Domain Names and Trademarks: Recent Developments in the European Union

By Karla Lemanski-Valente and Timothy Majka

Introduction

The Internet has redefined international boundaries and created new opportunities for companies to capitalize on the global marketplace. 

According to Forrester Research, the global e-commerce potential for non-U.S. e-commerce is expected to grow from $167.1 billion in 2000 to $3.4 trillion in 2004.  The European Union (the "EU"), in particular, is facing incredible growth.  In a report prepared by International Data Corporation, six of the top 10 information technology countries in the world in the year 2000 belonged to the EU, with Sweden, Norway, Finland and Denmark rounding off the top-five list. 

This growth in global e-commerce has caused businesses to realize the potential benefits of integrating a global development strategy early on in their business planning. 

However, even with the exploding growth rate of international e-commerce, many U.S. companies are just now realizing the importance and value of registering Internet domain names internationally and developing a global presence on the Internet. Part of this awakening is a direct result of increased awareness of the limitations of the Internet with respect to intellectual property protection.  Moreover, companies seeking to extend their domain name protection worldwide face the challenge of complying with the differing legal requirements from country to country.

This article discusses the importance and some of the challenges of Internet domain registrations in the EU and the role trademarks play in helping companies qualify for domain name protection as well as in resolving intellectual property conflicts within the region.

Why Register a Country-Code Top-Level Domain Name?

Domain names fall into two classifications: (1) generic top-level domains ("gTLDs") -- ".com", ".net", and ".org" -- that have a worldwide market; and (2) country-code top-level domains ("ccTLDs") -- such as ".de" for Germany and ".it" for Italy -- that have a localized market.

Currently, there are about 248 ccTLDs throughout the world.  While gTLDs -- particularly .com domains -- are the most common choice within the U.S. market, ccTLDs are accepted more widely in foreign markets. As of September 31, 2000, of the 32.8 million gTLDs and ccTLDs registered, 8.9 million were ccTLDs. Of all ccTLDs, the EU represented the most widely registered domains. For example, according to the German Registry, DENIC, there are currently almost 4 million domain registrations in the German country code ".de".

The primary reasons for a company to own ccTLDs include:

  • localized marketing,

  • increased search engine performance,

  • uniform global branding, and

  • intellectual property protection against cybersquatting and anticompetitive practices.

Localized domain names play an integral role in international online marketing success. For instance, international ccTLDs provide a foundation for localized content (yahoo.de contains news articles relevant to Germany), local customer service (consumers prefer a local customer service department in the local language and time), local inventory (a bookstore with a ".de" domain in Germany will be selling books in German), local shipping (overseas shipping is costly and time consuming), and local currency acceptance.

Because of the localization preference, most foreign residents use search engines that correspond to the appropriate ccTLD. Unfortunately, for most U.S. corporations these search engines present an initial foreign market barrier by filtering the search results by language and prioritizing by local country code. Therefore, ".com" domain names often are not included in their search results. For example, if a Danish user submits "bøg" (the Danish word for book) in the leading search engine in Denmark, "jubii.dk", neither Barnesandnoble.com nor Amazon.com will appear in the search results. The search results are limited to ".dk" domain names. 

International ccTLDs also improve international brand name recall and recognition. For example, when Dell started marketing directly to consumers in France, it did not market itself as www.euro.dell.com/countries/fr/fra/gen/.  Instead, it set up a local site, "Dell.fr", and started using this domain in its marketing and advertising materials. Thus, French-speaking consumers in France have an immediately recognizable Internet destination in "Dell.fr", just as English-speaking consumers in the U.S. have "Dell.com". This branding technique permits companies to be known throughout the world as one uniform brand. 

Registering ccTLDs also helps companies protect their brand from cybersquatting, cybercloning, and other anticompetitive practices. Cybersquatting occurs when a domain name is registered by a third party in bad faith. Most major companies around the world have recently found themselves the victim of cybersquatters and have had to resort to litigation and arbitration proceedings to win back their rights. Additional problems arise when a competitor registers its rival's ccTLD to block or delay the rival from entering the foreign market. Cybercloning takes place when a foreign company appropriates the brand name and business model of another company and then registers the same or a similar domain name using the appropriate ccTLD in an effort to establish a "copycat" business within their local market. 

An example of alleged international cybersquatting is the Paris Court of Appeals case involving the domain name "Ebay.fr", where the U.S. company Ebay lost to its French competitor, Forum On The Net, a subsidiary of Ibazar. The French court based its ruling on a French law that allows two non-competing organizations to have the same tradename. Although Forum On The Net is a competitor of Ebay, the domain name "Ebay.fr" was actually registered under Ibazar, which the court found not to be a competitor of Ebay. Thus, the court ruled that Ibazar could continue to own the domain name "Ebay.fr". Ebay was then forced to enter the French market using the domain name "Ebayfrance.com". An interesting development in this case is that in February 2001, just a few weeks after the court decision, Ibazar was acquired by Ebay in a deal worth over $100 million. 

Another example of cybersquatting is the Greek case involving the domain names "Amazon.gr" and "Amazon.com.gr," where the Greek Provincial Hearing of Syros found that the small Greek firm holding these domain names intentionally misled consumers into believing that they were operated by Amazon.com. 

These cases could have been avoided had Amazon and Ebay taken steps to register these domain names before their competitors.

Registering Domain Names in the European Union

Countries are divided into two groups with respect to domain name registration:

  •  Unrestricted -- those that allow anyone from anywhere to register based on a "first-come, first-served" principle (unrestricted European Union countries are Denmark, Switzerland, UK, Austria and Belgium); and

  • Restricted-- countries that require some sort of local presence such as a local trademark, local tax identification number, local company, local administrative or billing contact, etc. (restricted EU countries are Sweden, Finland, the Netherlands, Germany, France, Italy, Greece, Luxembourg, Portugal and Spain).

Currently, within the restricted EU countries, there are several approaches to whether trademark rights should be extended to the domain name registration process. In Greece (".gr" and ".com.gr"), Spain (".es"), and Ireland (".ie"), for example, an applicant can use either a Community Trademark (CTM) or a local trademark registration to qualify for a domain name allocation. In Iceland, an Icelandic trademark but not a CTM can be used to qualify for the ".is" extension. Portugal (".pt") and Finland (".fi") also accept a trademark to qualify for domain name allocation, but, in addition to the trademark, require the applicant to provide the registries with a local tax identification number or other supporting documentation. 

France and Sweden present interesting approaches to trademark use for domain name allocation. In both countries, a trademark cannot be used to qualify for the major domain name extensions --".fr" and ".com.fr" in France, and ".se" in Sweden. However, both countries have created special sub-domains for applications based on trademarks. In France, a trademark owner seeking a domain name registration and not owning a local tax identification number can obtain the ".tm.fr" extension. In Sweden, the trademark owner can register a ".tm.se" domain. 

Certain countries within the EU, such as Luxembourg and Italy, do not require that the domain name registrant own a trademark; however, they do require applicants to represent that the domains do not violate third-party intellectual property rights. In Italy, for example, the applicant makes these representations by signing a "Responsibility Letter."

Domain Dispute Procedures in the European Union

Domain names themselves have not been afforded intellectual property protection but, rather, are perceived as a right granted to the domain registrant under contract between the registrant and the relevant domain name registration authority. The registrant of a domain name is merely given a contractual right to use the domain name. Thus, the registration of a domain name in and of itself does not confer intellectual property rights, such as trademark rights, to the registrant. Nevertheless, in certain cases, parties owning trademarks within the country where the dispute takes place can use trademark law to seek protection against cybersquatters. 

While the gTLDs and 18 ccTLDs are governed by the Internet Corporation for Assigned Names and Numbers' ("ICANN") Uniform Domain Name Dispute Resolution Policy ("UDRP") -- which provides for the online arbitration of disputes through the World Intellectual Property Organization's ("WIPO") Arbitration and Mediation Center, or another approved provider -- most domain name registries in the EU do not offer dispute resolution services and instead rely exclusively on the courts to handle disputes. Some of the exceptions to this are Belgium, Greece and Italy. 

In December 2000, Belgium changed its domain name registration policy from restricted to unrestricted and also instituted mandatory alternative dispute resolution for domain name disputes. The mandatory dispute resolution process is similar to the UDRP in that proceedings are conducted online. According to the Belgium Registry, DNS BE, a complainant must prove that:

  • the registrant's domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights;

  • the registrant has no rights or legitimate interests with respect to the domain name; and

  • the registrant's domain name has been registered in bad faith or is being used in bad faith.

Like the UDRP, the arbitration in Belgium is conducted through a third-party arbitration provider, and the arbitrator has the power to cancel a domain name or to have it transferred to the complainant. 

Greece is another country in which the registry, the Foundation for Research and Technology Hellas Institute of Computer Science, has provided an expedited method for parties to resolve disputes. However, unlike in Belgium, the registry in Greece will become actively involved in helping the parties reach a settlement. If the parties cannot reach a settlement, the National Telecommunications Committee (NTC), which oversees the Greek domain name registry, has the power to make an official ruling to resolve disputes. Also unlike in Belgium,there are no established policies or guidelines for the NTC to use when resolving disputes. Interested parties reserve the right to appeal NTC decisions to the courts. 

Italy takes another approach and gives the domain registrant the option at the time it submits its domain name application to agree to have any disputes resolved by arbitration. 

Some registries, while not arbitrating disputes, may offer services to help registrants. In the United Kingdom, for example, the domain registry, Nominet, provides a dispute resolution service whereby the disputing parties are encouraged to achieve a mediated resolution. If an agreement is reached, then it will create a contract enforceable in law. If the parties cannot come to an agreement, their only recourse is through the local courts. 

In Luxembourg and Switzerland, the registries, like most in the EU, do not decide disputes but may issue warnings in cases of obvious possible domain name conflicts or when a name is likely to conflict with another name, trade name, trademark or service mark. However, the registry has no obligation to issue such warnings. The registry may, at its own discretion, interrupt the registration until the entity seeking registration submits a written confirmation from the holder of the conflicting name, trade name, trademark, or service mark confirming that the application is valid and that it is acceptable to the name/mark holder.

Domain Dispute Laws and Cases in the European Union

Due to the lack of dispute resolution policies throughout the EU, if not the world, WIPO held a conference in February 2001 where it issued the "WIPO ccTLD Best Practices for the Prevention and Resolution of Intellectual Property Disputes." In this report, WIPO called for ccTLD administrators to require better identification of companies and individuals that register domain names and mandatory dispute resolution procedures.  WIPO urged domain registries to adopt a dispute resolution policy similar to the UDRP. It is expected, though, that if WIPO's recommendations are implemented, it could be years before the EU has a unified dispute resolution policy. 

Since most registries throughout the EU do not offer a dispute resolution process, a party must seek relief in court to protect its rights against cybersquatters. As in the United States, courts in Europe have a range of different laws that they can apply to domain disputes, such as trademark laws, unfair competition laws, etc. Of these, trademark law is typically the most uniform throughout the EU, especially with the implementation of Council Directive 89/104/EEC, which has harmonized the definition of trademarks and defined infringement situations. 

Courts throughout Europe, like those in the United States, have typically found that the use of a domain name that is identical or substantially similar to a trademark constitutes trademark infringement if used in bad faith or in connection with the sale of competing products or services and will permit the trademark holder to obtain injunctive relief. 

However, European courts do not agree on whether the act of registering a domain name without having an active web site or offering the domain for sale constitutes trademark infringement. Relevant cases include British Telecommunications plc. v. One In A Million Ltd., where the British Court of Appeal found that the act of registering well-known names and trademarks constituted grounds for trademark infringement, even though the domains were inactive and the registrant did not offer to sell the domain names. 

Thus, in the UK, the owner of a well-known brand or mark can take action against a cybersquatter as soon as it knows that the registration of an infringing domain has taken place. Italy has also extended such rights to situations where a name or mark has a reputation in Italy, allowing the owner of a well-known mark to obtain an infringement ruling against a party attempting to register a domain name. On the other hand, in the Danish "Beologic" case, the Municipal Court of Copenhagen found that the mere registration of domain names or the offer to resell them did not violate trademark law, since the defendant was not "doing business" under the marks. The court did find, though, that the defendant violated the Marketing Act, which forbids "unfair marketing" and common law conversion. 

Some countries have enacted or are in the process of enacting new legislation to deal with cybersquatting issues. In April 2001, the Italian government responded to the cybersquatting phenomenon with Bill No. 4564 on "Use of names for identification of domain names and network services." The bill provides rules for using domain names and prohibits the registration of domain names corresponding to names, trade names, or trademarks already in use by third parties due to potential confusion of the general public. In cases of infringement, the domain name is cancelled, and damages can be awarded to the plaintiff.

Recommendations

Although most courts in the EU will protect trademark owners from cybersquatters -- particularly when well-known marks are involved -- litigation can take months, if not years, to resolve and can cost thousands of dollars. Accordingly, it is recommended that companies incorporate ccTLD registrations into their overall identity or brand-protection strategy. In the event a foreign company has registered ccTLDs in the EU and plans to use the domain names, it is also important that it conduct a trademark search and register its marks to prevent later third-party infringement claims.

The following are some additional recommendations for companies to optimize their international online initiatives:

  • Companies should implement a comprehensive international intellectual property strategy early into their business plan. Such a strategy should incorporate international Internet domain name and trademark registrations in the major markets, especially those markets where the company plans to do business.

  • Before registering ccTLDs in the EU, companies should first check to see if existing trademarks could be used to qualify for domain name registrations.

  • Prior to press releases concerning mergers, acquisitions and new product developments, companies should secure their new brand names using trademarks and domain names. 

  • Companies should seek professional services for their domain name and trademark registrations. The cost, time and technical structure required to learn and comply with local requirements requires professional expertise.

  • To ensure that all domains and trademarks are owned by the company and are properly renewed, companies should make sure that they are properly and consistently managed.

  • Companies should be proactive and develop a strict enforcement program to monitor and respond to domain name registrations that infringe their trademarks.

Karla Lemanski-Valente and Timothy Majka are International and Corporate attorneys for 1GlobalPlace, Inc., a company specializing in counseling companies on how to effectively enter foreign markets.

Karla Lemanski-Valente E-mail: kvalente@1globalplace.com klvalente@yahoo.com 

Timothy Majka E-mail: tmajka@1globalplace.com.

This article was originally published in Volume 10, number 1 of the Bright Ideas Spring/Summer 2001 issue, a publication of the Intellectual Property Law Section of the New York State Bar Association.


JurisNotes.Com - The Law in Brief
Copyright ©  JurisNotes.Com