Domain Name Squatting to Gain Leverage Can Trigger "Bad Faith Intent" in an ACPA Claim

by Holland & Knight LLP
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A required element to sustain a claim under the Anti-Cybersquatting Consumer Protection (ACPA) (15 U.S.C. § 1125(d)(1)(A)) is proof that the defendant acted with "bad faith intent to profit from that mark." As bad faith intent is a somewhat nebulous phrase, and courts are given wide latitude to interpret it, often times the conclusion will depend entirely on the unique facts of a case. This occurs even though Congress enumerated within the statutory text nine factors that indicate bad faith intent, or a lack thereof. See Interstellar Starship Servs., Ltd. v. Epix, Inc., 330 F.3d 936 (9th Cir. 2002) (holding that the factors are not exclusive; instead, "the most important grounds for finding bad faith are the unique circumstances of the case, which do not fit neatly into the specific factors enumerated by Congress."). A recent holding on a defendant's motion to dismiss an ACPA claim illustrates both the type of claim that can epitomize bad faith intent, and also how expansive the definition can possibly be given the particular factual circumstances of a given dispute.

Atigeo LLC v. Offshore Ltd., No. 2:13-cv-01694-JLR, 2014 WL 239096 (W.D. Wash. Jan. 22, 2014) (slip op.) concerned a bitter dispute between an employer and a former employee. Atigeo is a software company run by Michael Sandoval (Sandoval) that markets products and services in fields such as healthcare in social media. It solely owns a registered trademark "ATIGEO" and the domain name "atigeo.com." Dennis Montgomery (Montgomery), a former employee of an Atigeo subsidiary, approached Sandoval to invest in a "new business venture" and was declined. Montgomery responded by, among other things, telling Sandoval that "if you're not with me, you're against me" and registering the domain name "atigeo.co" On this domain name, Montgomery posted allegations that Atigeo had billed a client for nonexistent work, misappropriated investor funds and helped to shelter money from a potential divorce settlement. Montgomery thereafter filed suit for a violation of the ACPA, primarily on grounds that the "atigeo.co" domain name confused Atigeo's customers and business partners, and tarnished the goodwill associated with its mark and business. Montgomery then filed a motion to dismiss.

The court focused solely on the third element of the ACPA claim, whether Montgomery "acted with bad faith intent to profit from that mark," as Montgomery did not contest the other two elements. Montgomery argued that Atigeo could not show a "bad faith intent to profit" from the Atigeo mark because it did not intent to profit from its actions by either (1) selling Atigeo the website "atigeo.co" or (2) diverting customers from Atigo's website to derive commercial gain. The court disagreed with Montgomery, and found that Atigeo had stated a claim under the ACPA and could thus survive a motion to dismiss. Specifically, the court noted that as a threshold matter, the bad faith intent to profit element is not limited to the scenarios claimed by Montgomery. Rather, in citing to the Ninth Circuit decision in DSPT Int'l, Inc. v. Nahum, 624 F.3d 1213 (9th Cir. 2010), the court held that an attempt to gain leverage in a business dispute can dovetail with a violation of the ACPA pursuant to the enumerated statutory factors. Therefore, since Montgomery threatened to retaliate against Sandoval, created a website containing false statements about Atigeo that confused its customers, and used meta-tags to lure those searching for the legitimate Atigeo website to "atigeo.co," all with the intent to induce Sandoval to invest in a business venture, Atigeo showed that Montgomery was attempting to gain leverage sufficient to trigger the bad faith intent element of the ACPA.

In holding so, the court noted that the actions of Montgomery augured with the fifth ACPA bad faith statutory factor which considers a defendant's intent to divert customers from the mark owner's website as a means of harming the good will associated with the mark, either for commercial gain or with the intent to tarnish or disparage the mark. Most importantly, the court then held that even if Montgomery's actions did not pertain to any of the statutory factors, his attempts to gain business leverage over Atigeo would establish a bad faith intent to profit.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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