Domain name marketplace organizer's appeal dismissed

As previously reported in World Trademark Report (see Organizer of domain name sale found liable for infringement), the Paris Court of First Instance found Sedo GmbH - a company that organizes the sale and purchase of domain names - liable for trademark infringement and ordered it to pay €10,000 damages plus costs. The Paris Court of Appeal has now confirmed the First Instance decision and ordered Sedo to pay damages of €75,000 plus costs.

Sedo operates an online domain name marketplace where domain names can be bought and sold by users. In addition to the United States and the United Kingdom, Sedo operates in France, Spain and the Netherlands, and currently has a database of over 6 million domain names for sale. Notable sales last year included 'vodka.com' for $3,000,000, 'cheapgifts.com' for $90,000 and 'ich.de' ('Ich' meaning 'I' in German) for €40,000.

The court action started after an individual named Stéphane Hellequin used Sedo's platform to advertise the domain name 'hotel-meridien.fr' for sale. In the view of the first instance court, Sedo assisted the registrant while being fully aware that the rights of Société des Hôtels Méridien (SHM) were being infringed. It therefore ruled against Sedo.

On appeal, the Court of Appeal stressed that SHM had rights in well-known trademarks so that auctioning domain names confusingly similar to these marks and displaying commercial links on the websites associated with them constituted infringement. Furthermore, the Court of Appeal found that Sedo was liable in tort as, according to the principles of loyalty and free trade, companies should always act with extreme care in the marketplace so as not to disrupt the activities of others. The court went on to note that the first instance decision did not act as a warning and cause Sedo to change its ways because auctions of domain names confusingly similar to SHM's well-known trademarks were still ongoing.

In a press release, Sedo underlined that the ruling was somewhat deceptive as Sedo does not buy or sell domain names. It merely acts as a marketplace for sellers and buyers to meet. The decision would indeed appear to put domain marketplace organizers in a rather awkward situation, because it would seem that they risk incurring liability only once they have become aware of a potential infringement. The sheer volume of names for sale on such websites means that many services are provided automatically, and so turning a blind eye would appear to be the easiest course of action. Checking names appearing for sale would not only prove expensive and inefficient, but paradoxically it could also expand the essentially passive role of the marketplace organizer and increase the possibility of it being found liable in the event of dispute. The court's decision would therefore appear to be somewhat unsatisfactory for domain marketplace organizers. In this regard, parallels may be drawn with the recent French court decisions on the sale of AdWords and keywords finding Google Inc and other search engine service providers liable. These decisions have also proved unpopular with such providers, who also insist on their essentially passive role.

David Taylor and Charles Simon, Lovells LLP, Paris