Bad-faith use after good-faith registration not actionable under UDRP

In LULU Enterprises Inc v eBrand Factory, a World Intellectual Property Organization (WIPO) arbitration panel has considered whether bad-faith use of an established good-faith registration can lead to the transfer of that domain name.

The complainant, LULU Enterprises Inc, is a US company that provides creators of digital content the means to distribute their works over the Internet via its website located at 'lulu.com'. LULU Enterprises also owns the domain name 'lulu.tv'. LULU Enterprises did not own trademark registrations, but had a pending application filed with the US Patent and Trademark Office and had used a family of LULU-formative marks since 2002.

The respondent, eBrand Factory, is a Canadian company engaged in advertising, marketing and web development. On August 25 2005 eBrand registered the domain names 'luluvision.com' and the domain name in dispute - 'lulutv.com'.

In September of 2005 eBrand incorporated a new company which entered into an agreement with Lululemon Athletica Inc, a yoga-inspired athletic apparel company. The agreement provided that eBrand's company would produce a show which was to be broadcast over the Internet on the website at 'luluvision.com'.

There was no active website associated with the 'lulutv.com' domain name and, from the time of registration until August 15 2006, it resolved to an "under construction" placeholder website.

In February 2006 a representative of LULU Enterprises (without disclosing to eBrand his connection with LULU Enterprises) initiated an email exchange with eBrand to purchase the 'lulutv.com' domain name. A dispute arose as to whether an agreement had been reached to effect the transfer. On August 15 2006 LULU Enterprises' representative made reference to the 'lulu.tv' domain name. This prompted a change to the website associated with 'lulutv.com', which began displaying a webpage that indicated that a new concept in video blogging was "coming soon", with a background colour similar to that used on LULU Enterprises' 'lulu.tv' website. This remained the page displayed in association with 'lulutv.com' until the complaint was commenced.

On September 28 2006 LULU Enterprises began a proceeding under the Uniform Domain Name Dispute Resolution Policy (UDRP) regarding the 'lulutv.com' domain name alleging, among other things, that:

• it had common law rights in the mark LULU;
  
  
• eBrand, as a sophisticate in brand development, may reasonably be expected to have performed a trademark search; and
  
  
• eBrand had registered the 'lulutv.com' domain name to trade off LULU Enterprises' goodwill.

eBrand denied all LULU Enterprises' allegations.

The administrative panel found that LULU Enterprises had rights in the LULU mark and that the disputed domain was confusingly similar to that mark. However, the panel found that LULU Enterprises failed to establish that eBrand had no right or legitimate interest in the domain name. Specifically, the panel found that the evidence established that the domain name was registered for a legitimate purpose, namely in furtherance of the agreement with Lululemon Athletica.

With respect to bad faith, the panel specifically rejected the concept of constructive knowledge. The panel also found that eBrand had demonstrated it had registered the 'lulutv.com' domain name in good faith. The question was whether the subsequent use, specifically eBrand changing the background colour to match that of LULU Enterprises' website, could amount to bad faith.

The panel rejected the idea that bad-faith use can turn a good-faith registration into bad. Bad-faith use is relevant where it is the only evidence tending to show the purpose for which the domain name was registered. The panel noted that that the UDRP was not specifically designed to prevent situations of good-faith registration followed by bad-faith use.

Antonio Turco, Blake Cassels & Graydon LLP, Toronto