Every so often a seemingly merit-less UDRP Complaint is publicized, and rightfully so. It is often shocking to see complaints that purport to challenge a domain name, that was for example, generic, or that was registered before the corresponding trademark was even a “twinkle in the eye” of the trademark owner. These kind of complaints are often accurately characterized as “Reverse Domain Name Hijacking” attempts (“RDNH”). RDNH cases are in reality, relatively very rare in comparison to the thousands of bona fide complaints that are brought. But when an RDNH-type complaint is filed by a sophisticated  complainant with an equally sophisticated law firm representing it, one cannot help but be justifiably concerned that a kind of attempted “fraud” or “theft”, is being attempted in broad daylight, under the guise of a legal proceeding.

When such complaints are filed, many observers and domain name owners will suggest that complainants who are found to have engaged in RDNH should be made to pay the registrant’s legal fees. Surely, that would seem to be fair, as otherwise a finding of RDNH would continue to largely be toothless, without any direct consequences. On the other hand however, if complainants should face cost consequences for RDNH, there are surely many trademark owners that would like to see cost consequences against unsuccessful registrants.

Under the British and Canadian legal systems, unlike the American one, generally successful parties are entitled to be reimbursed for their legal fees and expenses, to a varying degree. Accordingly, if there were to be a “loser-pays” system, a registrant who loses a UDRP could be ordered to pay the successful complainant’s legal fees.

Although I am unaware of a complete “loser pays” system in UDRP disputes, there are at least a couple of examples of UDRP-type arbitrations that do feature a partial loser-pays system. Under the Belgian (.be) domain name arbitration system, a successful complainant is entitled to a refund of its filing fee (€ 1,750). Interestingly, it is the registry (DNS.be) that reimburses the complainant when successful, but the registry then claims this amount back from the unsuccessful registrant. In contrast, under the Canadian (.ca) domain name dispute arbitration procedure, a registrant will never be held responsible for any costs or legal fees, but a complainant who is found to have engaged in RDNH, may be held liable by the Panel for up to $5,000.00. In that case, it is up to the registrant to collect the funds in small claims court and the complainant is barred from bringing any more cases until it pays the amount due. Accordingly, there are at least these two examples of a “loser pays” system.

Some observers and domain name owners might suggest that the only fair approach would be to have an unsuccessful complainant pay, and never have the registrant pay. Aside from the obvious self-serving motivations for such an approach, the claimed logic of such proponents is often that ‘RDNH is so egregious and akin to theft, that it must be punished accordingly, if only for deterrent’s sake’. That may be true, however it is difficult to distinguish RDNH from cybersquatting on a fundamental level. Both are egregious and both contain elements akin to fraud and theft. From a trademark owner’s perspective, cybersquatting, by its very nature, if not by definition, involves the intentionally registering a domain name ‘belonging’ to someone else, for the purposes of extortion or interference with business interests. From a domain name owner’s perspective, RDNH involves an abuse of legal process in an attempt to unjustifiably obtain the transfer of someone’s rightful property, often perpetrated through misrepresentation and deceit, with the assistance of legal counsel, no less. Accordingly, cybersquatting, arguably often smacks of attempted ‘theft’ and ‘fraud’ of sorts, to a comparable extent as RDNH, and both are entirely unjustified and unlawful.

So, if there ever were to be a “loser pays” system in UDRP disputes, there would likely be significant pressure to make it apply to both complainants and respondents, since good arguments exist for both. Nevertheless, if there were to be an “equal playing field” under a “loser pays” system, it would be registrants that overwhelmingly would end up paying, since the volume of RDNH cases pale in comparison to cases of cybersquatting. And if registrants feel content with that, they should be nonetheless wary, as such a system could be coupled with a prohibition on registering or maintaining any domain names until the penalty is paid, as a means of enforcing a costs order. And if even that is palatable to registrants just so they can see a penalty for RDNH, then they should take heed of the number of terrible UDRP decisions that have been issued and not taken to court by registrants (because of cost), since registrants could be at risk of losing a case for no good reason, and thereby become liable for payment of the complainant’s legal costs or else face restrictions on registering domain names or face collection in courts.

By Zak Muscovitch

It boggles the mind that a sophisticated brand owner, represented by sophisticated intellectual property counsel, would make a "rookie" mistake in a domain name dispute, but it happens with surprising regularity.

A trademark owner has two options in a domain name dispute;
1) The trademark owner can ask the Panel to "transfer" the disputed domain name to the trademark owner; OR
2) The trademark owner can ask the Panel to "cancel" the disputed domain name.
Both options cost the same amount (usually US $1300-$1500) for a single-member UDRP Panel at NAF or WIPO, plus legal fees that usually range upwards of US $2,500 - $5,000. Accordingly, a trademark owner Complainant can incur costs of thousands of dollars in bringing a UDRP domain name dispute, and if fortunate, this will be money well spent, because the Panel will declare the Complainant the "winner".
But there are "winners", and then there are real winners. A complainant that requests the UDRP Panel to transfer a disputed domain name is the real winner, because the UDRP costs and fees will have resulted in the trademark owner becoming the owner and registrant of the domain name that was previously held by a cybersquatter.
The other kind of "winner" however, is really a big loser. By asking the Panel to "cancel" a disputed domain name, you might as well flush your UDRP costs and fees down the toilet. The reason is that "cancellation" merely results in the disputed domain name being taken away from the cybersquatter, and promptly made available again, for anyone at all who would like to register it. In other words, it goes right back into general circulation! And who will register it this time around for 10 bucks? The same cybersquatter who just "lost" the UDRP proceeding? Or perhaps a new cybersquatter? 

So, why would any trademark owner and its domain name lawyer, ever choose to request a cancellation rather than a transfer? Who knows, but it happens. Look at the recent case of  Sanofi v. Domains By Proxy, LLC / domain admin (WIPO D2013-0368). The Complainant was Sanofi of Paris, France, represented by Selarl Marchais & Associés, France. The Domain Name, SANIFI.COM consists of the SANOFI Mark with the letter “o” replaced by the letter “i”. But instead of requesting the transfer, the Complainant requested the cancellation of the domain name. After spending likely thousands of dollars on a domain name dispute, this Complainant may find out the hard way, that it made a mistake by not requesting the transfer, as this domain name will likely be picked up right away, this time by a different cybersquatter, or even the very same one, all for the mere cost of the registration fee of about $10.