On November 29, 1999, President Clinton signed into law the "Anticybersquatting Consumer Protection Act" (ACPA).  This law adds section 43(d) to the U.S. Trademark Act of 1946 and creates a cause of action for "cybersquatting" on famous trademarks.  The ACPA also creates a federal cause of action for cybersquatting on a person's name without his or her permission.  As a domain name reseller, you need to know about this law.

A "distinctive trademark" is any trademark that has been registered with the U.S. Patent and Trademark Office or which has been used with goods and/or services for sufficient time that it has acquired "secondary meaning" among consumers.

A "famous trademark" is one that a court says is famous. There are numerous factors that are considered, including the duration and extent of use, extent of advertising, degree of public recognition, and whether the mark was registered with the U.S. Patent and Trademark Office. In practice, a "famous trademark" is one that most people have heard of, on a regular basis, for many years (i.e. Kodak, Exxon, Microsoft).

The important thing to realize about the ACPA is that it distinguishes between a "distinctive" mark and a "famous" mark. Liability is imposed with respect to a "distinctive" mark if the domain name is "identical or confusingly similar." However, liability may be imposed with respect to a "famous" mark even if the domain name is merely "dilutive" of that mark. It is the notion of "dilution" that creates the largest pitfall for domain name resellers.

The term "dilution" means the lessening of the capacity of the famous mark to identify and distinguish goods or services, regardless of whether there is actual competition between the trademark owner and the accused diluter, and regardless of whether the public is likely to be confused or deceived. Thus, McDonalds Corp. could sue the owner of www.McDonaldsBakery.com under the theory of dilution. Likewise, Disney could sue the owner of www.DisneyStinks.com under the same theory. It seems unfair, but that is the law.

In general, domain name resellers who maintain a large stock of unused domain names, which they offer for sale to others, will be deemed to have "bad faith" under the ACPA if one or more of the names infringes another person's trademark. In contrast, a domain name owner who registers and uses a confusingly similar or dilutive mark for bona fide or "fair use" purposes, and who does not offer the name for sale, will probably not be deemed to have "bad faith."

"Fair use" of a trademark is a use for descriptive purposes, political commentary, parody, and other legally-recognized activities. There are no hard and fast rules in this area of law, so if you intend to knowingly make "fair use" of another's trademark, you should consult a trademark attorney.