Domain name registrars not secondarily liable for cybersquatting

As 2013 drew to a close, the US Court of Appeals for the Ninth Circuit addressed, in a case of first impression, the issue of whether the Anti-cybersquatting Consumer Protection Act (ACPA) created a cause of action for contributory cybersquatting which would have extended liability to neutral domain name registrars (Petroliam Nasional Berhad (Petronas) v GoDaddy.com Inc (Case No 12-15584, December 4 2013)). Applying principles of statutory interpretation, the court concluded that neutral domain name registrars, such as GoDaddy.com (one of the largest domain name registrars), did not have secondarily liability exposure for cybersquatting based on the plaintiff’s theory that the registrars actions have the effect of aiding cybersquatters.

The plaintiff, a Malaysian government-owned entity, owned both the Petronas Twin Towers in Malaysia and the US trademark PETRONAS. In 2007 a third party began using defendant GoDaddy’s domain-forwarding services to direct the domain names 'petronastower.net' and 'petronastowers.net' to the adult website 'camfunchat.com'. Because GoDaddy took no action against the alleged cybersquatting, Petronas sued alleging, among other things, contributory cybersquatting. The district court granted GoDaddy’s summary judgment and Petronas appealed.

The ACPA added two cybersquatting causes of action to the Lanham Act, which itself was a codification of the then existing common law of trademarks and unfair competition (which recognised secondary liability). By placing the ACPA within the Lanham Act, Petronas argued, Congress intended to incorporate the common law principles of secondary liability.

Although “[e]stablished common law principles can be inferred into a cause of action where circumstances suggest that Congress intended those principles to apply”, the Ninth Circuit disagreed that was the case here: 

• the plain text of the ACPA did not include contributory liability;
• Congress created a new cause of action distinct from traditional trademark remedies; and
• allowing suits against neutral service providers would not advance the statutory goals.

The text of the ACPA limits when a person can be considered a cybersquatter to those that “register, traffic in, or use a domain name” with the “bad-faith intent to profit” from that protected mark. The court reasoned that extending liability to neutral third parties would improperly expand the range of prohibited conduct to include persons who are not cybersquatters but whose actions may have the effect of aiding them. 

Unlike the Lanham Act, the court noted that the ACPA did not result from, or codify, any existing common laws. Rather, it created a new statutory cause of action to address a new problem: cybersquatting. To address cybersquatting, the ACPA sought to “ensure that trademark holders can acquire and use domain names without having to pay ransom money to cybersquatters”. Under the ACPA, a person may be civilly liable for cybersquatting “if... that person has a bad faith intent to profit from that mark... and registers, traffics in, or uses a [protected] domain name”. Imposing contributory liability would not further the goals of the ACPA, but would force otherwise neutral service providers to divine the [bad-faith] intent of their customers or suffer the consequences of cybersquattering.

The court concluded by saying that mark holders nevertheless have sufficient remedies to protect their marks under the ACPA (and Lanham Act) without the need for contributory cybersquatting liability.

Teri HP Nguyen, McDermott Will & Emery LLP, Silicon Valley