Verizon awarded over $33 million in cybersquatting case

United States of America

In Verizon California Inc v OnlineNIC Inc (Case C-08-2832 JF (RS), December 19 2008), Verizon California Inc has received an unopposed default judgment against OnlineNIC Inc. Under US law, default judgments are binding in favour of the plaintiff if the defendant has not responded to a legally served summons or has failed to appear in a court. 

Ten years ago Congress enacted the Anti-cybersquatting Consumer Protection Act (ACPA), now codified in Section 43(d), 15 USC § 1125(d)(1) of the Lanham Act. Two related causes of action are covered by that section. Subsection 1 provides an action in personam against a cybersquatter grounded in bad faith (registration or use of the domain name). Subsection 2 creates an action in rem against the domain name itself where:

  • the cybersquatter is not subject to personal jurisdiction of the court in the judicial district in which the domain name registrar or registry that issued the domain name is located; or
  • the trademark owner is unable to find the cybersquatter after due diligence.  

Both grounds were used in the present case.

Verizon alleged that OnlineNIC was a prolific cybersquatter, registering at least 663 domain names (eg, '' and '') that are confusingly similar to Verizon's famous trademarks or service marks (eg, VERIZON and VERIZON WIRELESS). A cybersquatter may receive advertising revenue when internet users accidentally mistype a web address and inadvertently visit the cybersquatter's website rather than the intended website. OnlineNIC had concealed its location so that in personam service of process was not achieved. The US District Court for the Northern District of California granted Verizon's ex parte application for an order authorizing service on OnlineNIC in personam by delivery of the summons and complaint to the California secretary of state.
Upon default, the well-pleaded allegations in the complaint are considered to be true and sufficient to establish a defendant's liability. However, absent a hearing, this rule does not apply to allegations with respect to damages. In lieu of actual damages, Section 43(d)(1) coupled with Section 35 permit an election by the plaintiff of statutory damages of between $1,000 and $100,000 for each domain name found to be in violation of the provisions of the ACPA. A violation occurs where a domain name registrant registers, uses or traffics in a domain name that is identical or confusingly similar to a distinctive or famous trademark, with bad-faith intent to profit from the trademark. 
In the instant case, the court found that OnlineNIC's actions with respect to Verizon's trademarks undoubtedly violated the ACPA. OnlineNIC did not refute that finding, but refused to alter its behaviour. Its bad faith was further evidenced by its machinations to avoid detection through the use of fictitious business entities, shell corporations and domain kiting. After a hearing in December 11 2008, wherein OnlineNIC failed to appear, the court concluded that OnlineNIC had committed 663 violations of the ACPA. Therefore, the court entered judgment in Verizon's favour, awarding $50,000 for each of the 663 violations - a total of $33.15 million. 
The ACPA also authorizes transfer of offending domain names to the rightful owner. Accordingly, the court entered an order transferring the ownership of all 663 offending domain names to Verizon. Finally, Section 34, 15 USC § 1116(a) authorizes injunctive relief to prevent violations under the ACPA. Therefore, the court entered injunctive relief against OnlineNIC's ongoing and egregious violations of the ACPA, concluding that permanent injunctive relief was appropriate. A defendant which has had a default judgment entered against it may move for an order vacating the judgment if the defendant can show 'good cause' for not responding to the complaint or summons. 
While this is one of the largest monetary default judgments against a cybersquatter under the ACPA to date, it will probably not be the last. It is highly unlikely that OnlineNIC will be able to set aside this default judgment.
Brian E Banner, Rothwell Figg Ernst & Manbeck PC, Washington DC

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