By Michael Leventhal

Ultimately, as money has poured onto the Net, and business entities have taken their storefront identities more seriously, not only has more litigation occurred over the issues of ownership, and rights to ownership, of domain names, but InterNIC and its sub-contractor on this task, Network Solutions, Inc. ("NSI") have found themselves party to such litigation.

As a result, NSI instituted the following changes in procedure, for the purposes of slowing the practice of "prospecting" and minimizing its own exposure.

1. They now charge a higher fee ($50.00). This will deter some of the prospectors who previously set out to register everything, wait until someone with a need for that domain name came along, and then charge what they could get away with to the unfortunate who didn't think of it first. It will also put extra cash in the accounts of NSI, in theory, to defend against the extra liability it has taken on.

2. NSI will now request that all applicants confirm that they have the legal right to the name they are registering, and that the applicant will be using the name for appropriate reasons (e.g. not for an unlawful purpose). While not determinative of any dispute over ownership rights to a domain name, the new InterNIC policy is to view trademarks as quantifiable evidence relevant to domain name disputes.

3. The applicant will now agree to "defend, indemnify and hold harmless" NSI and all conceivable related entities and individuals for any damage, including attorney's fees "arising out of or related to the use or registration of the Domain Name . . ." [All quotes herein from the November 23, 1995 InterNIC policy statement]. If the Applicant does not honor this obligation, its domain name will be withdrawn. There is an exception for educational or governmental entities which are not able to indemnify NSI.

4. NSI gives itself the right to withdraw the domain name from use and registration upon notice from a United States court or arbitration panel agreed upon by the parties to the dispute, ruling that the domain name "rightfully belongs to a third party."

5. NSI also gives itself the power to request that the applicant relinquish the domain name if the applicant is in breach of any obligations to NSI, and also gives itself the ultimate right to terminate the use and registration of the name.

6. With regard to disputes brought by allegedly damaged parties, NSI divides the claims into two categories: (1) claims brought by third parties who own a Federal trademark or servicemark in and to the disputed domain name, and (2) claims brought by third parties that do not. A properly registered state trademark or servicemark is not sufficient for a claimant to land in category number 1.

(a) When the dispute falls into category (1), the analysis goes to the next level, which is whether or not the applicant's use of the domain name predates either the use or registration of the Federal or foreign mark. If the applicant's use of the domain name is prior to the third party challenger's use or registration, NSI will allow the applicant to continue to use the name "unless and until a court order or arbitrator's judgment to the contrary is received by NSI . . ." Where the applicant can show neither a registered trademark nor prior use, NSI will, if requested to do so, assist the applicant in changing domain names, with the applicant being allowed to use both names for a period of up to ninety days to allow for an orderly transition. After that time, NSI will put the name on hold pending resolution of the dispute. If the applicant does not agree to this procedure, NSI will simply put the domain name on hold until the resolution of the dispute.

(b) In a situation in which the challenger has the Federal trademark or servicemark, but the applicant can present documentation that is satisfactory to NSI, NSI will allow the applicant to continue to use the domain name, if the applicant will further indemnify NSI with regard to the dispute.

(c) In category number 2 cases, where the challenger does not have a valid foreign or United States trademark or servicemark, the applicant will be allowed to continue to use the domain name "unless and until a court order or arbitrator's judgment to the contrary is received by NSI."

The immediate result of the changes in policy was to significantly cut back the number of applications for domain names. First among the factors was undoubtedly the price hike, which raised the cost of prospecting five-fold. Second was most likely the requirement that applicants represent and warrant that they have a bona fide intention to use the domain name on a regular basis on the Internet.

So this is the state of this issue on the Internet as of April, 1996. Stay tuned for further changes, coming from all sources. Will we see more adjustments from business? Will Congress get involved and rewrite the relevant trademark statutes? Will international intellectual property conventions attempt to intervene? Will the states step in? The answers to these questions are not fully known yet, but look for each jurisdiction or entity to have an opinion. In what is possibly a sign of things to come, California has jumped into the fray. California SB Bill 1533, introduced February 14, 1996, would make the unauthorized use of a trademark over the Internet an act of unfair competition and would be grounds for injunction, $1,000 in damages and attorney's fees. It also provides that the sysop may remove infringing marks if based on good faith and in reliance upon credible information.

No doubt we'll be writing about this one again.