Disgruntled ex-agent’s cybersquatting activities held to constitute passing off

United Kingdom

In Lifestyle Management Ltd v Frater ([2010] EWHC 3258 (TCC), December 10 2010), Mr Frater, a former agent of claimant Lifestyle Management Ltd, has been found by the High Court, on a 'without notice' application for an interim injunction, to have committed acts of passing off by pointing certain domain names to websites that closely resembled the home page of his former principal's website. There was an underlying dispute between the parties in that the ex-agent claimed that he was owed commission under the terms of a now terminated agency contract. Lifestyle denied that this commission was owed, so Frater decided to cybersquat until Lifestyle agreed to pay him the money, explicitly telling Lifestyle of his intention to do so. This, the court said, was intended to damage or undermine the credibility of the claimant's business and, therefore, amounted to passing off.

Lifestyle engaged Frater, who was domiciled in Scotland, as an agent in respect of its business as financial advisers to expatriates from the United Kingdom working, mainly, in Africa. On termination of the contract, Frater claimed that he was entitled to commission under its terms. A dispute arose when Lifestyle denied that he was owed anything.

Lifestyle's website operated under the domain name 'offshorelsm.com'. According to Lifestyle's evidence, Frater, on termination of his agency contract, registered the domain names 'offshorelsm.net', 'offshorelsm.org' and 'offshorelsm.co.uk' and pointed them to a home page that was very similar to Lifestyle's own home page. Frater had, Lifestyle asserted, also set out confidential information on these websites relating to Lifestyle's business and arguably defamatory material which was calculated to damage Lifestyle's business.

Frater had made it clear to Lifestyle that he intended to continue with these cybersquatting activities until Lifestyle paid him the commission to which he claimed to be entitled. The evidence, which included emails from Frater to Lifestyle, also showed that Frater had made it clear beyond any doubt that his intention was to injure Lifestyle's business. Accordingly, Lifestyle applied to the High Court without notice for an injunction restraining Frater from continuing with these activities, on the basis that Frater was committing the tort of using unlawful means to injure another or was committing acts of reverse passing off by deceiving Lifestyle's clients into visiting Frater's websites in the mistaken belief that they were, in fact, Lifestyle's own website. Such clients were thereby exposed to information intended to damage or undermine the credibility of Lifestyle's business.

The court first had to deal with the question of jurisdiction, given that Frater was domiciled in Scotland. It was persuaded that, under Rule 3(c) of Schedule 4 to the Civil Jurisdiction and Judgments Act 1982, the court did have jurisdiction, as the matter related to a tort resulting in a "harmful event" (ie, deception) taking place in any part of the United Kingdom, including England and Wales.

As for passing off, the court decided that the threefold requirement had been established:

  • reputation (or goodwill) in Lifestyle's domain name 'offshorelsm.com';
  • misrepresentation by Frater's use of domain names calculated to deceive; and
  • damage to Lifestyle's business. 

Further, following British Telecommunications plc v One in a Million Ltd ([1999] 1 WLR 903), in which the notion that use of a website as an "instrument of fraud" amounted to passing off was first established, the court stated that the essential ingredients of a deceptive use of a company name with an acquired goodwill in order to damage the owner of that name were present here.

The court thus ordered that Frater should:

  • point his three domain names to blank pages;
  • deliver up to Lifestyle confidential client information in his possession; and
  • refrain from making any further use of Lifestyle's confidential information.

The court declined, however, to order Frater to relinquish his interest in his websites or to transfer the domain names to Lifestyle without him first having the opportunity to be heard.

Given that Frater had sent emails to Lifestyle advising that he was carrying out these cybersquatting activities as a way of damaging Lifestyle's business and threatening to continue until Lifestyle paid him the commission he considered he was owed, it would seem that this was a relatively easy decision for the court to make. However, it must be remembered that the application was without notice and, therefore, Frater had no opportunity to put his side of the story. That said, given the strength of the evidence, it will be interesting to see whether the case progresses to a full trial.

Leigh J Smith, McDermott Will & Emery UK LLP, London

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