• Ronald A. Flate

Cybersquatting and the Courts

A former employee who refused to give up a domain name that he had registered for the benefit of his former employer has been hit with a sizeable damages verdict. The federal appeals court that heard his case looked unfavorably on his having held the domain name for “ransom,” and agreed that the employee had violated the federal Anticybersquatting Consumer Protection Act (ACPA). Meanwhile, an Illinois company was unsuccessful in bringing a claim against a Texas company under the ACPA. Although the Texas company had registered a domain name similar to one held by the Illinois company, there was not sufficient jurisdiction for the Texas company to be sued in Illinois.

In the first case, an employee of a men’s clothing company registered a domain name for the company. The domain name was registered in his name, but that was not the cause of his subsequent problems in court. Some years later, after the company had come to depend on its website for most of its business, the employee left to work for a competitor and, in effect, took the domain name with him.

He shut down the website and declined to give up the domain name unless he was paid commissions that he claimed were due to him. This use of the domain name as a means of gaining leverage over the former employer led to civil liability under the ACPA. The law requires an “intent to profit,” but this is broadly construed to include an attempt to procure an advantageous gain or return and it was of no significance whether the employee was, in fact, owed the commissions he was seeking.

Like any other civil lawsuit, an action under the ACPA can proceed only if jurisdictional requirements have been satisfied. This became apparent in the second case when an action filed under the ACPA in a federal court in Illinois against a defendant from Texas was dismissed for lack of personal jurisdiction over the defendant.

The plaintiff, based in Chicago, provided medical services in various other cities, including Houston. When a small Houston company in the same line of work registered a domain name that was very similar to that of the Chicago business, the Chicago firm sued under the ACPA.

The defendant from Texas simply did not have sufficient contacts with Illinois to be sued there. It had no physical presence nor any clients in Illinois, and it certainly had not purposefully directed any of its activities in Illinois. Of course, a website is accessible from all over the world, but that was insufficient to satisfy the “contacts” requirement for personal jurisdiction over the defendant in Illinois.

The doctor who ran the Texas business was licensed to practice only in Texas, the only telephone number on his bare-bones website was a Houston number, and the site invited doctors in the “greater Houston area” to contract for his services. As the court dismissing the lawsuit put it, if a doctor in Chicago did happen to find the defendant’s website and call the Houston business, “their conversation would be very short.”

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