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Small Business Digest


Small Firms Being Hit With Trademark Challenges Concerning Their Domains

Many small companies are caught unawares that a domain they own somehow infringes on a trademark.

Often, the first they are aware of the problem is when they get a phone call from an attorney representing the trademark owner.

In many cases, the matter is settled by either the small company voluntarily giving up the domain name or a mutually agreed upon settlement as to how the domain is used.

For those cases where the matter is not settled by talking, the matter is referred to one of the dispute resolution service providers (often called panels) authorized to handle such disputes.

No matter the outcome, the costs of these situations are more than most small firms can afford in terms of dollars and time.

If the company agrees to change domains, lost business activity results as most experts agree that switching domains will generate a 30-50% visitor loss in the first five months.

In many instances reported to ISI, firms have sought to add a generic term to their domain names and run into trademark issues.

Donna Flammang, a partner with Roetzel & Andress. Ms. Flammang, based in the firm's Fort Myers, Fla. office, said, "In domain registrations for .com, .org and .net, which are open to any kind of registrant, the policy is first-come, first-served as long as you have registered and used the domain name."

"However, (companies) have no right to violate trademark law, breach the Registration Agreement or engage in cybersquatting just because they registered the name first," she added.

"In newer domains, such as .biz and .name, there are additional registration requirements that must be met and are restricted. Trademark owners may also have advanced registration rights. It is the domain name registrant's responsibility to make sure the domain name they are registering does not infringe the rights of others," she said.

"However, that does not mean you have to perform a trademark search or look for common law trademarks. A domain name holder may still have rights or legitimate interests in a domain name and the trademark owner must complain and then prove bad faith. Domain name policy was primarily intended to deter abusive registration practices, not punish ordinary domain name holders who have a legitimate business and register a name they are commonly known by and offer goods and services online," she added.

Several examples of trademark infringement in domain names where the owners were vigorous in their defense include Playboy and Sports Authority.

Legal experts interviewed by this newsletter’s parent, Information Strategies, Inc., said the best course is to consult an attorney if there is any doubt about impinging on a trademark name.

As Kirk Teska, a Massachusetts attorney specializing in trademark issues said, "trademark names should not be used in a domain name where possible."

"Just adding a letter before or after a trademark is not enough, Teska added.

According to Teska, there are exceptions and some case law to that effect.

"If the trademark words do appear and are there other words in between, then the impact becomes less clear," Teska said.

"Trademarks and patents were enacted so that the public wouldn’t be confused. Domain names are a relatively new area of the law and we are still creating the case law," Teska continued.

According to attorneys interviewed for this article trademarks that include generic terms denoting a specific sector, activity or material product are possibly open to domain usage.

Said Teska, "Generic terms, such as "car" or "pizza" do not have capacity as a source-identifier because they designate the class or "genus" of goods. Hence "Super Pizza" does not impinge on "Boston Pizza."

As Chicago attorney Lee Eulgen said, "a small firm needs to be careful in what it uses as a domain name."

His advice to small business managers, "be careful of what you say when that large company counsel calls. Asking for monies for the domain leaves the owner open to a charge of "bad faith" which can be a reason for losing the domain."

"While I don’t want it to seem like I am drumming up business for lawyers, it is important that you get advice before talking to the opposing counsel or better yet have your attorney do the talking," he added.

This highlights a problem facing many smaller firms. They often don’t have the funds or time to fight this type of battle.

Keska pointed out that Sports Authority was vigorous in its defense of its trademark involving the words "sports" and "authority."

"Many companies folded when confronted with legal challenges until one firm stood up and won in court," he said.

Some firms surveyed said they were intimidated by the threat leveled by trademark-owner attorneys that the penalty for "Cyber Squatting" can be as much as $100,000 per incident.

Lee said that these larger fines occur for egregious violators rather than for civil cases involving business/trademark disputes.

The Internet is still relatively new and because companies can enter the market cheaply, there is a wide range of activities, which have not been clearly defined by legal precedents.

For small firms, the best advice is to spend some funds to make sure the storefront, (domain) meets all legal requirements.

Ironically, the arbitration panels authorized to handle disputes have proven to be a trap for many smaller firms as they seek to avoid protracted legal proceedings.

When confronted by a domain challenge, these firms have often sought to settle the matter through direct negotiations.

The process is tricky as any discussion of compensation leaves the domain holder open to the charge of bad faith.

As Euglen said, "make sure these talks are held as a settlement discussion and not a demand for monies."

Also, keep in mind that the domain holder needs to be actually using the site in conjunction with a business and not just holding the name.

"At the same time, that business should not be in competition with the trademark holder," Flammang said, "As that would cause confusion for the public and would be grounds for revoking the domain holding."

To prevent this happening to any business, Janet Satterthwaite of Venable LLP in Washington, DC urges companies "to do your due diligence, the same as you would for any venture.

"That includes searching the federal trademark records at and look on the Internet if you don’t have the funds to hire a trademark attorney."

If you don’t do your homework at the start, you may face a problem in two or three years after you have invested time and money in building your brand," she added.

One other point Satterwaite made was to make sure that the domain name is renewed at the proper time and that some one doesn’t go in and take it thereby forcing you US Trademark Record and the Internet trademark attorney search prudent to due diligence if can’t trademark office database However this is not recommended if you’re really really in start-up. Downside risk.

Karen K. Hammond, who is with Porter Wright Morgan & Arthur in Columbus,Ohio suggests that if firms decide to move forward with a domain name that may have some impact on a trademark that they maintain a record of their business plan and reasons for choosing a particular domain name.

"There should be a legitimate reason for choosing this domain name the usage should also reflect the business’s activities, she added.

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