Eric Goldman's post discusses Verizon’s recent cybersquatting lawsuit against Navigation Catalyst Systems and its registrar Basic Fusion. A preliminary injunction was granted in June against Navigation Catalyst Systems and Basic Fusion, preventing them from registering any domains identical or confusingly similar to the VERIZON mark. According to Verizon, Navigation Catalyst Systems registered 1,392 domain names either incorporating their marks or consisting of typographical errors confusingly similar to their marks. In doing so, in my opinion, it clearly evidenced its real identity as a cybersquatter rather than a domainer.
Navigation Catalyst Systems stated that it uses a proprietary software tool to bulk register thousands of domain names through its affiliate and registrar Basic Fusion. To do this, Navigation utilized the ICANN Add Grace Period to “reserve” domain names and test the amount of traffic to the site, also known as domain tasting. This tool, which consisted of both a manual and automatic component, scrubbed the registered domain names to remove those that incorporated the trademarks of others. The tool apparently didn’t work, as Navigation Catalyst Systems kept 126 of the 1,300 domains that they had initially tasted. Basic Fusion argued that it was a separate legal entity from Navigation Catalyst Sytems and that it only processed Navigation Catalyst System's registration requests, but the court stated that no distinction between the two was necessary for the purposes of a preliminary injunction motion.
Navigation Catalyst Systems attempted to draw a distinction between registering and merely “reserving” the domain name during the Add Grace Period. The court did not accept this argument, and instead pointed out that Navigation used the domains even during the tasting period by placing pay per click ads on the reserved sites. Navigation Catalyst Systems also asserted an unclean hands defense, arguing that Verizon’s DNS wildcarding operated under the same principles, but the court also rejected that defense. Ultimately, the court held that domain tasting was evidence of a bad faith intent to profit under the Anticybersquatting Consumer Protection Act (ACPA), especially where the tasted names contained pay per click ads in direct competition with Verizon’s goods and services.
It is clear that their intent was to profit from the poor typing abilities of consumers trying to reach Plaintiffs' sites: what other value could there be in a name like ve3rizon.com? Further, the sites associated with these names often contained links to products directly competitive with Plaintiffs' cellphone and internet businesses, potentially diverting consumers who would otherwise have purchased goods or services from Plaintiffs away from Plaintiffs.
What does this mean for domainers? Well, in a word, nothing. Domainers as a class understand that the best way to protect their businesses is to register generic or descriptive domain names that do not incorporate the trademarks of others. There is a clearly discernable line between domaining and cybersquatting.
What this does signal is an end to the common cybersquatter argument that software “scrubbing” or other dubious risk-management strategies can prevent liability for trademark infringement or violations of the ACPA. As you can see from the 187 page exhibit in the suit, Navigation Catalyst System’s scrubbing system failed to catch even the most famous of trademarks.
The only real way to prevent liability under the ACPA may be to actively manage your risk by registering generic or descriptive domain names, actively monitoring your domain portfolio, and purging infringing domains. Whether scrubbing can effectively be done with current technology remains to be seen, but I do not think that this is the last of these suits, nor is it the last against Navigation Catalyst Systems' scrubbing system.