Hold the line: the pros and cons of Octogen

The proliferation of low-cost domain registrations quickly led to the phenomenon of large numbers of domains being registered by business ventures with the sole purpose of selling these domain registrations to third parties with legitimate legal and commercial interest in them. This includes use as a company product or service name, with corresponding trademark and company name registrations to protect these interests. 

This is particularly relevant when domain grabbers register vast numbers of domains and wait for these to become important to third parties with bona fide commercial interests.

If the domains are registered by domain grabbers after the corresponding trademarks, service marks or company names, rights holders have a substantial number of instruments at their disposal to assert their rights and reclaim the domains.

In Uniform Domain Name Dispute Resolution Policy (UDRP) proceedings to recover these domains, however, the complainant needs to show the identity or similarity of a registered domain to an earlier trademark or service mark and to establish the offending registrant’s lack of interest.

The claimant additionally needs to prove that the domain name has been registered and is being used in bad faith (see paragraph 4a. (iii) UDRP). The original dispute about whether it is sufficient to satisfy one of these requirements, or whether both conditions need to be fulfilled, appears to have been settled. It has become common practice to require both registration and use in bad faith in order to make it possible to assign or cancel the domain.

This creates an obvious problem for domains which were registered before the rights in the trademarks and service marks arose.

This problem has been discussed in a considerable number of recent UDRP decisions. While many panellists ruled out the possibility of registration in bad faith if the right on which the complaint was based was created after this point in time, a number of panellists took the view that this result was not what was intended when the policy was drafted.

This led to the so-called Octogen line of cases. In the first of these, it was held that a domain name may be registered or acquired in good faith. However, the future use of the domain may violate the representations and warranties made at the time of registration. Such use can lead to a retroactive bad faith registration.

This line of cases was endorsed by a number of other panellists and has provided a useful legal remedy for companies faced by commercially unreasonable demands from domain grabbers.

However, the Octogen line has been heavily criticised by fellow panellists both in literature and subsequent decisions. The criticism is mainly based on two arguments which may be summarised as follows:

First, the wording of the policy does not expressly recognise this form of bad faith registration. For that reason it should not be accepted. Second, this approach is not consistent with previous decisions, so for the sake of consistency, it should be rejected.

Following a further decision rejecting this approach, in August 2011, vocal critics of the Octogen line stated that it could no longer be applied.

“WHILE THIS DOCTRINE MAY NOT HAVE BEEN PART OF THE UDRP CASE LAW IN THE PAST, THIS CANNOT, AND MUST NOT, BAR IT FROM BEING IMPLEMENTED IN THE FUTURE.”

However, these arguments are not convincing. While this doctrine may not have been part of the UDRP case law in the past, this cannot, and must not, bar it from being implemented in the future.

It is a common feature of case law systems to adapt in order to apply new and correct legal doctrines, even if it means having to give up previous positions. It would seem obvious that the failure to use the domain other than for the purposes of obtaining money for its transfer satisfies several of the conditions of paragraph 4b. (i) or (ii) UDRP:

Failure to use the domain can show that there is no other purpose to the registration than selling, renting or otherwise transferring the domain name registration to the owner of a trademark registration for payments in excess of the registration costs of the domain (i); or, alternatively, that the purpose is to prevent the owner of the mark from re ecting the mark in a corresponding domain name, if a pattern for doing so can be established (ii).

Especially where there is a pattern of such behaviour, it seems illogical to argue that simply because there is no explicit evidence of actual bad faith concerning a particular domain at the time of registration, this means that the registration must have occurred in good faith. Frequently, quite the opposite is true.

From the point of view of a trademark lawyer, the concept that failure to use a registered right could lead to its loss does not appear as outlandish as it seems to those who criticise the concept.

While it is not necessarily considered bad faith, in many jurisdictions failure to use trademarks can make it impossible to assert any rights out of a trademark registration and will make the registration subject to cancellation. In other jurisdictions, failure to use the mark will prevent registration completely, and incorrect declarations concerning use of the mark can be the cause for cancellation of the mark for fraud.

It is also not unheard of in the domain world. In the regulation governing the alternative dispute resolution (ADR) proceedings concerning the .eu top-level domain (TLD), Article 21(3)b) ii) Commission Regulation (EC) No. 874/2004 clearly states that bad faith may be demonstrated if the domain name has not been used in a relevant way for at least two years from the date of registration.

Use may take various forms, which can include typical use as an address for websites, or for email communication. However, the use needs to be relevant. If this is not the case, .eu domain names are frequently transferred on the basis of bad faith due to non-use.

There are ample arguments for enabling proprietors of trademarks to freely use their marks in domain names vis-à-vis unused domain names.  is goal can readily be achieved by following the doctrine established in the Octogen line of decisions.

Should the possible ambiguity of the UDRP not make this acceptable to all panellists, an amendment of the policy, bringing it in line with other IP regulations such as trademark law and the provisions governing ADR proceedings for .eu TLDs, should be seriously considered.