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Thursday, March 31, 2011

The WIPO Cybersquatting Statistics

by Thomas O'Toole

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The World Intellectual Property Organization is out this morning with its annual statistics on the number if cybersquatting cases handled by its Arbitration and Mediation Center. WIPO says that its domain name arbitration business was up 28 percent in 2010. According to WIPO, trademark owners filed 2,696 cases (covering 4,370 domains) under the ICANN Uniform Domain Name Dispute Resolution Policy last year.

No reason to doubt these statistics. But the report carries the provocative headline "Cybersquatting Hits Record Level, WIPO Center Rolls Out New Services" and is evidently intended to drive the townsfolk through the town square screaming "Cybersquatting hits record level! Cybersquatting hits record level! Something must be done!!" This is how the report will be played in Congress (to the extent Congress pays attention to such matters) and at future ICANN policy discussions.

Here's a look back over the past 10 years:





Is cybersquatting really at record levels? I am not so sure. I can think of a few reasons why a skeptical person might want to put an asterisk next to the WIPO headline.

Cybersquatting as a percentage of all domain name registrations has dropped. In 2004, when WIPO received 1,176 UDRP complaints, there were roughly 67 million registered internet domain names, according to Verisign. In 2010, Verisign pegged the number of internet domain name registrations at 205.3 million. WIPO had 2,696 complaints that year. As a percentage of all domain name registrations, the incidence of cybersquatting is falling not rising.

WIPO is expanding its services in country-code domains. WIPO's statistics reflect complaints in dozens of country-code domains in addition to the traditionally commercial .com and .net domains. When WIPO began deciding domain name disputes in country-code top-level domains back in 2000, there were just 19 ccTLDs in the program. Today WIPO adjudicates domain name disputes in 65 top-level domains (including the recently created .eu and the recently commercialized .co top-level domains). According to WIPO Director General Francis Gurry, ccTLD cases now account for 15 percent of all cybersquatting disputes handled by WIPO compared to 1 percent in 2000. Small wonder that the number of cybersquatting complaints handled by WIPO is rising.

Are we really talking about cybersquatting? Cybersquatting, in 2000, described the practice of registering a domain name and was identical or confusingly similar to another person's trademark with the intent of selling it back to the trademark owner at a profit. These kinds of claims are rare in 2010. The vast majority of "cybersquatting" claims that arise under the UDRP today involve domains containing generic terms, typo-squatting, and permutations of trademarks for the purpose of click-farming and other schemes to monetize traffic from wayward internet users. Whether or not mark owners are actually harmed by any of this activity is debatable. What is not debatable, however, is the fact that the types of activity that fall under the heading of "cybersquatting" is significantly greater than it was when the UDRP was introduced.

It is relatively easy to sell "confusion" to a WIPO panelist. In the federal courts, a dynamic cyberlaw issue right now is the proper application of trademark law to internet domain names, particularly on the point of whether or not internet users are confused by domains that contain trademarked terms. The gap between a UDRP panelist's and a federal judge's evaluation of actionable "confusion" is marked and growing wider. In one recent case involving the buy-a-lexus.com and buyorleaselexus.com domains, Toyota Motor Sales USA Inc. v. Tabari, No. 07-55344 (9th Cir., July 8, 2010), the court challenged the assumption that internet users are necessarily confused—if only for a moment—about sponsorship or source when they visit a website at a domain name containing a trademarked term. "When a domain name making a nominative use of a mark does not actively suggest sponsorship or endorsement, the worst that can happen is that some consumers may arrive at the site uncertain as to what they will find,” the court wrote.

The Tabari court described the typical internet consumer like this:

They skip from site to site, ready to hit the back button whenever they’re not satisfied with a site’s contents. They fully expect to find some sites that aren’t what they imagine based on a glance at the domain name or search engine summary. Outside the special case of trademark.com, or domains that actively claim affiliation with the trademark holder, consumers don’t form any firm expectations about the sponsorship of a website until they’ve seen the landing page—if then. This is sensible agnosticism, not consumer confusion.

Contrast the foregoing passage with a WIPO panelist's views on consumer confusion involving the very same mark, LEXUS, and the internet domain lexusfinancail.com:

First, it is confusingly similar to the LEXUS trademarks because the dominant feature of the domain name that compels the attention of the potential customer and of any reasonable bystander is the word “lexus”, which instantly invokes the name Lexus, being the famous brand of motor vehicles. The belief engendered by the domain name that it is associated with that famous brand is not dispelled in the slightest by adding the word “financail”, as this would clearly be taken either to be the word “financial” and hence to be referring to the financing of Lexus vehicles or, if the difference in the spelling is noticed, it would be assumed that it was a simple spelling mistake. In either case the domain name would still be assumed to be linked with the brand Lexus and hence the trademark LEXUS.

...

The Panel also draws the inference that the misspelling in the present case was done deliberately to ensnare Internet users who are looking for a website devoted to the financing of Lexus vehicles and who make a mistake when trying to spell the combined word “lexusfinancial”.

The case is Toyota Motor Credit Corporation v. Digi Real Estate Foundation, No. D2006-1619 (WIPO, Feb. 12, 2007).

This decision is typical. For better or worse, it is certainly true that a trademark owner's belief that "cybersquatting" is afoot receives a more sympathetic hearing in a UDRP proceeding than in federal court. I believe this state of affairs is also creating a situation in which raw number of WIPO cybersquatting complaints overstates the amount of cybersquatting that is actually going on out there.

So I don't think, based on WIPO's evidence, that cybersquatting is actually on the rise. The number of registered domain names is exploding, WIPO's mediation services cover an ever-growing number of top-level domains, and WIPO's definition of cybersquatting is expansive relative to federal courts in the United States. Little wonder business is up.
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