CASE:
Virtual Works, Inc. v Volkswagen of America, Inc
CITATION:
238 F.3d 264
FACTS:
In October of 1996, Virtual Works registered the domain name vw.net with Network Solutions. Two principal agents for Virtual Works were aware that internet users might take the vw.net site as being associated with Volkswagen, but continued to use the domain name anyway. The principal agents did agree that they would be willing to sell the domain name to Volkswagen for a lot of money.
One of the principal agents of Virtual Works left a message with the trademark department at Volkswagen that Virtual Works would sell the domain name to the highest bidder, and that Volkswagen had twenty-four hours to respond. Volkswagen invoked Network Solutions’s dispute resolution procedure. Network Solutions told Virtual Works that it would lose its domain name unless it filed a declaratory judgment action against Volkswagen. Virtual Works complied.
The court looks at Virtual Works’s bad faith intent to profit on the domain name under the Anticybersquatting Consumer Protection Act (“ACPAâ€), the inability of the company to qualify for a safe harbor provision, and the domain name being confusingly similar to the VW trademark.
PROCEDURAL HISTORY:
Domain name owner filed suit. Trademark owner counterclaimed. District Court granted summary judgment to trademark owner and relinquishment of vw.net to Volkswagen. Domain owner appealed. Court of Appeals affirmed.
ISSUE:
Can Virtual Works retain their domain name under existing cyber law principles?
ANALYSIS:
Many other domain names were available at the time that Virtual Works registered vw.net. Virtual Works displayed cybersquatting practices when it registered the domain name and offered it to the highest bidder.
The court examines the factors of the ACPA: (1) that the person has a bad faith intent to profit from the mark, and (2) that the person registers, traffics in, or uses a domain name that (a) in the case of a mark that is distinctive- is identical or confusingly similar to that mark (b) in the case of a famous mark- is identical or confusingly similar to or dilutive of that mark.
The court examines the factors to bad faith determination, including, but not limited to: (1) the trademark or other intellectual property rights of the person, if any, in the domain name, (2) the extent to which the domain name consists of the legal name of the person, (3) the person’s prior use, (4) the person’s bonafide noncommercial or fair use of the mark, (5) the person’s intent to divert customers, (6) the person’s offer to sell the domain name, (7) The person’s provision of misleading material when applying for the domain name, (8) the person’s registration of multiple domain names, which he knows is identical or confusingly similar to the marks of others, and (9) the extent to which the mark incorporated in the domain name is not distinctive or famous.
Because the ACPA was enacted after the actions of Virtual Works, Volkswagen was entitled to either transference of the domain name to them or its cancellation.
The court restates the lower court’s determination that: (1) Virtual Works had no right to the VW mark, (2) Virtual Works had never done business under VW. (3) Comments posted by Virtual Works harmed the goodwill of the VW mark, and that (4) the VW mark was famous.
The court finds it unnecessary to review all nine factors of the ACPA and instead focuses on the determination of Virtual Works’s bad faith. The facts alone provide circumstantial evidence of bad faith. These facts include the famousness of the VW mark, the similarity of the marks, the admission of Virtual Works that it never did business as VW, and the availability other domain names at the time of registration. The court concludes that Virtual Works was intending on profiting from the natural association between vw.net and VW, because of the similarity of the marks. It also concludes that the offer of Virtual Works to sell its domain name weighs significantly against them.
The court states that the bad faith actions of Virtual Works makes it ineligible for any safe harbor protection. It adds that there is no dispute that Virtual Works registered, trafficked in, and used vw.net, and that the mark is famous. The court concludes that Virtual Works admitted to potential customer confusion when the company told Volkswagen that users would use their domain in order to connect with the Volkswagen site. This is a good outcome. There is little doubt that Virtual Works was attempting to exploit Volkswagen. They got what they deserved.
HOLDING:
(1) Domain name owner was motivated by bad faith intent to profit, in violation of the ACPA.
(2) Domain name owner was disqualified for the safe harbor provision of the ACPA.
(3) The domain name “vw.net†was confusingly similar to Volkswagen’s famous “VW†mark.