Epix court rules offer to sell domain name is not evidence of bad faith

In Interstellar Starship Services v Epix, the US Court of Appeals for the Ninth Circuit has rejected a claim that an alleged cybersquatter's offer to sell a domain name constitutes bad faith. The court's decision appears to contradict the express language in the US Anti-cybersquatting Consumer Protection Act (ACPA), which lists an offer to sell a domain name as one factor to consider when determining whether a domain name was registered in bad faith.

Congress passed the ACPA in 1999 to protect trademark owners from cybersquatters. In establishing a violation under the ACPA, it is essential for the mark owner to prove that the domain name was registered with bad-faith intent to profit from the trademark at issue. The ACPA contains a non-exclusive list of nine factors to be considered by courts in assessing the domain name registrant's bad-faith intent. One of these factors is whether the registrant made an offer to sell the domain name to the owner of the mark.

Epix appealed the district court's finding that Interstellar Starship Services (ISS) did not cybersquat, even though ISS had offered to sell 'epix.com' to Epix. On appeal, the Ninth Circuit acknowledged that an offer to sell a contested domain name may be probative evidence of bad faith but rejected Epix's claim because the offer came in the context of settlement negotiations. The offer to sell came from the respondent's attorney after litigation started, and the evidence suggests that ISS' offer of $25,000 was not made to extort Epix but to recoup the investment made to develop and operate 'epix.com'.

The Ninth Circuit's decision makes the circumstances surrounding the offer to sell indispensable to the analysis of whether that offer is truly evidence of bad-faith intent under the ACPA. This leaves questions as to whether the court's conclusion would have been different if ISS had offered to sell immediately upon receipt of a cease-and-desist letter from Epix. Would the court's conclusion have been different if ISS had offered to sell for $2.5 million instead of $25,000?

Where does one draw the line between a bad-faith offer to sell and a good-faith offer to settle? Given the relative youth of the ACPA, the courts have yet to provide trademark owners with clear-cut answers to these questions. However, Epix makes it clear that courts and litigants need to look behind an offer to sell a domain name. It is not enough to simply rely on an offer to sell to support an allegation of bad faith.

Keith W Medansky and Gina Durham, Piper Rudnick LLP, Chicago