Cybersquatting: Don’t bank on it! It’s bad for the brand December 2017

By JEANINE COETZER, Published in Intellectual Property

Trade mark owners are becoming ever more vigilant in the pursuit to protect their intellectual property, particularly their trade marks, at a time where there is a prevalence of cybersquatting in the online community. Cybersquatting remains an ongoing concern for brand owners.

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The practice known as cybersquatting occurs where a registrant pre-emptively registers a domain name, which is virtually identical to a name or well-known trade mark in which a complainant has rights, for the primary purpose of either selling or renting that domain name to third parties or to block the trade mark owner from registering that domain name.

Cybersquatters effectively abuse the first-come, first-serve nature of the domain name registration system and register domain names incorporating trade marks or names of businesses with which they have no association. Their conduct relies on diverting customers and users to their domains by riding on the coat-tails of more reputable trade marks. Trade marks are moving targets for cybersquatting and the most popular brands can be the targets of thousands of cybersquatting sites.

The vast increase in the number of cybersquatting cases is partly due to the influx of new generic top-level domain names (gTLDs). It is noteworthy to mention that, according to the World Intellectual Property Organization (WIPO), cybersquatting disputes relating to new gTLDs have risen to 16% of WIPO's caseload, which covered a total of 5 374 domain names. WIPO Director General, Francis Gurry, has been quoted saying that "the continuing growth in cyber-squatting cases worldwide shows the need for continued vigilance by trademark owners and consumers alike".

In an attempt to address cybersquatting in South Africa, the .ZA Domain Name Dispute Resolution Regulations (ZADRR) were introduced to deal with co.za domain names. The speed at which domain names change hands, and given that cybersquatters are famously inactive, make it all the more challenging to track and combat abusive registrations.

A cybersquatter may register a name and not use it, nor try to sell or rent it, but simply wait to be approached by the trade mark holder. These actions of domain name pirates often result in damage to a company's brand reputation and potentially to losses if the appropriated name is used as an instrument of fraud.

Some of the most ubiquitous cybersquatting methods are evidenced through, for example, a domain name that points to no active website, a phishing site or, most commonly, a domain name that redirects to a parking page containing advertisements and sponsored links to competing products and services for the purpose of generating internet traffic.

Where a well-known trade mark is appropriated as a cybersquatted domain name, it sometimes serves as an instrument of fraud or creates a false connection with the owner of that trade mark. Various Uniform Domain-Name Dispute-Resolution Policy (UDRP) decisions have found that disruption of a business may be inferred if the registrant has registered a variant of the complainant's mark by adding a generic word and the conduct of the registrant in such cases is evidence that the registration and use of the disputed domain name have been made in bad faith.

Amongst the top victims of cybersquatting are trade mark owners who operate in the banking and financial sector. Many South African companies in the banking and financial sectors have growing concerns about their trade marks being appropriated in cyberspace.

Well-known banking or financial services institutions discover that a website associated with the disputed domain name features various topics associated with banking and finance, such as loans, credit and banking. When, for example, the financing tab is accessed, a number of sponsored listings related to this subject are reflected. Because the complainants' businesses in these cases include financial and monetary affairs, people will likely think that the offending domain name and its business are somehow connected with, or related to, the complainant. The intention is to deceive customers and clients into believing the website they are visiting is genuine by mimicking the content and page behaviour. To the extent that the disputed domain name and the offending website are diverting internet traffic intended for the trade mark holder, it is prejudicial to the complainant and its functions.

An even more worrisome occurrence is where cybersquatters register a domain name for an online "advanced fee" scam using e-mail communications pretending to be from a bank and it may include identity fraud and credit card fraud. The e-mail encourages the recipient to make an up-front payment in order to receive a pre-approved loan. In a field where reputation, honesty and reliability are the lifeblood of these institutions, it is prudent that trade mark owners enforce their trade mark rights.

While the Alternative Dispute Resolution (ADR) process is cheaper, and may save time by successfully transferring offending domain names to the complainants without drawn-out litigation proceedings, it has by no means served as a deterrent to cybersquatters who invent domain names that play on an endless number of variants of well-known trade marks, including common misspellings to drive internet traffic to their own domains.

Despite well-intentioned efforts by both the international communities and local authorities, cybersquatting continues to flourish as new age pirates find ways to benefit from the loopholes in legislation and lethargic enforcement. Trade mark proprietors are, therefore, well advised to implement a proactive line of attack to protect their trade marks online or face litigious heat.

Coetzer is a Candidate Attorney with Spoor & Fisher. The article was signed off by Herman Blignaut, a Partner.

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