Domain name “trolls”: The Trademark Trial and Appeal Board may have offered a way out

Rothwell, Figg, Ernst & Manbeck, P.C.
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In today’s world, e-commerce and online visibility are sine qua non for success. Businesses are willing to invest considerable sums to boost their online presence and maximize sales. Because of this digitalization of business, domain names acquired incredible value. And where there is value there is opportunity for profit.

Trying to reap the benefits of this opportunity are several hundred entities engaging in what is generally called “domain name warehousing”. Among them are, for example, some of the most well-known retail Registrars. A retail Registrar is a business that handles the reservation of domain names as well as the assignment of IP addresses. But it is becoming more common to find private companies or even individuals engaging in this type of practice.

“Domain name warehousing” consists in purchasing (or holding) thousands of different domain names, without any real interest of using them, in the hope to sell them for profit to entities that actually intend to utilize the domain name for business. When big Registrars engage in this practice, they typically will obtain control of expired domain names already under their management, and will sell them to the highest bidder. However when it is private companies or individuals, often times they will actively reach out to existing businesses that they believe would have an interest in the domain and offer to sell the domain for significant amounts.

Recently, some entities have become more aggressive and, in an attempt to have their offer accepted, will try and pressure their target by threatening (or actually filing) a petition to cancel their target’s existing trademark registration.

In Philantropist Inc. v. The General Conference Corporation of Seventh-day Adventist, the Trademark Trial and Appeal Board was confronted with the issue of standing relating to trademark cancellations filed by entities engaged in “domain name warehousing”. Philanthropist Inc. (also “Petitioner”) is in the business of “domain name warehousing” and holds approximately 9,000 domain names. It acquired the domain name “Adventist.com” for roughly $8,000 and sought to sell it for about $120,000. As a result, The General Conference Corporation of Seventh-day Adventist (also “Respondent” or “GCCSA”) sent a cease-and-desist letter based on the GCCSA’s rights in the “ADVENTIST” marks and demanded transfer of the domain name. In response, Petitioner filed petitions to cancel all of the GCCSA’s marks for “ADVENTIST”, alleging that the GCCSA’s ownership of the “ADVENTIST” marks hinders its ability to sell the domain.

However, Petitioner rejected two inquiries from potential purchasers between 2016 and 2021 and none of them indicated that they believed the GCCSA dampened their interest in acquiring the domain name. Petitioner also never published any content as the only purpose of holding the domain name was admittedly for future sale at an inflated price or to redirect Internet users to the TTABVUE docket page for the related cancellations.

The Board found that such use does not constitute sufficient entitlement to obtain cancellation because Petitioner’s interests fall outside the zone of interest of Section 14 of the Trademark Act. It failed the “real-interest test”, which was designed to ‘distinguish parties demonstrating a real interest from mere intermeddlers or ... meddlesome parties acting as self-appointed guardians of the purity of the Register.’ The Board also specified that it found no reasonable basis in fact in Petitioner’s claim of proximate causation because, while there may have been belief of damage when the proceedings were initiated in 2017, the very limited used in subsequent years was insufficient to maintain such proximate causation alive.

In sum, it seems that this decision indicates that the Board believes that mere warehousing of domain names is insufficient to meet the entitlement standard set by Section 14 of the Trademark Act, which seemingly cripples the leverage that warehousing entities might have over trademark owners.

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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