Good-faith registration divides UDRP panel

International
In A Nattermann & Cie GmbH v Watson Pharmaceuticals Inc (Case D2010-0800, August 31 2010), A Nattermann & Cie GmbH, a subsidiary company of Sanofi-aventis, has failed to obtain the transfer of the domain name 'ferrlecit.com' under the Uniform Domain Name Dispute Resolution Policy (UDRP).
 
Unlike many other alternative dispute resolution policies put in place for other domain name extensions, on its face the UDRP requires a complainant to prove that the domain name in question was both registered and used in bad faith. This decision is interesting in that it was decided by a three-member panel, but one of the members, Scott Donahey, dissented. Donahey, who was responsible for deciding the very first UDRP decision in January 2000, filed a lengthy and complex dissenting opinion setting out why, in his view, the domain name should have been transferred, despite the fact that there was no bad faith on the part of the respondent at the time when the domain name was registered.
 
Nattermann owned the trademark FERRLECIT, which was used for one of its pharmaceutical products. As early as 1993, Nattermann reached agreement with respondent Watson Pharmaceuticals Inc, granting the latter an exclusive licence to import, use and sell the product, as well as an exclusive right to use the trademark FERRLECIT in several countries. Watson registered the domain name 'ferrlecit.com' in 1999 to promote the product. Cooperation between the parties lasted for a decade, but ceased following an arbitration which declared that their agreement would cease at the end of 2009. Watson was ordered to stop selling the product and using the mark following that date, and to transfer various documents and materials to Nattermann. The arbitration award did not refer to the domain name.
 
Watson thus retained the domain name and made it resolve to a website containing a statement that the product was now being marketed by Nattermann. Website visitors were invited to provide contact details for the purpose of receiving information on an alternative product promoted by Watson.
 
In 2010 Nattermann asked Watson to return the domain name. The latter refused and offered to sell it for $25,000. Nattermann filed a complaint under the UDRP seeking transfer of the domain name.
 
To be successful under the UDRP, a complainant must evidence that:
  • 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.
Both parties and the panel agreed that the first limb of the UDRP was satisfied, given that the domain name exactly reproduced Nattermann's mark.
 
With regard to the second limb of the UDRP, Nattermann contended that Watson was no longer licensed or authorised to use Nattermann's mark after the termination of the agreements and, therefore, had no rights or legitimate interests in the domain name. Watson rebutted this contention by emphasising the legitimacy of registering and using the domain name in connection with a good-faith offering of goods and services.
 
Based on the wording of Paragraph 4(a)(ii) of the UDRP, the panel considered that a right or legitimate interest in respect of the domain name needed to exist at the time of the complaint. In this respect, the fact that Watson registered and used the domain name while the agreements were in force did not prevent a subsequent loss of such an interest following the withdrawal of Nattermann's consent to use its mark. Consequently, the second limb of the UDRP was satisfied and the panel found that Watson had no rights or legitimate interests in respect of the domain name.
 
Turning to the third limb of the UDRP, Nattermann alleged that Watson's offer to transfer the domain name for $25,000 - a sum greatly in excess of its registration expenses - demonstrated Watson's bad faith. Watson's bad faith was further evidenced by its practice of promoting a competing product at the website to which the domain name resolved.
 
In response to Nattermann's assertions, Watson claimed that it offered a reasonable price to sell the domain name in light of the time and costs incurred in registering, maintaining and promoting it. More importantly, it underlined that its subsequent offer did not alter the fact that the domain name was initially registered in good faith. Lastly, Watson justified its current use of the domain name by stating that website visitors were well informed that Watson had ceased to sell the product and were directed to Nattermann for further information.
 
The panel had no difficulty in finding that the domain name had been used in bad faith. However, whether the domain name had been registered in bad faith was a complex question. The panel first discussed whether Watson's offer to sell the domain name for an elevated price could lead to a finding of bad-faith registration. In the panel's view, bad-faith registration could be invoked when an offer for sale was made shortly after the acquisition of a domain name, or when there was no other credible reason for a respondent to register a domain name. However, in this case, the offer was made more than 10 years after registration, and Watson had a very good reason for registering the domain name. Taking into account the totality of the evidence produced by both parties, the panel was convinced that Watson had no intention of selling the domain name at the time of registration or, at least, that it was not its primary purpose when registration took place.
 
The panel went on to assess the possibility of inferring bad-faith registration from Watson's subsequent use of the domain name in bad faith, which was well established in this case. The panel noted that, in a number of cases, previous panels had held that a domain name had been registered in bad faith on the grounds that the respondent had subsequently acted in bad faith. According to the majority of the panel, the concept of 'retroactive bad-faith registration' broadened the language of Paragraph 4(a)(iii) and was inconsistent with the ordinary meaning of the wording of the UDRP. The majority of the panel was thus inclined to adhere to the generally accepted view that the original registration must be in bad faith.
 
The majority of the panel thus concluded that the third limb of the UDRP was not satisfied because bad-faith registration could not be proved, only bad-faith use. The panel thus refused to transfer the domain name.
 
The majority of the panel thought that the UDRP resembled an international convention in its preparation and function, rather than a statute. Therefore, it was appropriate to consider the principles identified in the Vienna Convention on the Law of Treaties when deciding how to apply and interpret its terms. Such principles provided that the UDRP should be interpreted in accordance with the ordinary meaning of its terms in their context, and in the light of its object and purpose.
 
In addition, the majority of the panel considered the preparatory documents that were produced at the time that the UDRP was introduced, and concluded that they also supported the view that bad-faith registration and use were cumulative requirements, not alternatives.
 
In his dissenting opinion, Donahey supported the panels in the Octogen trio of cases (named after Octogen Pharmacal Company Inc v Domains by Proxy Inc(Case D2009-0786)), which advocated the view that, if the legitimacy of a registration was subject to compliance with certain conditions, a subsequent non-compliance with those conditions could make it a registration in bad faith, even if the registrant was intending to comply with the conditions when it registered the domain name. Under that particular line of cases, bad-faith registration and use was viewed as a unitary concept that could not be separated, and Donahey felt this to be the correct interpretation.
 
Furthermore, in Donahey's view, even though the UDRP was not a statute, it was a system of rules designed to remedy a specific wrong. Therefore, the rules of statutory construction should apply - in particular the 'mischief rule', which meant the examination of what 'mischief' or purpose the legislation was intended to prevent. According to Donahey, the purpose of the UDRP would appear to be two-fold: first, to prevent consumers from being misled and, second, to provide trademark owners with a relatively inexpensive mechanism to protect their rights. In Donahey's opinion, any decision that failed to find bad-faith registration and use when it was found that the respondent, in all the circumstances of the case, was acting in bad faith was a decision that failed to fulfil the purpose for which the UDRP was intended.
 
Finally, Donahey explained why he believed that it was intended that panels be vested with discretion in their interpretation and application of the UDRP, based on various preliminary reports and committees and the actual wording of the UDRP itself.
 
Overall, the decision is interesting as it highlights the fact that there is a very real difference of opinion between certain UDRP panels on the question of whether registration in good faith is necessarily fatal to a case. The majority of panels believe that it is, although a certain number, like Donahey, do not. It is unfortunate that such a difference of opinion has arisen, as it introduces an element of uncertainty for complainants and devalues the UDRP as a straightforward, swift solution. The best advice for parties wishing to recuperate a domain name that was clearly registered in good faith, but has since been used in bad faith, is simply not to use the UDRP but a different forum, if a negotiated solution cannot be found. A complaint under the UDRP in such circumstances could nevertheless succeed with the right panel, but relying on this would be risky in the extreme.
 
David Taylor, Hogan Lovells, Paris

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