the Respondent has actively provided, and failed to correct, false contact details, in breach of its registration agreement, and
(v) taking into account all of the above, it is not possible to conceive of any plausible actual or contemplated active use of the domain name by the Respondent that would not be illegitimate, such as by being a passing off, an infringement of consumer protection legislation, or an infringement of the Complainant’s rights under trademark law.
In light of these particular circumstances, the Administrative Panel concludes that the Respondent’s passive holding of the domain name in this particular case satisfies the requirement of paragraph 4(a)(iii) that the domain name “is being used in bad faith” by Respondent.
        In other words, the Panel reasoned that since there appeared to be no manner in which the domain could be used in good faith, that thus the only interpretation of the conduct of the Registrant was that it was done in bad faith.  (Of course, the Panel found all the other allegations required to be proven by the Complainant to be so proven.)

Conclusion

        It is worthwhile remembering that UDRP actions, while required of all Registrants, are non-exclusive remedies.  All parties have the right to resort to civil legal actions as well and in such civil legal actions, more formal burden of proof requirements might change given results.

        The law of the Internet continues to evolve.

© 2001 Ivan Hoffman

****************

This article is not intended as a substitute for legal advice.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  You should consult with an attorney familiar with the issues and the laws.
****************
No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.

FOR MORE INFORMATION:


MAIL

Where Next? 




Ivan Hoffman Attorney At Law || More Internet and Electronic Rights Articles || More Articles About Trademarks and Domain Names || Home