Summary of Virtual Works, Inc. v. Volkswagen of America, Inc., U.S. Ct. of Appeals, 4th Circuit (2001)
Parties: Appellant is the web address user; appellee is trying to keep appellant from using its initials as its website address.
Cause of action/remedy sought: Reversal of summary judgment under the Anticybersquatting Consumer Protection Act (ACPA).
Procedural History: District court agreed found for appellee, that appellant had bad faith in its registering with domain name. This court affirms.
Facts: Appellant, on 10/23/96, registered its domain name as vw.net. At the time, 2 of the company’s principals, thought some web users might get confused with Volkswagen, and after discussion decided to keep the name under the condition that if Volkswagen wanted to buy them out, they would do so for a lot of money. At the time they registered the name, there were several other names available to register under. Nonetheless, the domain name was used for appellant for 2 years.
When several Volkswagen dealers contacted appellant, expressing an interest in purchasing the domain name, appellant called appellee offering to sell, but the terms were “to the highest bidder” and stated that offer was open for “24 hours.” Volkswagen then invoked NSI’s (Network Solutions, the internet domain name company) dispute resolution procedure, which appellant had to file for declaratory judgment, and upon that filing, appellee counterclaimed, alleging trademark dilution, infringement, and cybersquatting under the ACPA.
Issue(s): Under property law, may one company use the initials of its company in its domain name with the intent of (1) confusing internet users; and (2) then selling the domain name to the company which internet users might identify more with, for an extensive amount of money?
Holding: No. When a company buys an ip address with the intent of confusing customers with another famous company, or plans selling the ip address to that aformentioned company for a large profit, there is bad faith, and with bad faith, there is a violation of the ACPA.
Court’s Rationale/Reasoning: When the ACPA was created, Congress intended to clear up confusion among internet users, and to prevent cybersquatting. This case more than anything serves the latter purpose, while incidentally serves the former purpose as well. It serves the former purpose b/c under the Act, appellee cannot sue to have the name merely taken away from appellant (as they were grandfathered in under the Act), they must sue to take the name outright (which they did by winning).
The latter purpose is served by a long list of factors which serve to determine the intent of a party when it bought an ip name: (1) tm/intellectual property rights of person in domain name
(2) how common is name used to identify the company/person
(3) person’s prior use of the domain name in connection with the bona fide in offering goods/services
(4) intent to divert consumers
(5) noncommercial fair use
(6) offer to transfer/sell name to a third party for financial gain w/o using the name in a bona fide sense
Upon an analysis of those factors and others, the court determined there were bad faith means by which appellant either initially bought the ip name, and also in the way they essentially held up the appellee in threatening to sell the name to a 3rd party within 24 hours of their offer to sell. VW.net could obviously be confused with Volkswagen, and it was admitted in a pretrial affidavit by the principals to sell the name for a lot of money when appellee came looking to buy.
Rule: If there is a bad faith intent from the beginning by one company to confuse internet users and to hold up another company for the rights to an ip name, then there is a violation of the ACPA.
Did court avoid issues?: No.
Dicta: ACPA does not give companies the right to face off on any address that bears any similarity to a protected mark.