Re-registration of Domain Name is not a “Registration” Under the ACPA — GoPets Ltd. v. Hise

[Post by Venkat Balasubramani]

GoPets Ltd. v. Hise, 08-56110; 08-56112 (9th Cir. Sept. 22, 2011)

Although Eric is not a big fan of them, the Ninth Circuit has produced a slew of domain name opinions this year. GoPets Ltd. v. Hise is one to add to the list.

Background: Hise registered gopets.com in 1999. Hise and his brother and their entity are experienced domainers; they registered more than 1,300 domain names in the past decade. In 2004, Eric Bethke founded GoPets Ltd., a Korean company that developed a game involving “virtual pets that move between the computers of registered users.” GoPets filed an application to register the “GoPets” mark in 2004 and the registration issued in 2006. Starting in 2004, Bethke made several attempts to purchase the gopets.com domain name from Hise. The parties went back and forth but never consummated a sale of the domain name.

In 2006, GoPets filed a UDRP action against Wise. The arbitrator ruled in favor of Hise, finding that since Hise registered gopets.com before GoPets Ltd. started using the mark, there could be no bad faith. After the UDRP ruling, the Hise brothers registered a slew of other gopets domain names, including gopet.biz, gopet.org, egopets.com, gopetz.bz, gopets.ws, gopet.tv, gopet.ws, gopet.bz, gopet.de, gopet.eu, and gopet.name. Meanwhile, Bethke again tried to purchase the domain name, and offered up to $40,000 for gopets.com. The Hises demurred and instead sent a letter to the investors of GoPets, offering to sell the domain name for $5 million. After receiving the offer to sell the domain name for $5 million, GoPets Ltd. filed a complaint for cybersquatting, and for claims under the ACPA, and Lanham Act.

The district court granted GoPets Ltd.’s motion for summary judgment on its ACPA and Lanham Act claims with respect to all of the domain names. The court also granted GoPets Ltd. its attorney’s fees.

Re-registration of gopets.com: Hise transferred the gopets.com domain name to Digital Overture, an entity owned by him and his brother. Digital Overture re-registered the domain in 2006. The question is whether the 2006 re-registration violated the ACPA. GoPets argued that since its mark was distinctive in 2006 when the domain was re-registered, this is sufficient to state a claim under the ACPA. According to the court, the key question is whether the initial registration was done in bad faith–subsequent renewals or even transfers are irrelevant:

we conclude that Congress meant “registration” to refer only to the initial registration. It is undisputed that . . . Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name. We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner.

The court finds that although the re-registration or transfer of gopets.com was not in bad faith, there was ample support for the factual conclusion that Hise’s registration of the remaining domain names were done in bad faith. Hise tried to argue that he thought that registration of these domain names was proper based on his UDRP victory, but not surprisingly, the court rejects this defense.

Damages: The trial court awarded $100,000 in damages for Hise’s registration of gopets.com and $1,000 in damages for the remaining domain names. The Ninth Circuit vacates the $100,000 award based on gopets.com but affirms the remaining damage award.

The ACPA allows for a plaintiff to elect statutory damages: “in the amount of not less than $1,000 and not more than $100,000 per domain name, as the court considers just.” Hise argued (relying on Feltner v. Columbia Pictures Television) that the statutory damage award should have been decided by a jury and not a judge, and having a judge rather than jury determine statutory damages violated his Seventh Amendment right to a jury trial. The court says that this may be a viable argument, but not in this case, since the court awarded the minimum statutory amount. Hise could not have achieved a better result in front of a jury since the jury would have had to award the minimum as well. (See the similar BMG v. Gonzalez ruling in the copyright context). This issue will have to be hashed out in another case.

__

If I’m reading the court’s opinion correctly, it means that any time someone registers a domain name before a mark has become distinctive or famous, that domain name gets a free pass, regardless of any transfers or changed use of the domain name? Or is the court’s decision based on the fact that the basis for the ACPA claim was based on “registration” (as opposed to “trafficking” or “use”), and therefore the renewal or transfer does not create ACPA liability? If GoPets had stronger facts around Hise’s use of the domain name, would it have made a difference?

I’m guessing the opinion just speaks to registration. Other decisions have held that the determination of the lawfulness of a domain name registration is not fixed–it may change over time, depending on the defendant’s conduct and use of the domain name. (Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 385 (2d Cir. N.Y. 2003) (“Congress intended the cybersquatting statute to make rights to a domain-name registration contingent on ongoing conduct rather than to make them fixed at the time of registration”.) It’s useful to contrast the result for gopets.com with Newport News Holding Co v. Virtual City Vision (4th Cir. April 18, 2011) [pdf]. As Eric wrote in May, the registrant of newportnews.com won a UDRP proceeding, but ten years later, was the subject of an adverse ruling on ACPA claims against it. What went wrong?

[I]n making changes to its website in 2007, VCV [the registrant of newportnews.com] shifted its focus away from the legitimate service of providing information related to the city of Newport News and became instead a website devoted primarily to women’s fashion….VCV cannot escape the consequences of its deliberate metamorphosis….newportnews.com went from being a website about a city that happened to have some apparel advertisements to a website about women’s apparel that happened to include minimal references to the city of Newport News.

Thus, the court awarded $80k in damages, $10k in sanctions and attorneys’ fees against VCV (the registrant of newportnews.com). It would not be prudent to read the Ninth Circuit’s Gopets.com opinion as giving registrants a free pass for the life of the domain name. I doubt that’s what the court meant, but I was surprised the court was not clearer about it, and surprised that the facts around the Hises’ use of the domain name did not factor at all into the legal analysis.

UPDATE: Ryan Gile says “The lesson here is two-fold. Failing to negotiate in good faith can lead to unnecessary lawsuits and lawsuits often last longer than internet companies or their brands.”