Fortunately, noted domain lawyer Zak Muscovitch has now stared a blog on his website.  I personally find it amazing that a lawyer, who is undoubtedly under a lot of time pressure, takes the time to blog about this important area of domaining.  Zak is known as Canada’s leading domain lawyer, and you may recall his name from our in depth interview with him about Canadian domain law.

Zak’s blog isn’t limited to Canadian law, indeed it provides a global view, for instance, talking about a recent domain decision by the Indian High Court, the Kentucky seizure of gambling related domain names, and Olympic trademark infringement.

Good luck Zak and I look forward to lots of interesting reading.

The case was brought by a company in Uruguay, which owns a trademark for “CHILLI BEANS” for eyewear and watches.

The panel found that the domain ChilliBeans.com was identical or confusingly similar to the trademark CHILLI BEANS and that the design elements of the trademark didn’t matter.  No big surprise here.

In the second stage of the UDRP analysis, the panel looks at the parties’ rights and legitimate interests in the domain.  The panel found that the Complainant had such rights and interests. Schilling argued that he was using the domain in a legitimate way – to display ads linking to goods and services relating to food and beverages, which is consistent with the meaning of “Chilli Beans.”  However, the panel found that there was no evidence that Schilling explored the possibility of third-party trademarks before registering the disputed domain name.  The panel further found that there was evidence of (a very small amount of) pay-per-click advertising links on the ChilliBeans.com, related to the trademark.

The Panel decided to make up its own law and stated:

Moreover, this Panel cannot ignore the implications of publicly available traffic rankings generated by Alexa – and unchallenged by the Respondent – reflecting that in August 2008 some seventy-five percent (75%) of the traffic to the Respondent’s website originated in Brazil. This is significant given that the CHILLI BEANS mark has been used in Brazil since as early as 2000 and is more widely known there than in other areas of the world. While the Panel has no effective means of discovering traffic data at earlier dates, this certainly cautions against the Panel blindly accepting the Respondent’s contention that the sheer numerical preponderance of links keyed to the generic or descriptive meaning of the domain name renders the presence of paid advertisements related to a trademark insignificant or inconsequential, at least insofar as it concerns the pay-per-click revenue generated as a result of these links.

What??  The panel is looking at Alexa data and domain owners are expected to do so too??  And Alexa can’t be easily gamed?

The ultimate issue in these sorts of cases is whether the domain owner registered the domain in bad faith.  Apparently, not knowing about a trademark, plus intending to use a domain only for its generic use, and targeting ads for the generic meaning are not sufficient.  The panel concludes that Schilling registered and used the domain in bad faith, as he failed to explore the possibility of third-party rights and his parking software was incapable of distinguishing between dictionary meaning and trademark meaning of a term.

The panel completely ignored the fact that Schilling went out of the way to target food products in his ads.

The panel ordered Schilling to transfer the domain.

My guess is that Frank will be taking this to court soon.  If something as generic as ChilliBeans.com is in danger of an UDRP loss, almost every domain is too.

Despite this, very little has been written about Canadian domain laws.  To get a better understanding of the legal situation facing Canadian domainers, I contacted Canada’s leading domain lawyer, Zak Muscovitch, and asked him a few questions.  Zak was the successful lawyer in the famous CheapTickets.ca case, which was the first domain dispute under the CDRP where a domain owner won, and which was fought all the way up to the federal court of Canada.  Zak has also worked on more domain disputes than any other lawyer in Canada.

Fortunately, Zak agreed to answer my questions.  Here is what he had to say:

1. Please provide a brief biography so that my readers know who you are.

I am a domain name lawyer located in Toronto, Canada. I have been practicing domain name law since 1999. I have acted for domainers all over the world in countless domain name disputes and have assisted many domainers with domain name sale and monetization deals.

2.  How did you get interested in domain law?

I applied to 50 intellectual property law firms for my first job in law and got hired doing personal injury.  I was lamenting this while having a beer and reading the newspaper in a local pub when I came across an article about a local artist who was being sued by two of Canada’s largest corporations, Bell and Torstar, over his registration of Toronto2.com. The companies were the owners of Toronto.com. The article said that the defendants needed a lawyer. I offered to take on the defense, pro bono. We won. You can read about the case here.  I still have a gorgeous painting that I received in appreciation for my services and the defendants and I are now lifelong friends.

3.  What is the law regarding registering trademark domains in Canada?

The best concise summary of the law in Canada was provided by Justice Blenus Wright in another precedent setting domain name case that I won, Black v. Molson. Douglas Black was a PhD student at the University of Toronto who had registered Canadian.biz.  He was taken to the National Arbitration Forum by Molson, the huge Canadian brewery. They claimed that Black was not entitled to the domain name since they had a trademark for “Canadian”.  The NAF Panelist, Robert R. Merhige, Jr. (1919 – 2005), was a distinguished jurist appointed by Lyndon Johnston and was even a World War II fighter pilot.  Unfortunately, his decision in this case was wrong, and Molson won, believe it or not, at the NAF.  I called up Douglas Black and told him that he had to appeal, and that I would take on the case for him.  Justice Wright, in his written opinion  said:

“Simply because a domain name is identical or similar to a trademark name should not result in the transfer of the domain name to the trademark owner.  In my view, unless there is some evidence that the use of the domain name infringes on the use of the trademark name, a person other than the owner of the trademark should be able to continue to use the domain name.”

That, in a nutshell, is the law in Canada, thanks to Justice Wright.

4.  How does the Canadian dispute resolution process work?

It’s very similar to how ICANN UDRP’s work for .com’s, etc.  Basically, the Complainant needs a trademark and must show that the registrant has no legitimate interest in the domain and registered the domain name in bad faith.  All contested cases are ruled on by three-member panels paid for by the Complainant.  The Complaint and Response are submitted by email and a written decision comes out several weeks later.  You can read the Canadian Domain Name Dispute Resolution Policy here.  There are some major flaws with the process but there is no review of the current Policy planned by CIRA at this time.

5.  How common are CDRP proceedings?

Not very common. There have only been 107 CDRP decisions to date (to August 2008). I acted for the Respondent in the very first CDRP case where a Respondent won.  It was called Cheap Tickets v. Emall. It eventually wound its way all the way up to the Federal Court of Appeal of Canada where we won again. You can read the final decision on the case.

6.  What are the practical differences between the CDRP and the UDRP?

This is a very complex area that would need a more thorough and complex answer.  One glaring example is that under the UDRP, “preparations to use a domain name for a web site” is considered a “use”.  In Canada, under the CDRP, there is no express provision that considers “use” to include “preparations to use”.  This is an important distinction because it means that you must erect a web site immediately upon registration, or risk being found to have “no legitimate interest” in the domain name because you haven’t used it. This flaw became apparent in the recent CanadaVisa.ca case (which I won nevertheless).

7.  Are there any other relevant laws that Canadian domainers need to be aware of?

There are lots of laws that could affect Canadian domainers, including both American and Canadian laws. One law that domainers should pay attention to is the US law, the Digital Millenium Copyright Act.  It has “Notice and Takedown provisions” that apply to US-hosted web sites. You can read about it here.  That’s why I always recommend that my Canadian clients to try to use a Canadian web site hosting service with Canadian-located servers, and even use a Canadian domain name registrar.

A Canadian domain name registrar comes in handy because of the governing law clauses in their registration agreements. They also come in handy when an ICANN UDRP is commenced, because the Complainant must agree to submit to the jurisdiction of either the location of the domain registrant, or his registrar, in the event of an appeal.  If both are in Canada, then any subsequent legal proceeding should generally be in Canada. This is to the Canadian registrant’s advantage.

8.  If you were in charge, what changes would you make to the CDRP to make it fairer to both trademark holders and domainers?

There are a number of things I would do. The first thing I would do is immediately hold consultations on revising the CDRP. I would also ensure that the panelists reflected a broader mindset and background.

9.  What future developments do you see in this area of law?

I think .ca domainers will have to get together to protect their interests more at CIRA and in the courts. Otherwise, it’s the trademark owners and their lawyers who will continue writing the rules of the game.

10.  How does Canadian tax law treat income from domaining?

That’s a question for a tax advisor, so I won’t comment on it other than to say that income is income.

Thanks again Zak for taking your valuable time to help Canadian domainers understand domain law in Canada!

1. The Contract Rules. Most of the rights and obligations domain holders have are governed by the contract between the domain holder and the registrar. Naturally, since the registrar writes the contract, it is lopsided in favour of the registrar. A lot of times I hear people claim that their registrar scammed them, when in reality, the registrar was acting within the terms of the contract. Whenever there is a problem regarding a domain, the first thing you should turn to is not the law, but the contract between you and your registrar.

2. Your Domain Can Be Shut Down. Normally, the registrars’ contracts allows them to shut down your domain. Network Solutions recently shut down an anti-Islam film site. Enom recently shut down domains about travelling to Cuba, despite the fact that the website owner was English, lived in Spain, and offered trips to Cuba only to Europeans. (Query whether ICANN, based in the US, is breaking US law by running a Cuban ccTLD).

Of course, this is done at the registrar’s discretion, so if you’re the Ku Klux Klan, you don’t need to worry that your domain will be shut by your registrar. As well, most registrars’ agreements don’t require them to notify you in advance that they will be shutting your domain down.

3. No Such Thing As Domain Ownership. The registrars’ agreements generally don’t give domain holders any property or ownership rights in the domains they register – ie, it’s not really “your domain.”

4. US Law Overreaches International Boundaries. Even if you live outside the United States, and your registrar is outside the United States, you may still be subject to the jurisdiction of the United States, simply because the registries for many TLDs are located in the United States. Kind of like child support laws or Canadian divorce laws. Bodog learnt this the hard way. They are a British based company. They were sued in a US court, on an issue unrelated to their domains. As they were not based in the US, they ignored the case, and a default judgment was granted against them. This default judgment was then used to take their domain from them, as it was registered through a US registrar. In short, if you are doing anything controversial with your domain, I’d try to avoid any connection with the US.

5. Generics Can Be Trademarks. Just because your domain is a generic word, doesn’t mean that it is not infringing a trademark. An “apple” is more than just a fruit. This is particularly important when parking your domain. You need to be very careful about the ads that appear.

6. Registrars Will Park Your Domains. If you don’t change your nameservers when you register a domain, then chances are that your registrar will put up its own parking page. The registrar collects any revenue earned from the parking page. But if you find yourself in an UDRP due to ads from the registrar’s parking page, you’re the one who has to face the music, not the registrar.

7. Record Keeping. Keep good records of all your domain registrations, including any emails sent by your registrar. If there are ever any legal problems, you there is a good chance you will need these.

8. Private Whois. If you use the private whois service offered by your registrar, it may be difficult to prove your right to a domain. This happened in the Registerfly debacle, where customers using the privacy services had difficulty proving which domains belonged to them when the registrar collapsed. Again, the point above about good record keeping is applicable here as well.

As well, some domainers don’t seem to realize that the private whois offered by many registrars just applies to the address, telephone number and email, but not to the name of the domain holder. You should check what you are getting before you sign up for private whois.

9. Accurate Whois. Don’t use incorrect whois information on any domain of value. Your registrar can suspend your domain if you do this.

10. Front Running. According to ICANN, domain front running doesn’t occur. Ha ha ha ha ha ha ha ha ha ha ha ha ha. Seriously, if you find a good name, register it right away. Rush through the checkout process as quickly as possible.

11. Hijacking. If your domain gets hijacked, a lot of registrars won’t help. Make sure you hold your domains with a registrar who takes security seriously.

12. Most Registrars Aren’t Helpful. You can’t really expect much from your registrar, especially in legal matters. You pay them $7 or $8 per year for your domain – how much effort are they going to put in for that amount of money?

13. Not Much Legal Protection. Scammers and fraudsters are everywhere. In practical terms, there is little that the law can do to help you if you are scammed. While it may be a theoretical possibility that the law can help, the international nature of domain names plus the high costs of legal proceedings in comparison to most domains means that in practical terms, there is little legal redress if something goes wrong.

CONCLUSION

So, if you’re a domainer, before you start talking about your “rights” you might as well realize that you don’t really have that many! Play it safe with your domains.

Rule 1. Register dictionary words and fanciful terms that you make up.

Rule 2. Use accurate contact information.

Rule 3. Do not register domain names with the intent to sell them to a trademark holder.

Rule 4. Do not forward Web traffic to a competing Web site.

Rule 5. Be honest!

Rule 6. Don’t make up crazy stories.

Rule 7. Avoid unnecessarily antagonizing the other side.

Rule 8. No forwarding Web traffic for trademarks – even descriptive ones – to porn sites, ever.

Rule 9. Resist the temptation to cyberflee.

Rule 10. Do not ignore cease and desist letters.

All seem like common sense to me, but where money is involved, people seem to lose their common sense sometimes.

The thing that bothers me so much about the UDRP process is that the results often seem unpredictable. An unpredictable legal system means more legal cases, and lower domain prices as the risk of the unpredictable legal system must be built into the price of the domain.