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ACPA and Contributory Cybersquatting Theory

In a recent case, Petronas v. Godaddy.com, the Ninth Circuit held that “contributory cybersquatting” was not a valid theory for relief. This case addressed the issue of whether the Anti-Cybersquatting Consumer Protection Act (“ACPA”) allows for secondary liability.

What Are the Facts?

Plaintiff, Petroliam Nasional Berhad (aka “Petronas”) is a Malaysian government-owned entity. Petronas holds the American trademark “PETRONAS.” The entity also owns the Petronas Towers in Malaysia. Defendant, Godaddy.com, is the world’s largest domain name registrar. The case revolves around a third party who registered the domain names petronastower.net and petronastowers.net in 2003. In 2007, the party began using Godaddy’s domain forwarding services to direct the domain names to an adult website. Petronas sued Godaddy for cybersquatting and contributory cybersquatting. In general, cybersquatting is the act of holding a trademark hostage in the form of a domain name and forcing the trademark owner to negotiate an unreasonable price for the domain. Although Godaddy did investigate the alleged cybersquatting, ultimately, they did not take any action.

Congress passed the ACPA, which is codified under 15 U.S.C. ยง 1125, to provide for civil liability for cybersquatting where people or entities register or use domain names in bad faith, with an intent to profit from another’s trademark. Petronas argued that Congress intended for the ACPA to include a cause of action for contributory cybersquatting. However, the Ninth Circuit did not agree with this argument. The court explained that a plain reading of the text of the ACPA showed that it did not provide for this type of remedy. Furthermore, the court reasoned that since secondary liability is a distinct remedy, it could not imply the statute contained it unless expressly provided. Finally, the court held that it was not within the goals of the statute to allow suits against neutral domain name registrars for contributory liability. Indeed, this would force the registrars to begin inquiring into their customer’s intent to determine whether bad faith existed, which is an unreasonable burden.

What Is Secondary Liability?

A party can be liable to another party for damages based on either primary or secondary liability. Under the secondary liability theory, or indirect infringement, a party has not committed the wrongful act. Instead, liability rests on material contributions to the wrongful act. Secondary liability can be vicarious or contributory. Vicarious liability holds parties responsible who profit from infringement and are in a position to prevent the wrongful act. On the other hand, under the theory of contributory liability parties who provide for or facilitate the infringement can be liable to the harmed party.

In this case, Petronas attempted to argue that Godaddy was contributorially liable for allowing a third-party to register a domain name that infringed on its trademark. Central to this argument would have been whether Godaddy knew the domain name was infringing, whether Godaddy did anything to help the third-party register and use the address, and whether Godaddy was in a position to have stopped any infringement. Ultimately, the court concluded that it was not Godaddy’s burden to police domain name and search for bad intent.

At our law firm, we provide guidance and legal expertise for issues dealing with the management and protection of trademark rights. If you are involved in a trademark infringement dispute, you may contact us to discuss the legal remedies.