Cybersquatting Thrives for Lack of a Strong Deterrent

Cybersquatting - Then and Now

In the first decade of the Internet, cybersquatting was little more than a get-rich-quick scheme pursued by opportunistic individuals operating with minimal technical sophistication. The practice was generally limited to the bad-faith registration of domain names incorporating or imitating well-known brands in hopes that they would one day be sold to the trademark owner for a large sum of money. Cybersquatters took chances that sometimes yielded a payday, but this practice had not yet become a business that provided a source of steady income.

Before 1999, a brand owner seeking to combat cybersquatting could bring a lawsuit for trademark infringement and/or brand dilution, but those claims were ill-fitting tools for the job. In 1999, Congress enacted the federal Anticybersquatting Consumer Protection Act (ACPA).

The statute creates a remedy specifically targeted at cybersquatting, which it defines as the bad-faith registration of a domain name that is identical or confusingly similar to a legitimate trademark. The ACPA authorizes courts to transfer domain names from the cybersquatter to the trademark owner. In addition, in a case of proven cybersquatting, a trademark owner can elect to recover either the actual damages it has suffered as a result of the defendant's conduct (e.g., lost revenues or harm to reputation) or statutory damages (damages that do not require any proof of actual loss) of between $1,000 and $100,000 per domain name. Although it is not a perfect remedy, the ACPA made it much simpler for trademark owners to combat cybersquatters.

Times have changed. In the last several years, cybersquatting has evolved into a sophisticated business and cybersquatters are no longer dependent on domain name sales for profit. Instead, they siphon traffic created by direct navigation, which is the practice of typing an address directly in the browser address bar. Cybersquatters have developed numerous methods to monetize that traffic, including pay-per-click sites, domain name tasting and domain name kiting. Pay-per-click sites include sponsored advertisements syndicated by the larger search engines that generate revenue from page views whenever users click ads. Tactics like domain tasting and kiting allow cybersquatters to test the profitability of domain names before paying for them.

In recent years, the most notable change in cybersquatting has been the scale on which it occurs. Automated programs acquire domain names and establish pay-per-click sites with minimal human involvement. As a result, it is possible for operators to control and monetize hundreds of thousands, or even millions, of domain names. Not all of those names infringe the rights of brand owners, but inevitably a large number of them do. With that many domain names in their portfolio, cybersquatters can make a significant profit even if each name generates just a modest profit.

Faced with this new breed of cybersquatter, trademark owners looking to protect their brands are faced with some difficult choices.

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