UDRP decision shows that domain names are vital to branding of start-up companies

In Beehive.com LLC v Alliance Capital Management (Case D2012-2003), a single-member panel has confirmed the well-established principle that ‘intent to use’ (ITU) trademark applications with the US Patent and Trade Mark Office are insufficient to establish rights for the purpose of recovering a domain name under the Uniform Domain Name Dispute Resolution Policy (UDRP).

The complainant was Beehive.com LLC, an internet social media corporation organised under the laws of Delaware, United States. The respondent was Alliance Capital Management, a corporation also based in the United States, doing business in the field of asset and investment management.

The disputed domain name was ‘beehive.com’, registered on September 24 1991. It had never pointed to an active website, but was being used by the respondent for a unix-to-unix copy intranet site and email server.

The complainant, convinced that the domain name was essential for the success of its business, initiated negotiations with the respondent to purchase the domain name, but refused the respondent's offer of $100,000.

Based on its alleged US trademark registration, the complainant decided to file a UDRP complaint to recover the domain name. To be successful under the UDRP, a complainant must evidence all of the following:

• 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.

The first limb of the UDRP's three-prong test is a low-threshold requirement that is generally satisfied by demonstrating that the complainant has trademark rights in any jurisdiction.

The complainant claimed to be the owner of US Federal Trademark Registration No 85573362 for BEEHIVE, registered for classes relating to online services, and contended that the domain name was identical, or confusingly similar, to said trademark. However, the respondent contended that the complainant's trademark registration was an ITU trademark application which did not confer upon the complainant any enforceable rights over the term ‘beehive’.

The complainant chose not to contest the respondent's contentions concerning the ITU trademark application and, given that it had not asserted any unregistered rights in the name, the panel held that the complainant had failed to show any enforceable rights in the Beehive name, thus failing the first requirement.

In the United States, contrary to many other jurisdictions, trademark rights are acquired by use and not by mere registration. Thus, under US trademark law, an applicant must demonstrate that it has used the mark in commerce prior to being able to register a trademark. However, an applicant who has not yet used its mark in commerce but has a bona fide intention to do so may file what is known as an ITU trademark application.

An ITU trademark application, as regulated by Section 1(b) of the Lanham Act, 15 USC §1051(b), has many benefits (eg, the filing date of the ITU application will serve as the date of first use of the trademark if it is eventually put into actual use), but it does not by itself confer any enforceable rights against third parties.

In the present case, although the panel held that the complainant had failed to demonstrate rights in the Beehive name, it nevertheless proceeded to examine the second and third requirements of the UDRP, even though this was not necessary as the complaint had already failed.

With regard to the second limb of the three-prong test, whilst the complainant was able to establish a prima facie showing that the respondent had no legitimate rights or interests in the domain name, the respondent succeeded in rebutting the complainant's showing. The respondent explained that it was using the domain name in connection with a unix-to-unix copy intranet site for its business and an email server. Although the complainant attempted to argue that such use was after the filing of the UDRP complaint, the panel found that the respondent's use was in connection with a bona fide offering of goods and services and preceded the filing of the complaint. Thus, the panel held that the complainant had failed to prove the second requirement of the three-prong test as well.

Turning to the third limb of the test, the complainant alleged that the respondent had acted in bad faith by offering to sell the domain name for a price that was much higher than its suggested sale value. Furthermore, the complainant argued that the domain name was of critical importance to the development and success of its business, but was of no significance for the respondent, which - according to the complainant - made the respondent's offer to sell even more unreasonable.

The complainant argued that its business success depended upon its ability to obtain the domain name, as without it, the complainant would not be able to brand itself and create an online identity, and the complainant’s business plan would no longer make sense without control of the domain name. In this connection, the complainant stated that its ability to raise money from investors so far had been adversely impacted as a result of its inability to obtain the domain name and that, if it had had the domain name during its efforts to raise capital, it would not have had to give up as much in equity.

Whilst recognising that the criteria set forth under the UDRP illustrating bad-faith registration and use of a domain name were not exhaustive, the panel was not persuaded that offering to sell a domain name for a price that was higher than its appraised value or the relative importance for the business of either of the parties was indicative of registration and use of a domain name in bad faith. Therefore, the panel ruled that the complainant had also failed to demonstrate that the domain name was registered and used in bad faith in accordance with the UDRP. In effect, this was unsurprising as an essential element of registration in bad faith is proof that the registrant knew of the brand in question and registered the domain name in order to profit from the brand owner's existing reputation and goodwill. Given that the domain name could be said to be a generic word that had been registered over 20 years ago, long before the complainant was formed, it was clear that the complaint was doomed to fail.

Whilst confirming a well-established principle under the UDRP concerning the necessity of proving existing trademark rights, this decision also highlights the fact that domain names are clearly vital to the branding of start-up companies. It is no longer sensible or advisable to decide on a brand, register a trademark and deal with the acquisition of a suitable domain name at a later date. This is even more pertinent if the chosen brand could be said to be descriptive in nature, as in such a case the acquisition of a relevant domain name could prove extremely expensive. Indeed, given the crucial importance of a domain name to a company's business, start-ups may be well advised to decide on a brand based simply on the availability of a suitable domain name, as opposed to any other factors, which illustrates the central place that domain names hold in today's corporate world.

David Taylor and Jane Seager, Hogan Lovells LLP, Paris