Decision shows that bad faith is key to UDRP matrix

In a recent case filed under the Uniform Domain Name Dispute Resolution Policy (UDRP), a panel has found that the registration of a domain name that had lapsed following the complainant's failure to renew it and an offer to sell it back to the complainant does not necessarily constitute, by itself, evidence of registration in bad faith.

The complainant was Capital Matrix Inc, a certified development company providing loans to small businesses, founded in 1983 and based in Idaho (United States). The respondent is G Repetto, an internet company that develops and monitors websites since 2009, based in Brazil.

The disputed domain name, ‘capitalmatrix.com’, was registered in 1997 by the complainant. The complainant had actively used the domain name until October 2012, when it allowed it to lapse inadvertently. The domain name was then acquired by the respondent in an auction held in December 2012. The respondent was using the domain name to point to a website containing information about its services.

After unsuccessfully attempting to recover the domain name from the respondent directly, the complainant sought to recover it by filing a UDRP complaint before WIPO. To be successful in a complaint under the UDRP, a complainant must evidence all of the following:

• The domain name is identical, or confusingly similar, to a trademark or service mark in which the complainant has rights;
• The respondent has no rights or legitimate interests in respect of the domain name; and
• The domain name has been registered and is being used in bad faith.

Regarding the first limb of the three-prong test, a complainant must demonstrate that it has registered or unregistered trademark rights, regardless of where and when the trademark has been registered (or first used), although these factors may be relevant for the third limb of the test.  

Whilst the complainant did not have any registered trademark rights, it claimed unregistered rights in the name Capital Matrix, under which it had been trading since 1995. In view of the evidence submitted, the panel accepted the complainant's claim to unregistered rights in the name Capital Matrix and went on to assess whether the domain name was identical, or confusingly similar, to the complainant's trademark rights in the name Capital Matrix. The panel found that the complainant's CAPITAL MATRIX mark and the domain name were both visually and phonetically identical (the top-level domain name ‘.com’ is immaterial in this assessment) and thus concluded that the domain name was identical to a trademark in which the complainant had rights. The complainant therefore satisfied the first requirement of the UDRP.

The panel then turned to the second limb of the policy. Whilst the burden of proof first falls on the complainant, once a complainant establishes prima facie that a respondent does not have a right or legitimate interest in a domain name, this burden shifts to the respondent. Paragraph 4(c) of the UDRP provides a non-exhaustive list of circumstances that may indicate that a respondent may have a right or legitimate interest in a given domain name, in particular:

1. the respondent is using, or has made demonstrable preparations to use, the domain name in connection with a bona fide offering of goods or services;
2. the respondent is commonly known by the domain name, or
3. the respondent is making a legitimate non-commercial or fair use of the domain name.

The complainant argued that the respondent lacked rights or legitimate interests in the domain name, given that:

• its use of the domain name was commercial in nature;
• the respondent is not commonly known by the domain name; and
• above all, the respondent was "a domain hijacker and cybersquatter who is attempting to sell the disputed domain name back to the complainant or to the highest bidder".

The respondent claimed in turn that it intended to register and operate a business under the name CAPITALMATRIX.com. It explained that the term ‘Capital Matrix’ was the combination of two generic terms, which together reflected the respondent's business idea: on the one hand, the term ‘capital’ captured the idea of a new business venture and, on the other, the term ‘matrix’ evoked the internet and the virtual nature of the business. However, the panel noted that the respondent did not submit any evidence in respects of its plans to develop such a business and furthermore stated that "it appears that it was not until being contacted by the complainant that the respondent indicated an intention to use the disputed domain name in connection with a business".

The panel however refrained from making a determination on whether the respondent had any rights or legitimate interests in the domain name and proceeded instead to examine the third limb of the three-prong test. According to the panel, although the domain name was pointing to a website containing information about the respondent, judging by the website, it found difficult to determine whether the respondent was actually offering any services.

In order to satisfy the third limb of the three-prong test under the UDRP, the complainant needed to show that the respondent had (or was likely to have) knowledge of the complainant and its rights in the name Capital Matrix at the time of registration of the domain name.

Based on the evidence submitted by the complainant, the panel was of the opinion that the complainant's business activities and repute were limited to a small part of the US territory and it was therefore unlikely that the respondent was aware of the complainant or its rights at the time of registration of the domain name. Thus, according to the panel, it could not be said that the respondent was specifically targeting the complainant so as to benefit from its repute when it sought to register the domain name.

The complainant argued that the fact that the respondent attempted to sell the domain name back to the complainant was evidence of registration and use of the domain name in bad faith. However, the panel rejected the complainant's argument, holding that this fact by itself, in the absence of other circumstances, was simply not enough to support a finding of bad-faith registration.

Therefore, the panel concluded that the respondent was unaware of the complainant at the time of registration of the domain name and thus found that the complainant had failed to prove registration in bad faith. In view of this finding, the panel considered unnecessary to examine whether the respondent's use of the domain name was in bad faith.

The panel thus denied the complaint for failure to prove registration of the domain name in bad faith.

Whilst the UDRP may be helpful in some instances to recover a domain name that has been inadvertently allowed to lapse, this decision highlights that recuperation may prove difficult, particularly if a complainant is relying on trademarks consisting of common or descriptive terms, as in the present case. In such cases, a trademark owner has a heavier burden to establish bad-faith registration and use of a domain name, given that it has to prove that the respondent was aware of the complainant's trademark rights and thus deliberately registered the domain name to benefit from the complainant's repute. The decision also highlights that failing to renew a domain name may have devastating effects for businesses and thus domain name holders would be well advised to take precautionary measures to ensure that the management and renewal of their key online assets are dealt with promptly and efficiently.

David Taylor and Soraya Camayd, Hogan Lovells LLP, Paris