Statement Of Senator Patrick Leahy, Ranking Member, Senate Judiciary Committee Hearing On "Cybersquatting And Consumer Protection: Ensuring Domain Name Integrity"

July 22, 1999

Trademarks are important tools of commerce. The exclusive right to the use of a unique mark helps companies compete in the marketplace by distinguishing their goods and services from those of their competitors, and helps consumers identify the source of a product by linking it with a particular company. The use of trademarks by companies, and reliance on trademarks by consumers, will only become more important as the global marketplace becomes larger and more accessible with electronic commerce. The reason is simple: when a trademarked name is used as a company's address in cyberspace, customers know where to go online to conduct business with that company.

The growth of electronic commerce is having a positive effect on the economies of small rural states like mine. A Vermont Internet Commerce report I commissioned earlier this year found that Vermont gained more than 1,000 new jobs as a result of Internet commerce, with the potential that Vermont could add more than 24,000 jobs over the next two years. For a small state like ours, this is very good news.

Along with the good news, this report identified a number of obstacles that stand in the way of Vermont reaching the full potential promised by Internet commerce. One obstacle is that "merchants are anxious about not being able to control where their names and brands are being displayed." Another is the need to bolster consumers' confidence in online shopping.

Both merchant and consumer confidence in conducting business online are undermined by so-called "cybersquatters" or "cyberpirates," who abuse the rights of trademark holders by purposely and maliciously registering as a domain name the trademarked name of another company to divert and confuse customers or to deny the company the ability to establish an easy-to-find online location. A recent report by the World Intellectual Property Organization (WIPO) on the Internet domain name process has characterized cybersquatting as "predatory and parasitical practices by a minority of domain registrants acting in bad faith" to register famous or well-known marks of others -- which can lead to consumer confusion or downright fraud.

Enforcing trademark law in cyberspace can help bring consumer confidence to this new frontier. That is why I have long been concerned with protecting registered trademarks online. Indeed, when the Congress passed the Federal Trademark Dilution Act of 1995, I noted that:

"[A]lthough no one else has yet considered this application, it is my hope that this antidilution statute can help stem the use of deceptive Internet addresses taken by those who are choosing marks that are associated with the products and reputations of others." (Congressional Record, Dec. 29, 1995, page S19312)

In addition, last year I authored an amendment that was enacted as part of the Next Generation Internet Research Act authorizing the National Research Council of the National Academy of Sciences to study the effects on trademark holders of adding new top-level domain names and requesting recommendations on inexpensive and expeditious procedures for resolving trademark disputes over the assignment of domain names. Both the Internet Corporation for Assigned Names and Numbers (I-CANN) and WIPO are also making recommendations on these procedures. We should make sure that any anti- cybersquatting legislation we pass does not frustrate these efforts.

The Federal Trademark Dilution Act of 1995 has been used as I predicted to help stop misleading uses of trademarks as domain names. One court has described this exercise by saying that "attempting to apply established trademark law in the fast-developing world of the Internet is somewhat like trying to board a moving bus..." [Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997)] Nevertheless, the courts appear to be handling "cybersquatting" cases well. As Professor Michael Froomkin notes in his written testimony, "[i]n every case involving a person who registered large numbers of domains for resale, the cybersquatter has lost."

For example, courts have had little trouble dealing with a notorious "cybersquatter," Dennis Toeppen from Illinois, who registered more than 100 trademarks -- including "yankeestadium.com," "deltaairlines.com," and " neiman-marcus.com" -- as domain names for the purpose of eventually selling the names back to the companies owning the trademarks. The courts reviewing his activities have unanimously determined that he violated the Federal Trademark Dilution Act.

Enforcing or even modifying our trademark laws will be only part of the solution to cybersquatting. Up to now, people have been able to register any number of domain names in the popular ".com" domain with no money down and no money due for 60 days. Network Solutions Inc. (NSI), the dominant Internet registrar, announced yesterday that it was changing this policy, and requiring payment of the registration fee up front. In doing so, the NSI admitted that it was making this change to curb cybersquatting.

In light of the developing case law, the ongoing efforts within WIPO and ICANN to build a consensus global mechanism for resolving online trademark disputes, and the implementation of domain name registration practices designed to discourage cybersquatting, we should be precise about the problems we need to address before we legislate in this area.

I am concerned that the S. 1255, the "Anticybersquatting Consumer Protection Act," introduced by Senators Abraham, Torricelli, Hatch and McCain, would have a number of unintended consequences that could hurt rather than promote electronic commerce. This bill would make it illegal to register or use any "Internet domain name or identifier of an online location" that could be confused with the trademark of another person or cause dilution of a "famous trademark."

The definition is overbroad. The bill covers the use or registration of any "identifier," which could cover not just second level domain names, but also e- mail addresses, screen names used in chat rooms, and even files accessible and readable on the Internet. As Professor Froomkin points out, "the definitions will make every fan a criminal." How? A file document about Batman, for example, which uses the trademark "Batman" in its name, which also identifies its online location, could land the writer in court under this bill. This bill is simply overbroad; cybersquatting is not about file names.

The bill threatens hypertext linking. The Web operates on hypertext linking, to facilitate jumping from one site to another. S. 1255 could disrupt this practice by imposing liability on operators of sites with links to other sites with trademark names in the address. One could imagine a trademark owner not wanting to be associated with or linked with certain sites, and threatening suit under this proposal unless the link were eliminated or payments were made for allowing the linking.

The bill would criminalize dissent and protest sites. A number of Web sites collect complaints about trademarked products or services, and use the trademarked names to identify themselves. For example, there are protest sites named "boycott-cbs.com" and "www.PepsiBloodbath.com." While the speech contained on those sites is clearly constitutionally protected, S. 1255 would criminalize the use of the trademarked name to reach the site and make them difficult to search for and find online.

The bill would stifle legitimate warehousing of domain names. The bill would change current law and make liable persons who register domain names similar to other trademarked names, whether or not they actually set up a site and use the name. The courts have recognized that companies may have legitimate reason for registering domain names without using them and have declined to find trademark violations for mere registration of a trademarked name. For example, a company planning to acquire another company might register a domain name containing the target company's name in anticipation of the deal. This bill would make that company liable for trademark infringement.

Cybersquatting is an important issue both for trademark holders and for the future of electronic commerce on the Internet. Yet the Congress should tread carefully to ensure that any remedies do not impede or stifle the free flow of information on the Internet. In many ways, the United States has been the incubator of the World Wide Web, and the world closely watches whenever we venture into laws, customs or standards that affect the Internet. We must only do so with great care and caution. Fair use principles are just as critical in cyberspace as in any other intellectual property arena. I am hopeful that Chairman Hatch and I, along with Senators Abraham and Torricelli, will be able to work together to find a legislative solution that works.