The odd inversion of the trademark “rights in gross” conundrum

Sunset, Court Plaza
A courthouse

Is reselling domain names a violation of the UDRP? At his blog, Gerald “Mr. UDRP” Levine lays out the question, and then answers it plain and simple (emphasis mine):

On the question of reselling domain names on the secondary market, a dissenting panelist in a 2005 case observed that “[t]here is no doubt Respondent is in the business of being a reseller of domain names that consist of common English words” and then suggested that the “fundamental question before the Panel is whether or not such a business should be allowed under the UDRP.” He concluded that such a business should not be allowed: “I would … find Respondent has engaged in a pattern of preventative domain name registration through its prior conduct of registering domain names that are identical to third-party marks.” Shoe Mart Factory Outlet, Inc. v. DomainHouse.com, Inc. c/o Domain Administrator, FA0504000 462916 (Nat. Arb. Forum June 10, 2005).

The same panelist (again in dissent) in Randall E. Kay v. Sebastian Kleveros / Comcept – Internet Ventures, FA1602001659119 (Forum March 18, 2016) (<nvrt.com>) states

Reselling domain names does not constitute a bona fide offering of goods or services for the purposes of the UDRP. To allow such an absurd construction would eviscerate the UDRP because every respondent could demonstrate rights by simply offering the relevant domain name for sale to the general public at the time of registration. The UDRP could be easily circumvented.

This exaggerates the consequences beyond recognition; buying and selling domain names is neither absurd nor would it eviscerate the UDRP. In fact, it’s legal.

And now you want to read Gerry’s post where he explains his conclusion.  My observation is just this:  

One of the doctrinal problems in the development of trademark practice is the creep toward treatment of trademark rights as “rights in gross” — which, arguably, is the wolf which, under the sheep’s mantle of “trademark dilution,” is sneaking in among the flock per the complaint of Prof. McCarthy discussed here.  In other words, courts and others authorities, such as the TTAB, who are charged with managing the enforcement of trademark law are, in various ways, permitting trademark holders to “alienate” trademarks from the good will they represent.  It is allowing them to treat them, typically as embodied in (or symbolized by) their associated trademark registrations, as commodities that can be bought and sold without any serious consideration for consumer association.

Mind bobbling!
Mind bobbling!

Now I am a bit of a pest on this topic, and recognize I’m fighting upstream.  As I explain here, the way courts and the world have treated the 1989 amendments to the Lanham Act’s Section 43(a) — by extending the definition of infringement to LIKELIHOOD OF CONFUSION not only concerning confusion as to source, but as to “affiliation, connection, sponsorship, association, and/or approval” — have undermined the concept of goodwill.  That is because goodwill is supposed to carry significance relating to quality, whereas the mere presence of a label that says “Official Licensed Merchandise” doesn’t necessarily impart a quality message at all.

Fine; that’s a lost battle.  But look what Gerry is observing here.  It seems to be a trend, or a threatened one, that would cuts entirely in the opposite direction from alienability; i.e., whether reselling domain names which we might call “sounding in trademark” on the secondary market is a violation of the UDRP and, hence, a kind-of, sort-of form of trademark infringement, if you will.

Of course, here the anti-alienability outcome desired by the opinion quoted would, by prohibiting sales by parties who are not the holders of the trademarks involved, favor those who do own registered marks.  Indeed, Gerry concludes that the analysis here is flawed, and that, in fact, is indication of bias by a particular UDRP panelist.

The analogy here is far from perfect, because the general “rights in gross” issue addresses what you can do with “your own trademark,” whereas the sale-of-domains issue addresses what you can do with domain names that someone else thinks involves their trademark.  But while the UDRP, the “bad faith registration” standard and the very nature of the domains market tend to distort almost any attempt to analogize domain name law to old fashioned trademark law, it is tempting to think there could be something here.

Or not.  What matters, more than theory, is the law — what you can and can’t do.  Gerry’s summary:

In summary, the consensus favors domain investors for reselling or monetizing where 1) the trademark is weak; and respondent 2) has priority, 3) has no knowledge of the trademark, 4) is not engaged in a deliberate business practice of registering domain names knowing them to be abusive, 5) is using the domain name in its semantic sense or holding it passively for sale as a name as long as it’s suitable for many types of businesses, and 6) has no history of cybersquatting. This follows even if respondent is unable to marshal sufficient evidence for rights or legitimate interests.

If you care about this stuff and you’re not following @gmlevine on Twitter, you are in error about one or the other.

Ron Coleman

I write this blog.