Registrant found to lack bad faith in UDRP dispute loses in ACPA action

United States of America
In Newport News Holdings Corp v Virtual City Vision Inc (Case 09-1947, April 18 2011), the US Court of Appeals for the Fourth Circuit has considered whether a domain name registrant who had prevailed in a Uniform Domain Name Dispute Resolution Policy (UDRP) proceeding possessed legitimate rights in the domain name in a subsequent court action for federal cybersquatting. The Fourth Circuit affirmed a grant of summary judgment to the plaintiff, finding that the defendant domain name registrant had ceased to possess rights in the underlying domain name when it changed the content of its website. 

Plaintiff Newport News Holding Corporation sells women’s clothing and accessories under the mark NEWPORT NEWS and has been in existence for more than 20 years. The plaintiff sells its products through catalogues and the internet at the domain name '', which it purchased in November 1997. The plaintiff attempted to purchase the domain name '' at that time, but it had already been acquired by defendant Virtual City Vision Inc. The defendant owns at least 31 domain names incorporating the names of geographic locations. 

The plaintiff brought a UDRP complaint against the defendant in 2000, seeking the transfer of the domain name '', but did not prevail. While the domain name and trademark were found to be identical, the UDRP panel determined that no likelihood of confusion existed because the defendant’s website explicitly provided information about Newport News, Virginia, and had no connection whatsoever to women’s fashions. The panel further held that the defendant’s website provided “bona fide service offerings” consisting of disseminating city information towards tourism, finding there was a “total absence” of competition between the parties. 

Approximately four years after obtaining the UDRP decision in its favour, the defendant began running occasional advertisements for women’s clothing on its '' website. Between 2004 and 2008, the defendant’s website shifted its focus from offering information about Newport News, Virginia, to emphasising women’s fashion. The website also ran advertisements for women’s apparel. In 2007 the plaintiff made an offer to purchase the defendant’s domain name. The defendant rejected the offer, demanding over $1 million or an arrangement whereby the defendant would sell the plaintiff’s goods on its website for a commission. 

In 2008 the plaintiff filed an action against the defendant for trademark infringement, false advertising, unfair competition, cybersquatting and related claims. The plaintiff later filed a motion for summary judgment on its cybersquatting claim under the Anti-cybersquatting Consumer Protection Act (ACPA). The district court granted summary judgment to the plaintiff on its ACPA claim pertaining to the domain name '', finding that the defendant possessed bad-faith intent to profit and awarding statutory damages and attorneys’ fees. The defendant appealed, arguing that the district court had erred in finding that it had acted in bad faith. 

On appeal, the Fourth Circuit upheld the district court’s finding of bad faith. While the defendant argued that it offered a legitimate service under the domain name by providing information about the city of Newport News, the court pointed to clear evidence that the defendant had shifted its focus away from providing information about Newport News and become a website devoted primarily to women’s fashion. It would undermine the purpose of the ACPA, the court explained, if a domain name registrant was permitted to profit from another company’s trademark simply by providing some minimal amount of information about a legitimate subject, as the defendant did here. Further, the Fourth Circuit pointed to the UDRP decision as additional proof of the defendant’s bad faith. The UDRP panel had found the defendant’s use proper precisely because its business of providing city information was unrelated to the plaintiff’s clothing business. However, “in the face of the cautionary language [from the UDRP decision]”, the court noted, “the defendant purposefully transformed its website into one that competed with the plaintiff by advertising women’s apparel”. 

Further, the Fourth Circuit found no abuse of discretion in the district court’s award of attorneys’ fees to the plaintiff, agreeing with the district court’s finding that the defendant’s conduct was exceptional in light of the timing of the transformation of the site - the defendant had changed its website content clearly after it had been made aware by the UDRP panel that only lack of competition between the parties made the defendant’s use of the domain name legitimate. Similarly, the court affirmed the district court’s statutory damages award of $80,000, finding the amount appropriate given the particularly egregious nature of the defendant’s conduct. 

Whitney D Brown and Rita Weeks, McDermott Will & Emery LLP, Washington DC

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