“AFFILIATE’S” RIGHTS TO DOMAIN NAMES

IVAN HOFFMAN, B.A., J.D.



        Here is the situation: a domain name registrant (“Respondent”) has registered and may be using a domain name that is the trademark, registered or not, of another party (“Complainant”).  The Complainant brings an action under the Uniform Domain Name Resolution Policy (“UDRP”) seeking to have the domain transferred to the Complainant.

        Among the many issues presented in UDRP actions is whether or not the Respondent has any “legitimate interests” that entitle it to use that domain.  (For a larger discussion of some of the other issues, read the other articles on my site under the link “Articles About Trademarks and Domain Names.”)

        As used in this article, the term “affiliate” is used loosely to describe a myriad of relationships that might exist between a Respondent and a Complainant and range from official “affiliate” all the way to companies that merely deal in the product that is the subject of the trademark.

The “Authorized” Distributor

        There are a number of cases dealing with the rights of an “authorized” distributor or dealer in the goods and/or services represented by the trademark to use the trademark as a domain, at least for a site dealing in and with those goods and/or services related to the mark.

        In Canon U.S.A. Inc., Astro Business Solutions, Inc. and Canon Information Systems, Inc. v. Richard Sims, the domains at issue were usacanon.com, astrocanon.com, canonastro.com and canoncopymachines.com.  The Panel described the business of the Respondent as follows:

The evidence establishes that Respondent registered the domain names in dispute as a means to directly access the global web site for Ameritek Business Solutions Inc.  Ameritek is engaged in the distribution of new and used full color and black-and-white copiers and other business equipment, including facsimile machines, and, thus, competes directly with Complainants.  .... [Remember for a moment the concept of “competes directly” because it will come up again in a few paragraphs] The excerpts show use of the name “Ameritek Business Solutions - Serving Your Company Across The United States” at the top of the home page, followed by a list of names of copier makers, including Ricoh, Xerox, and Canon.  The page contains text material indicating that Ameritek sells new, remanufactured and certified lease copiers and specializes in the remanufacturing of copiers made by Canon, Xerox, and Ricoh.
        For reasons not directly relevant to this article, the Panel ruled that Respondent lacked legitimate interests in usacanon.com, astrocanon.com and canonastro.com.  The issue in this article deals with the rights to “canoncopymachines.com” and the issue was whether or not the “affiliate” had “legitimate interests” sufficient to warrant the registration and use of the indicated domain.  As to that last domain, the Panel stated:
However, the Panel reaches a different conclusion with respect to the domain name canoncopymachines.com.  With respect to this domain name, the evidence indicates that the domain name is in use, insofar as it accesses Respondent’s web site, and that such use commenced prior to notice of this dispute in connection with the bona fide offering of goods or services, within the meaning of paragraph 4(c)(i) of the Policy.  Further, upon review of Exhibit E to the Complaint, the Panel concludes that Respondent’s use of the “Canon” mark falls within paragraph 4(c)(iii) of the Policy.  Respondent has the right, at least under U.S. trademark law, to refer to the marks of others as a means to identify the types of products it services or sells. [emphasis added].
        In Chantelle v. Marvin Anhalt, the Panel found these facts:
Since its incorporation, Olga’s [Respondent] has been engaged in the sale of women’s lingerie. Since August 2000, the company has been purchasing Chantelle products from Chantelle for the explicit purpose of resale of those products. As a part of the retail sale of the products, the company has marketed and advertised the products as being Chantelle products. This marketing and retailing of the products under the brand name of “Chantelle” should have been known to Chantelle, which does not sell on a retail basis, but only on a wholesale basis to authorized distributors.
        As a result, the Panel found that the Respondent had the right to use the domain.

        However, the right of an “authorized distributor” is not a carte blanche right.

        In Koninklijke Philips Electronics N.V. v. Cun Siang Wang, the Panel stated:

It is a widely recognized principle of trademark law, sometimes referred to as “exhaustion of rights”, that the owner of a trademark cannot object to the resale of goods which it has placed on the market bearing the mark unless there is some good reason, such as interference which might affect the quality of the goods....

Where the principle of exhaustion applies, it has also been recognized that a trader is permitted to advertise goods using the mark under which they were placed on the market, provided that it does not do so in a way which causes confusion or damage to the reputation of the mark….If this is the position under the applicable trademark law or laws, the Panel considers that a trader in genuine branded goods can have a legitimate interest in using a domain name incorporating the brand name for a website promoting and selling the branded goods, provided that the trader does not use the domain name so as to cause confusion, for example by indicating that the website is approved by the brand owner. [Emphasis added].

        But of course, in true legal fashion, there are the opposite approaches and opposite conclusions that can be drawn as well.  Each case is decided on an individual, ad hoc, basis and often the Panel has to make decisions based on the inherent equities involved in such cases, crafting exceptions and refinements to otherwise general rules.

        In Societe Civile Agricole Chateau Margaux v. Goldman Williams Ltd, the Panel found that even though the Respondent was legitimately trading in goods bearing the trademark of the Complainant, that activity did not entitle it to the domain because, by definition, having a domain confers exclusive rights to that domain and, the Panel concluded, would thus deprive the trademark owner of its trademark rights.  The Panel stated:

However, one should not misunderstand the true nature of the right to a domain name once it has been legitimately acquired and used. Certainly, the Respondent is permitted to use any trademark as a means of indicating the goods he is selling, just as is any other person who has an interest in using the trademark to the same extent. It is, however, a non exclusive use of the trademark, i.e. it does not impinge on the right of the trade mark owner and on the right of third parties equally to use the same trade mark to indicate which goods they are selling. On the contrary, a domain name registration will only confer the use of the said domain name to its owner. Any other person will be prevented from using that domain name, cybersquatting not being tolerated any longer. The right to a legitimately registered domain name is therefore an exclusive right, and its nature is very different from the right the Respondent has to use the trademark for describing the merchandises sold in its business. Once again, if the Respondent were to be allowed to keep the domain name at issue, third parties would be prevented to indicate to the public that they are suppliers of the same wine through the use of an Internet domain name.
        The Panel found:
Further, it is important to note that the Respondent already has an established website at Goldmanwilliams.com from which it can conduct his business operations. It has no need for a <chateaumargaux.org>. In fact the Respondent can sell Chateau Margaux wine on the Internet without the use of this confusing domain name. The Respondent claims that it is only by using the words "Chateau Margaux" in the domain name that it can indicate what its business is and attract potential customers to the site. As is explained above, it clearly appears that in the present case such argumentation is not technically correct. Therefore, it does not afford any rights or legitimate interests to the registration of the domain name.
        But perhaps most importantly, the Panel concluded:
Also important is the fact that the Complainant and the Respondent are competitors in the wine selling business as they both sell Chateau Margaux wines. The registration by the Respondent of a domain name identical to the Complainant’s trademark and apparently previously registered domain name results in the impossibility for the Complainant to reflect its own trademark in a domain name belonging to itself, without creating a confusion with the establishment of its competitor. Thus the registration of this domain name is disruptive of the Complainant’s business. It deserves to be observed that at least a well-known trademark should be protected against all domain names that are identical or similar to it when considering the second-level domain, even leaving aside the fact that there might be little legitimate interest for a merchant of wines to register a domain name under the top level domain org. [emphasis added]
        If you remember my reference to “competition” when discussing the Canon case above, you will see that the same factor in the above case weighed against the Respondent and apparently in favor of the Respondent in the Canon case.

        But of course, things in the law are never easy.  So in Oki Data Americas, Inc. v. ASD, Inc., the Panel discussed what it means to have legitimate interests because a Respondent is engaged in a “bona fide offering of goods or services.”  (Read “Legitimate Interests in Domain Name Disputes”.)

Here, there is no dispute concerning Respondent’s status: It is an authorized Oki Data repair facility, and has been offering OKIDATA goods and services since prior to the commencement of this case. The only issue before the Panel, then, is whether Respondent’s offerings may be characterized as “bona fide.” To be “bona fide,” the offering must meet several requirements. Those include, at the minimum, the following:
• Respondent must actually be offering the goods or services at issue. [citing cases]
• Respondent must use the site to sell only the trademarked goods; otherwise, it could be using the trademark to bait Internet users and then switch them to other goods. [citing cases]
• The site must accurately disclose the registrant’s relationship with the trademark owner; it may not, for example, falsely suggest that it is the trademark owner, or that the website is the official site, if, in fact, it is only one of many sales agents. [citing cases]
• The Respondent must not try to corner the market in all domain names, thus depriving the trademark owner of reflecting its own mark in a domain name. [citing cases]
        Further, the Panel in ABB Asea Brown Boveri Ltd v. Mark Maddison found:
One difference between that case [another case not mentioned in this article] and the present situation is that the site <mercedesshop.com> contained a clear disclaimer stating that the site displayed trademarks belonging to the complainant and the respondent was in no way affiliated with the complainant. While the Respondent’s site in this case contained the statement: “MOMO© is a registered trademark of Momo Italy S.r.l.”, it did not disclaim any relation to or authorization from the Complainant to use the domain name.
        Finally, the Respondent must in fact be the actual “affiliate.”  It is not sufficient if it is an affiliate of an affiliate or if the Respondent is an employee of the affiliate.

        In Las Vegas Sands, Inc. v. Red Group, it was stated:

As a result, the existence of a trademark registration in another party’s name is insufficient to prove that Respondent has rights or legitimate interests in the domain name.
        And in Medtronic, Inc. v. gotdomains4sale.com,  the Panel stated:
Even if Respondent is right in suggesting that a distributor is entitled to register and use a domain name to truthfully identify the source of the products it distributes and to suggest an affiliation with that supplier, the employees of a distributor do not acquire that right independently of the distributorship for whom they work (or purport to work).
The Written Trademark License

        One of the key lessons in these cases jumps out from the screen.  That lesson is  that if you have rights in a trademark, registered or not, or you are intending to become a licensee (“authorized” distributor, dealer etc.) of a party which has rights in a trademark, the trademark license should be in writing and very clearly and explicitly deal with the issue of which party has the rights to register domain names using the mark, among of course many other issues.  Without such express provisions, you end up in situations such as are described in this article.  If you have copied a form from some book or other source in an attempt to “save” money by not having an appropriate license drafted by an experienced attorney, you may find that if there are gaps in provisions, whether as to these or other issues, your “savings” quickly disappear in legal costs to either bring on or defend one of these UDRP or other actions.

        It is worth keeping in mind that even though an “authorized distributor” may have the right, the trademark owner (Complainant) can still restrict that right in the written license mentioned above.  Thus there is a difference between having a right and having the right to exploit that right.  The Complainant may wish to restrict its distributors in exploiting the mark via a domain.  This should be done via a thorough, written license agreement.

        Without such written, express license, the parties may find themselves with the same result as in Action Sports Videos v. Jeff Reynolds, in which the Panel basically left the parties to figure things out for themselves.  It stated:

The Panel finds the relations of the Complainant and the Respondent are intricate and date back several years. During that time there seems to have been acquiescence on both sides about use of various versions of the mark in the disputed domain names. The Panel does not believe it is the function of the Policy [the UDRP] to serve to disentangle the conflicting rights of parties to a mark once it is apparent both parties have colorable claims to a mark underlying a disputed domain name.
        The same “it is beyond the UDRP to figure it out” response was given in Adaptive Molecular Technologies, Inc. v. Priscilla Woodward & Charles R. Thorton, d/b/a Machines & More.  Here too, the facts were quite complex and as a result, both parties were unable to effect a true UDRP solution, although since the domain was not taken away, the Respondent “won.”  But such a win merely postponed what might be a more expensive federal trademark litigation.  All this might have been avoided by a thorough written license agreement.
While Complainant satisfies the first requirement, the same cannot be said of the second and third requirements of Paragraph 4(a). As to both, significant factual issues remain, resolution of which are beyond the scope of the panel’s jurisdiction….

Under these circumstances and on this record, it cannot be concluded that Respondent has no “rights or legitimate interests” in the domain as is required under the Policy. While Respondent does not own MILITEC as a trademark, questions remain as to whether Complainant legally acquiesced in Respondent’s registration and use of the domain, at least initially, or whether Respondent’s use is a nominative fair use. Acquiescence and fair use are principles of trademark law, each requiring full analysis of the underlying facts. These are issues for the courts.

Conclusion

        The refrain continues.  As the Internet evolves, new areas of legal conflict continue to arise.  One of the ways to deal with the ever-present uncertainty of these new areas is to enter into thorough agreements, in writing, that cover the many issues that might arise.  As I have said before, we are in the “day of the deal.”  Parties cannot rely on a body of law, in existence for many years and in many instances, codified, to fill in gaps in their understanding.  There is no such body of law nor codification.  Thus, it is up to all parties, in the exercise of their personal responsibility, to have it all set out in a valid, thorough agreement.  Read “Private Laws.”

© 2002 Ivan Hoffman

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This article is not intended as legal advice.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  You should consult with an attorney familiar with the issues and the laws.  This article does not create any attorney client relationship.
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