November 28, 2011
Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
[Post by Venkat Balasubramani]
Luxury brand Chanel has engaged in a fierce campaign against counterfeit websites in federal court in Nevada. It has seized approximately six hundred domain names in the last few months.
The basic facts alleged by Chanel are nearly identical. It identifies domain names which are used to "advertise, promote, offer for sale or sell" Chanel goods, including "handbags, wallets, shoes, boots, sunglasses, tee shirts, watches, and costume jewelry." Chanel's investigative team orders goods from the sites. When the goods arrive, they identify the goods as counterfeit (i.e., they bear Chanel marks but are "non-genuine Chanel products"). Chanel also argues that the defendant websites can "transfer registrations, change registration data and content, change hosts, and redirect traffic," thus thwarting Chanel's ability to have effective recourse against the defendants.
Based on these allegations, the court first enters a TRO against approximately 400 domain names, followed by a preliminary injunction (the September 26 and October 11 orders). The second time around, the court enters a temporary restraining order and preliminary injunction aimed at approximately 200 domain names (the November 14 order).
The relief granted by the court is extraordinary in its scope, and includes:
- an injunction against the defendants prohibiting them from using any Chanel marks or selling any Chanel products;
- an injunction against the top-level domain name registry, directing it to change the registrar of record for the domain names to GoDaddy (!);
- an injunction telling GoDaddy to change the DNS data for the domain names so the domain names resolve to a site where a copy of the case documents are hosted (servingnotice.com/sdv/index.html);
- authorization for Chanel to enter the domain names into "Google's Webmaster Tools" and cancel any redirection of the domain names;
- an order requiring Google, Bing, Yahoo, Facebook, Google+, and Twitter to "de-index and/or remove [the domain names] from any search results pages."
Chanel is required to post a bond in the amount of $20,000.
I'm sympathetic to the "whack-a-mole" problem rights owners face, but this relief is just extraordinarily broad and is on shaky procedural grounds.
First, I did not get a clear sense that this is an enforcement action against a single defendant. If there's no credible allegation of a conspiracy or an arrangement between whomever is behind these domain names, it strikes me as problematic for Chanel to file a placeholder lawsuit and then add or remove defendants at its convenience.
Second, it was not entirely clear why the lawsuit was in Nevada. The domain names are not registered to a registrar that is based in Nevada, and there's no clear basis for in rem jurisdiction. It's possible that plaintiff picked this jurisdiction as a matter of convenience, but there's no apparent relationship between the alleged counterfeiting activities and the State of Nevada.
Then there's the matter that some of the court's relief is directed at a variety of entities that are not parties to the dispute (including the registrars, the registry, Facebook, Twitter, Google, etc.). I'm not sure how this court can direct a registry to change a domain name's registrar of record or Google to de-list a site, but the court does so anyway. This is probably the most problematic aspect of the court's orders. [Interesting that GoDaddy was chosen as the registrar that the domain names would be transferred to.]
Finally, there's no clear basis to authorize a transfer of a defendant's property pending resolution of a lawsuit to the plaintiff. (See Bosh v. Zavala.) I don't see this as particularly problematic in this case because Chanel is not looking to liquidate the domain names, but it certainly raises due process red flags, given that this is all done with minimal (or no) notice to defendants.
On a loosely related note, TorrentFreak has a post about the latest seizure action by ICE/DOJ: "Feds Seize 130+ Domain Names in Mass Crackdown," where the feds seized a bunch of domain names that were allegedly used to sell or promote "counterfeit clothing." I'm always stumped by the timing, motivation, choice of targets, and other aspects of the DOJ's intellectual property enforcement efforts, but particularly in this context, I'm unclear as to why the DOJ puts energy towards enforcements that private parties seem to be able to accomplish on their own. (I'm sure they have their reasons, but they're never obvious to me.)
It's also worth viewing this case within the broader context of SOPA and thinking about which of the remedies obtained by Chanel in this case are ones that SOPA provides (and which have resulted in a hue and cry). (See, e.g., Eric's post: "Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act"; Techdirt: "The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas.") An injunction requiring Google to "de-list" sites is one remedy which SOPA expressly makes available, and ordering the registry to transfer domain names to GoDaddy and ordering GoDaddy to update the DNS records is in effect achieving another remedy which SOPA creates. The fight against SOPA may be a red herring in some ways, since IP plaintiffs are fashioning very similar remedies in court irrespective of the legislation. Thus, even if SOPA is defeated, it may turn out to be a Pyrrhic victory--opponents may win the battle but may not have gained much as a result.