What is Domain Squatting?

Internet domains are registered, rather than bought and sold, and they are available on a first-come, first-served basis. These ground rules lay the foundation for the practice of domain squatting, also known as cybersquatting. A domain squatter registers a site not for his or her own use but with the idea that it can be sold at a profit.

Cybersquatters acquire names in several ways. They may pick up domain names that become available after a bankruptcy or when a renewal registration fee isn’t paid. They may also follow people’s checks on domain name availability and purposefully register the name if there is a pause while the person makes a decision.

The goal of domain squatting is to make money. Cybersquatters hope to be able to resell the domain names they have registered to they people who wanted them or to whom they rightfully belong. They also hope to receive an inflated price for doing so.

It is important to differentiate domain squatting from the acceptable practice of domain “reselling.” The key point that separates the domain squatter is the focus on a domain name that is either the service mark or trademark of another person or organization or bears a confusing similarity to one. This is what distinguishes the person who registers http://buypepsi.net or http://buypep-si.com from the one who registers http://buytastysoda.com.

The law governing this area is the Anticybersquatting Consumer Protection Act (ACPA) of 1999. It forbids registering a domain name, trafficking in domain names, or using a domain name with a bad faith intent to profit from the fact that it contains a tradename that is owned by someone other than the registrant or that is confusingly similar to a service mark or trademark. In cases in which the domain name registrant cannot be located to answer to the court, an “in rem” action can be brought by the trademark owner. In this case, even without the domain registrant’s participation, the court may order that the domain name be either canceled or transferred to the owner of the trademark.

The sway of ACPA is limited because it is U.S. law, rather than global law. However, the Uniform Domain Name Dispute Resolution Policy of ICANN, the Internet Corporation for Assigned Names and Numbers — an international nonprofit coalition, also has bearing here. In either case, in order to be able to maintain innocence before either a U.S. court or ICANN, it is essential that a domain owner not offer to sell a domain name that could be the subject of a suit for more than the out-of-pocket expenses involved in its acquisition. Even for a domain registrant who had no idea that the domain name was infringing, such an attempt at a sale would be taken as a sign of bad faith, and thus, an indication of domain squatting.