Article - Test of ‘bad faith’ in domain name arbitration (October 2001)

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A small Australian company has been involved in a domain name dispute regarding the domain The matter has been resolved by the WIPO Arbitration and Mediation Centre, and is an interesting example of the new domain name dispute resolution procedure in practice. In particular, this case provides guidance on the test for ‘bad faith’ in a domain name arbitration.

The facts

A small airline based in the United States of America, Spirit Airlines, was the Complainant. They had been using that business name since 1992 and had to the United States Patent and Trade Mark Office for registration of Spirit Airlines Inc as a service mark in 1997. The mark was registered in April 2000.

The Australian company was registered in December 1997 as Spirit Airlines (Aust) Pty Limited, and changed its name to Sprit Airlines Pty Ltd on February 12, 1998.

In April 1998, the Australian company registered the domain name

In April 1999, the US company’s lawyers wrote to the Australian company claiming infringement of their trade mark rights and seeking cancellation of the domain name. The Australian lawyers replied, denying the allegations and offering to hand over the domain name for $200,000. The correspondence continued through to April, 2001, but without agreement being reached.

On April 28, 2000, the Australian company renewed the registration of the domain name. The Australian company has never operated an airline under the name Spirit Airlines or any similar name.

Legal arguments

The US company argued that the domain name is identical or confusingly similar to its US service mark. They pointed out that the Australian company never actually launched an airline under the name Spirit Airlines and suggested that they had abandoned any intention to do so. They asserted that the Australian company must have known of their superior rights in the name at the time that it registered the domain name. They argued that this behaviour established that the Australian company had registered the domain name in bad faith. They also pointed to the demand for $200,000.

They argued that in renewing the domain name registration the Australian company’s main intent must have been to extract a large sum of money from the US airline, because by that time they would have been well aware of the dispute. The US airline claimed that the renewal was made in bad faith and in violation of the dispute resolution policy and cited in support the decision in ABF Freight System Inc v. American Legal.[1]

The Australian company admitted that its website received thousands of hits a month from US residents looking for the US airline. Originally, the Australian company directed those visitors to the US airline’s website. However, they later redirected visitors to the sites of competitors such as Southwest Airlines, jetBlue and Air Tran Airways. The US airline therefore alleged that the Australian company was deliberately disrupting their business.

The Australian company stated that it originally intended to launch an airline under the name Spirit Airlines and exhibited extracts from an independently produced corporate plan showing its original intention to do so. However, by the time the company was ready to attempt a launch, the market conditions were not favourable. The Australian company admitted that it had an alternative name in mind, but denied that it had abandoned its plans to launch under the name Spirit Airlines.

The Australian company stated categorically that it knew nothing of the US airline when it registered the domain name. They pointed out that the US airline’s website itself included a reference to a newspaper article headlined ‘Spirit, the most successful small carrier you’ve never heard of, is poised to take off.’

The Australian company argued that while similar, the Australian company’s name/domain name and the US airline’s service mark are far from confusingly similar. ‘There is no overlap between the parties’ businesses. Nobody seeking cheap domestic travel in the US is likely to believe that an airline offering similar services in Australia is connected’.

The Australian company acknowledged that it received a significant number of hits seeking information about domestic travel within the US. Up until April 1999 it forwarded any hits which it could identify as being hits intended for the US airline. Thereafter it ceased to do so. The directors of the Australian company took exception to the US airline’s behaviour and modified the website to include reference to competitors. However, they modified the website to provide a link to the US airline’s website shortly before the arbitration proceedings.

The Australian company asserted that in all the circumstances the demand for $200,000 compensation for changing its name and transferring the domain name and the associated Australian rights was reasonable.

The Findings

According to paragraph 4(a) of the dispute resolution policy, the US airline would have to prove that

(i) The domain name is identical or confusingly similar to a trade mark or service mark in which the US airline has rights; and
(ii) The Australian company has no rights or legitimate interest in respect of the domain name; and
(iii) The domain name has been registered and is being used in bad faith.

The fact that the Australian company had received substantial numbers of hits from people evidently intending to reach the US airline led the Panel to conclude that the domain name was confusingly similar to the US airline’s service mark.

The incorporation of the Australian company under a name including the name Spirit Airlines back in December 1997 and the commissioning of the corporate plan for their airline under the name Spirit Airlines in March 1998 was accepted by the Panel as clear evidence of an intention to use a name corresponding to the domain name in relation to an offering of services at the time the domain name was registered (i.e. long before they received any notice of the dispute).

The Panel noted that ‘in this case, whether or not it was a bona fide offering depends upon whether the Australian company was aware at the time of the US airline’s rights in the name Spirit Airlines and, further, whether they knew or ought to have known that its use of the domain name would infringe any such rights’.

The Panel concluded that it had no reason to doubt the Australian company’s claim to have been unaware of the US airline at that time. The US airline acknowledges on its own website that at the relevant time it was a very low profile operation. On that basis the Panel accepted that they had demonstrated rights and legitimate interests in respect of the domain name.

However, the US airline stated that the Australian company has abandoned its plans to use the name Spirit Airlines for its service offering and had taken that decision prior to renewing the domain name registration. They asked the Panel to review the position as at the date of renewal.

The Panel’s view was, however, that renewal of a domain name registration in this respect is no different from renewal of a trade mark registration. ‘It represents a continuation of the original registration. Were the US airline’s argument to succeed, all ‘innocent’ registrants of domain names would be at risk of becoming branded ‘cybersquatters’ as a result of a letter of notification coming in out of the blue. Many registrants will have no satisfactory means of assessing the validity of the ‘notification’ without going to the expense of taking legal advice. This will result in undue pressure being brought upon registrants. The object of the Policy is to provide a cost effective alternative to litigation as a means of dealing with cybersquatters, i.e. in general people who have deliberately selected and registered a domain name knowing it to be the name of a complainant. The US airline’s argument seeks to take the Policy way beyond its original scope.’

The Decision

In this case the US airline’s argument depended in part upon the Australian company’s alleged abandonment of its intention to use the domain name. They were asserting that the renewal of the Domain name was primarily with the intention of extracting a large sum of money. The Australian company denied that it has abandoned its plans for the name. The Panel noted: ‘Clearly, they were aware that it might be worth the US airline’s while paying a large sum of money for the domain name registration, but it seems to the Panel that the Australian company is legitimately hedging its bets. It is flexible and free to go under its originally planned name, Spirit Airlines, or another name. The Panel accepts their denial of abandonment.’

‘Accordingly, even if the Panel had come to a different conclusion in relation to the ‘registration/renewal’ issue, it is evident that in this case when renewing the domain name the Australian company maintained a continuing intention to use the name Spirit Airlines. Accordingly, for present purposes the Australian company continues to have the benefit of its original plans to provide a bona fide offering of services under or by reference to the domain name or a name corresponding to the domain name.’

The Panel therefore found that the US airline had failed to prove that the Australian company had no rights or legitimate interests in respect of the domain name. For the above reasons the Panel also noted that the bad faith claim failed. The complaint was dismissed.

For more information on the domain name dispute resolution service see;

Chris Connolly

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