Do-Over for Bad-Faith Domain Registration Triggered by Re-Registration

A recent Anti-cybersquatting Consumer Protection Act (“ACPA”) case in the Southern District of Alabama highlights the importance of a domain name’s registration date and the date a plaintiff’s asserted trademark becomes distinctive or famous.

ZP No. 314, LLC (Plaintiff) and ILM Capital (Defendant) each own and operate competing off-campus student housing facilities, ONE TEN STUDENT LIVING and CAMPUS QUARTERS, respectively.  ZP began advertising its One Ten facility on its parent company’s website in February 2016 and in May, posted ads on its social medial webpages.  Learning of ZP’s student housing plans, ILM registered five “One Ten”-formative domain names on May 11 and set the domain names up to redirect web traffic to its own competing website, expressly intending to draw Internet traffic away from ZP.  ILM registered three more “One Ten” domains on May 27. 

After multiple cease and desist letters, ILM stopped redirecting the domain names to its own website.  ILM also falsely denied ownership of the only domain ZP had learned about, stating that the “owner” had purchased it for legitimate business purposes and was reserving it for potential future use.  Moreover, ILM did not disclose that it owned seven other “One Ten” domains. 

ZP’s ONE TEN STUDENT LIVING and ONE TEN trademarks registered at the USPTO on July 25 and October 10, 2017, respectively.  In May 2018, despite knowing that ZP’s owned registrations for its ONE TEN marks, ILM re-registered all the domain names.  ZP filed suit.

In addition to proving a defendant’s bad-faith intent to profit from a disputed domain name, ACPA plaintiffs must assert trademarks that were distinctive or famous on the date the disputed domain name was registered.  Here, because the court had previously held ZP’s marks did not become distinctive until after they registered at the USPTO, the court considered whether ILM’s May 2018 re-registration of the domain names violated the ACPA.

The court found the evidence “strongly suggest[ed] bad faith,” but nonetheless, ruled for ILM.  According to the court, as of May 2018, ILM no longer redirected the domain names to its own websites but had merely “parked” them at websites that displayed various links unaffiliated with ILM’s business or services.  Because nothing suggested ILM derived any economic benefit from the parked domains, the court found ILM had not registered the domain names with a bad faith intent to profit. 

Other Eleventh Circuit courts have denied ACPA relief in cases where the asserted mark was not distinctive when the domain name first registered.  Circuit courts largely agree, however, that evidence of bad faith may arise after registration.  Here, the court seems to have gone the other way, suggesting that regardless of how nefariously the domain may have been acquired, the bad-faith slate is wiped clean as long as the domain registrant was no longer profiting from the domain name when it is re-registered.

Not all was lost for ZP.  The district court found for ZP on its federal unfair competition and state law infringement claims, so where an ACPA claim fails, other claims may succeed.

Notably, had ZP pursued a Uniform Domain-Name Dispute-Resolution Policy proceeding (“UDRP”) instead of an ACPA action, it may well have prevailed on a theory of opportunistic bad faith.  An opportunistic bad faith claim allows a UDRP complainant to assert bad faith in situations similar to the one described above if it can show the registrant intended to capitalize on the complainant’s anticipated trademark rights.   

The case is ZP No. 314, LLC v. ILM Capital, LLC, No. 1:16-cv-00521-B (S.D. Ala. Sept. 30, 2019).