November/December 2010 Issue
Civil Cases
DSPT Int’l, Inc. v. Nahum,
2010 WL 4227883 (9th Cir. Oct. 27, 2010)
ABSTRACT
As part of his job for plaintiff, defendant was responsible for setting up a website for plaintiff. Defendant registered the domain name for the site in his own name. Six years later, defendant left plaintiff to work for a competitor and removed all of plaintiff’s content from its website. Defendant would not relinquish control of the domain name until he received past commissions allegedly owed him by plaintiff. After a jury trial, the jury found defendant guilty of cybersquatting and awarded plaintiff $152,000 in damages. The Ninth Circuit affirmed, holding that defendant intended to profit by using the domain name as leverage.
CASE SUMMARY
FACTS
Plaintiff DSPT International, Inc. (“DSPT”) sold clothing under its EQUILIBRIO and EQ trademarks. In 1999, DSPT’s owner hired defendant Lucky Nahum and tasked him to set up a website for DSPT. Nahum’s brother designed the site and Nahum registered the domain name eq-italy.com in his own name. The website served as DSPT’s online catalog, where retailers could browse and order goods for their stores. In August 2005, Nahum left DSPT to work for a competitor. Shortly thereafter, Nahum took down DSPT’s website at eq-italy.com and replaced it with a page that read: “All fashion related questions to be referred to Lucky Nahum at: lnahum@yahoo.com.” DSPT repeatedly asked Nahum to return the website, but Nahum refused. Nahum told his new employer that he had changed the site to get DSPT to pay money owed him. Without its online sales portal during the critical holiday season, DSPT was forced to send out samples of its clothing to retailers, but retailers no longer wanted to do business this way. DSPT’s sales plummeted, it had to sell much of its inventory below cost, and it spent over $31,000 explaining the situation to its customers and replacing its website and stationery.
ANALYSIS
The Court of Appeals for the Ninth Circuit upheld the jury’s verdict. Nahum argued that he did not cybersquat because he did not attempt to profit in bad faith by selling the domain name back to DSPT or by using the domain name to divert business from DSPT. Instead, Nahum used the domain name “only to get what he was entitled to.” The Ninth Circuit rejected this argument, stating that it was “not implausible,” but characterizing it as “mistaken.”
Although the court noted that the ACPA was intended initially to prevent cybersquatters from registering well-known trademarks as domain names to sell them to the trademark owners for a profit, the statute was written “more broadly.” The Ninth Circuit held that although Nahum’s registration of the domain name in his name was originally lawful, his later “use” of the domain name as leverage for his claim for commissions was enough to support the cybersquatting verdict. Initially, although the ACPA has a safe-harbor provision for persons who reasonably believe that use of a domain name was fair or lawful, Nahum did not qualify because he could not have reasonably believed that he could lawfully use the eq-italy.com domain name when he no longer worked for DSPT. Turning to the ACPA statutory factors for “bad faith intent,” the court noted that factor six strongly supported DSPT’s claim. Factor six states that a bad-faith intent to profit from the mark may be inferred if the person offering to transfer the domain name to the owner of the mark has never actually used or intended to use the domain name for the bona-fide sale of goods. The court interpreted factor six to include “hold[ing] a domain name for ransom,” where the domain name holder uses it to get money from the trademark owner rather than to sell goods. Although Nahum did not explicitly offer to sell the domain name to DSPT, the jury could infer Nahum’s intent to give back the domain only if he received his disputed commissions. Moreover, “the intent to profit” means simply the intent to get money or valuable consideration. There was no requirement for a “profit,” i.e., Nahum did not need to ask for or receive more than what he was allegedly owed. Rather, the term “profit” also included “an attempt to procure an advantageous gain or return.”
The Ninth Circuit also affirmed the jury’s $152,000 damages award to DSPT. Nahum argued that there was insufficient evidence to support the damages award. But the court reasoned that Nahum’s infringement was intentional and made it “impossible” to know with any “precision” what DSPT’s sales would have been had Nahum not committed his wrong. Here, even without expert testimony on damages, the jury had sufficient tools for calculating DSPT’s actual damages and lost profits in the form of DSPT’s 2002-2006 financial statements and testimony about the $31,000+ DSPT spent to address the infringement. Under these circumstances, the Ninth Circuit found that the jury’s award was reasonable.
CONCLUSION
This decision is significant because of its expansive view of “bad faith intent to profit” in the ACPA to include “holding a domain name for ransom” or as leverage for some commercial purpose.
