OnlineNIC Loses One Lawsuit and Gets Sued in Another

By Eric Goldman

Two anti-domainer developments involving OnlineNIC occurred over the holidays.

Yahoo! Inc. v. OnlineNIC, Inc., 5:08-cv-05698-PVT (N.D. Cal. complaint filed Dec. 19, 2008)

Yahoo has sued domain name registrar OnlineNIC and some Does for cybersquatting, trademark infringement, trademark dilution and related causes of action. This lawsuit caught my eye because OnlineNIC is a registrar, and normally lawsuits against registrars are barred by 15 USC 1114(2)(d)(iii). However, that immunization does not apply if the registrar has a “bad faith intent to profit from such registration or maintenance of the domain name.” Here, Yahoo alleges that OnlineNIC registered the domain names for itself (i.e., it was both the registrar and the registrant–see Para. 47) and used a variety of covers and fronts to mask that it was the true registrant. I also think many of Yahoo’s allegations of “abusive” domain name tasting and domain name kiting support a bad faith argument if Yahoo chooses to go that route.

Verizon California, Inc. v. OnlineNIC Inc., 5:08-cv-02832-JF (N.D. Cal. Dec. 19, 2008)

The same day Yahoo sued OnlineNIC, Verizon won a “record” $33+M default judgment against OnlineNIC. The Verizon press release. It was a slow news week before Christmas, so Verizon got a lot of press coverage (see, e.g., WSJ, NYT, for its victory.

Although it’s hard to divine much insight into future jurisprudential developments from a default judgment order, Judge Fogel’s brief opinion does conclude that OnlineNIC violated the Anti-Cybersquatting Consumer Protection Act:

Defendant’s actions with respect to Verizon’s trademarks undoubtedly violated the ACPA. Defendant has registered hundreds of domain names that are designed to attract web users seeking to access Verizon’s legitimate websites. Moreover, Defendant has refused to alter its behavior, and its bad faith is further evidenced by its machinations to avoid detection through the use of fictitious business entities, shell corporations, and kiting of its domain names.

This builds on Verizon’s early win against Navigation Catalyst that certain domaining practices can constitute impermissible cybersquatting.

Three Brief Observations

FIrst, Verizon’s sizable award against OnlineNIC is a pretty empty public gesture. Good luck collecting that, Verizon. (InternetNews has more on the likelihood of collection). It’s a little like Facebook’s recent $873M default judgment against spammers using its private messaging system. As we used to say in the old days, these multi-million judgments plus a nickel will buy you a cup of coffee. (I recognize Starbucks is more like $5/cup, but you get the point). Yahoo shouldn’t bank on any big paydays either, even if it wins.

Second, earlier this year, I suggested the Verizon v. Navigation Catalyst case could be a turning point in the legal battles over domaining, and the latest ruling might reinforce that. Even though Verizon’s latest win has no real financial implication, it does help accrete the anti-domaining legal precedent. I expect to see nothing but bad legal news for abusive domaining in 2009.

Third, I can’t avoid observing how interesting it is to see Yahoo and Verizon bringing plaintiff-side lawsuits over domaining. After all, Verizon sells ads on mis-typed domain names when its consumers use its browser (i.e., on its mobile devices), and Yahoo is still fighting a lawsuit over having placed ads on domaining sites.