How to cross swords with pirates holding domain names to ransom

Domain names corresponding to corporate trademarks, like trademarks, have gained an increasingly important identifying role and commercial value, especially for a multinational corporation that wishes to enter the China market.

However, under the immature domain name system in the PRC, the pirate registration of domain names has become a means for some lawbreakers to make a profit. Domain name registration follows the first-to-file principle, and accordingly the pirate registration of another’s registered trademark as a CN domain name and/or Chinese-language domain name results in the “theft” of the added value of another’s trademark. CN domain names and Chinese-language domain names such as “iphone5.cn”, “强生.中国”, “麦当劳.中国”, etc. that match well known brands have been pirated by other enterprises or individuals.

To solve this problem, firstly an enterprise should register its trademark as the corresponding domain name and effectively protect it; secondly, enterprises that have an immediate connection with the internet should emphasise defensive domain name registration, registering copycat domain names and even domain names that are negative or defile its corporate name, so as to guard against others engaging in illegal acts after such registration.

Once an enterprise’s registered trademark has been preemptively registered in bad faith as a CN domain name or Chinese-language domain name, the trademark rights holder who has been harmed by the bad faith pirate registration may obtain relief pursuant to the domain name rules and related laws.

Bad faith pirate registration

The term “bad faith pirate registration” mainly refers to an act of registration that infringes another’s lawful prior right. As specified by the Supreme People’s Court in the Explanations of Several Issues Concerning the Application of the Law in the Trial of Civil Dispute Cases Involving Computer Network Domain Names, an “act of bad faith pirate registration” may be manifested as follows: (1) registering another’s well known trademark as a domain name for commercial purposes; (2) registering and using for commercial purposes a domain name that is identical or similar to the rights holder’s registered trademark or domain name; (3) having offered to sell or lease for a high price or otherwise transfer the domain name to obtain illegitimate gains; or (4) not using and not making preparations to use a domain name after registering the same, but intending to prevent the rights holder from registering the domain name in question.

CNNIC definition

The China Internet Network Information Centre (CNNIC) has specified in the Measures of the China Internet Network Information Centre for the Resolution of Domain Name Disputes that “acts of bad faith pirate registration” include, but are not limited to: (1) the objective of registering or acquiring a domain name being to sell, lease or otherwise transfer the domain name to the lawful rights holder or a competitor thereof in order to obtain illegitimate gains; (2) registering, on numerous occasions, names or logos in which others have the lawful rights and interests as one’s own domain name so as to block others from using the names or logos in which they have the lawful rights and interests as domain names on the internet; or (3) the purpose of registering or acquiring a domain name is to harm the reputation of the rights holder, disrupt its normal business activities or blur the distinction with the rights holder and mislead the public.

Means of remediation

In practice, there are two remediation means to tackle this problem. The first is to seek resolution of the domain name dispute from a dispute resolution institution authorised by the CNNIC to recover the domain name by way of an administrative procedure pursuant to the relevant rules and regulations issued by the CNNIC. However, such institution may not accept a complaint if the disputed domain name has been registered for at least two years. To date, there are two institutions authorised to resolve disputes of this kind: the China International Economic and Trade Arbitration Commission and the Hong Kong International Arbitration Centre.

This avenue is convenient, efficient and low cost. However, there are also some disadvantages: (1) the award rendered by a domain name dispute resolution institution is not final and is open to further legal action instituted by either party to the dispute; and (2) the award rendered by a dispute resolution institution only involves a change in the particulars of the disputed domain name holder, that is, the trademark rights holder can only secure the rights of the holder of the domain name where the registration was pirated, and cannot make the infringer assume liability or compensate for losses.

Civil action

The other means of remediation is to resolve a domain name dispute through civil action. The Trademark Law and the Unfair Competition Law of the PRC regard bad faith pirate registration of another’s trademark as a domain name as a form of unfair competition. In such a case, the enterprise that has the prior trademark rights may institute a legal action in the Intermediate People’s Court of the place where the infringement occurred or where the defendant is domiciled.

This means of remediation gives stronger protection to the rights holder and a final judgment is comparatively more decisive and easily enforced. However, a litigation procedure is comparatively slower and more costly, and an enterprise should carefully weigh the pros and cons of this option.

Time to parley

An enterprise also has the option of holding negotiations to secure the domain name at a reasonable price. In practice, there have been some enterprises who have recovered domain names by paying the pirates a significant sum, but this method will regularly require an enterprise to pay even more and will, to a certain extent, further encourage such unethical acts of pirate registration of domain names. We recommend that efforts be expended to recover domain names through lawful means of dispute resolution.

Wang Yadong is the executive partner, and Shan Meng is a lawyer at Run Ming Law Office