Can I Really Be Forced to Sell My Domain Name?

forced-to-sell-domain-name

Is it possible for the owner of a domain name used for a business to be forced to sell their domain name?

Earlier this month, I received a frantic e-mail from a business owner (to protect the innocent, let’s call her “Debbie”), who had received a threatening e-mail from another business owner (whom we’ll call “Penny”). Debbie’s e-mail went something like this (edited by me for brevity and client confidentiality reasons):

I just learned another party has filed to trademark the name of a website I have owned now for several years. She says I have to sell her the domain name. What are my rights?

Since this question (in some form or another) is often posed to me, I figured it might be the perfect time to relate some of what I explained to Debbie once we were able to schedule an actual consultation.

Domain names are not trademarks, but trademarks can be domain names

I won’t say much more on this because I already have in a previous blog post. If you’re unclear on what this means exactly, I encourage you to check out my recent post addressing this very topic.

Basically, although there can be and often is overlap, the two are not the same and come with their own separate set of rights and obligations under the law. Put another way, in these types of disputes, the trademark aspect must be separated from and evaluated apart from the domain name issues.

There is a saying that you learn early on in law school (some people learn it even earlier in life) that “possession is 9/10ths of the law”. In Debbie’s case, she owned the domain name which she had purchased a number of years prior. From looking into the facts of her situation more closely, it seemed that her ownership of the domain predated Penny’s claims by a few years. Since Debbie owned the domain name outright, it was her property just like any other asset she might own.

As such, I told Debbie that she likely held the legal high ground here. If Penny wanted it, she would have to do what most people who want or need a specific domain name have to do; make an offer to purchase it which Debbie would have to agree to. Otherwise, she (Penny) would have to come and try and take it (more on that below). In the meanwhile, Debbie wasn’t legally bound to sell her [squat].

Where a domain name/trademark conflict can be an actual problem

Now, before any of you take what I told Debbie as some type of license to grab or exploit any ‘ol domain name you chose, that is most definitely NOT what I’m saying. Like anything else in the law, there are exceptions, and Debbie’s situation did not appear to fall into any of them.

What do I mean? Under certain circumstances, a legitimate trademark holder could have certain legal rights as well as both legal and non-judicial remedies against that domain owner.

I’ve written about this in yet another blog post but, to summarize, these are usually situations where:

  • the trademark owner used the name in-commerce first
  • the conflicting domain was obtained after the trademark owner’s usage
  • the domain owner isn’t actually using the domain for a legitimate business or free-speech purpose
  • rather, that domain owner is using the name to extort, exploit the goodwill of, divert traffic from, or otherwise cause harm to the trademark owner or their business

In this case, the trademark owner has rights under both Federal and most state’s trademark or unfair competition laws, in addition to Federal cybersquatting/piracy laws, as well as a possible arbitration claim under the Uniform Domain Name Dispute Resolution Policy (UDRP) or even Uniform Rapid Suspension (URS) framework.

In Debbie’s situation, she hadn’t been doing anything like the nefarious things I mentioned above. Rather, she had acquired and been using her domain name in-commerce before she had even heard from Penny.

Moreover, just a casual examination of the brief correspondence between Debbie and Penny, as well as a cursory inspection of the U.S. Patent and Trademark Office’s publicly searchable trademark database cast a ton of doubt on whether or not Penny had even applied for registration of her trademark as she had claimed, let alone received actual registration of it. Some of the red flags included:

  • No registration (or at least) serial number: every application for trademark registration with the USPTO receives a serial number. Assuming the mark is granted registration, it later receives an actual registration number. Both of these can easily be looked up in the USPTO database and neither were provided by Penny.
  • Trademark not found in TESS: We looked into the mark on the USPTO’s free searchable database (fortunately, it is a rather unusual name, so it didn’t take too long). In this case, a quick look showed no application for registration, let alone actual registration of the claimed trademark. And while the USPTO does take a few days to input in and assign a serial number to new applications, this had been more than a few weeks.

Conclusion

Based upon what Debbie had told us, as well as our own investigation into the matter, it appeared that Penny was more than likely trying to bully or bluff Debbie into a sale of the domain to Penny. I advised Debbie that I was more than happy to write a nice response back to Penny but, before I did, advanced some other possibilities that Debbie might want to first consider, including:

  • assuming Debbie was no longer interested in operating her business under the domain name (or could do so under a different name), coming up with a dollar figure that she would be happy with and offering to sell it to Penny for that
  • assuming she had no problem demonstrating her own actual use of the domain name in-commerce, attempt to flip the script on Penny and instead file for her own registration of the trademark with the USPTO immediately
  • if she didn’t actually want to register the trademark, then Debbie might consider opposing or raising a challenge to Penny’s attempted registration of the trademark with the USPTO, at a minimum to delay prosecution of Penny’s application, as well as use as leverage against her to either drop her claim against Debbie or force Penny into a co-existence (or even joint venture) agreement or other settlement with Debbie.

As e-commerce continues to permeate every single facet of our commercial lives, the oftentimes murky boundaries between trademark and domain names will continue to give rise to disputes like Debbie’s. While some claims involving trademarks and domains are legitimate and should be taken very seriously by you and your legal counsel, some others, like this one, can be based on the worst sort of lack of education or misconception that comes from skipping class at “Google law school”.


Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a startup, technology, and e-commerce law practice advising founders and management teams on company startup, corporate and technology transactions, e-commerce, as well as Internet privacy concerns. The firm serves corporate and individual clients throughout Arizona, the United States, and internationally. Our offices are conveniently located along the Camelback corridor in Phoenix’s financial district. For more information about our Internet and e-Commerce practice, feel free to reach out using the contact form on the right or call us at (602) 222-5542 to schedule a meeting. Connect with Ben on LinkedIn or Avvo.