I am pleased that the Committee will take up legislation today to address the growing problem of deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners. For the Net-savvy, this burgeoning form of cyber-abuse is known as “cybersquatting.” For the average consumer, it is simply fraud, deception, and the bad-faith trading on the goodwill of others. Whatever you call it, it is an issue that has a great impact on American consumers and the brand names they rely on as indications of source, quality, and authenticity.

As anyone who has walked down the aisle in the grocery store knows, trademarks serve as the primary indicators of source, quality, and authenticity in the minds of consumers. These brand names are valuable in that they convey to the consumer reliable information regarding the source and quality of goods and services, thereby facilitating commerce and spurring confidence in the marketplace. Conversely, unauthorized uses of others’ marks undercut the market and harm consumers by eroding consumer confidence and the communicative value of the brand names we all rely on.

As we are seeing with increased frequency, the problems of brand-name abuse and consumer confusion are particularly acute in the online environment, where traditional indicators of source, quality, and authenticity give way to domain names and digital storefronts that take little more than Internet access and the most basic computer skills to erect. That is why, in many cases, the domain name that takes consumers to an Internet site and the graphical interface that greets them when they get there are the only indications of source and authenticity, and legitimate and illegitimate sites may be indistinguishable in cyberspace. So if a bad actor is hiding behind a domain name bearing someone else’s trademark, an online consumer is at serious risk of being defrauded. The result, as with other forms of trademark violations, is the erosion of consumer confidence in brand name identifiers and in electronic commerce generally.

Last week this Committee heard testimony of a number of examples of online consumer confusion stemming from abusive domain name registrations. We heard, for example, of a cybersquatter who registered the domain names “attphonecard.com” and “attcallingcard.com” and used those names to establish sites purporting to sell calling cards and soliciting personally identifying information, including credit card numbers. We heard a similar account of a cybersquatter purporting to sell Dell Computer products under the name “dellspares.com”, when in fact Dell does not authorize online resellers to market its products. We also heard from a Salt Lake City trademark practitioner who is representing Porsche in protecting their trademark against more than 300 instances of cybersquatting, some of which are associated with bad actors sell counterfeit goods and non-genuine Porsche parts under website’s bearing Porsche’s name.

The list of examples goes on and on. Consider, for example, the child who in a “hunt-and-peck” manner mistakenly typed in the domain for “dosney.com”, looking for the family-friendly content of Disney’s home page, only to wind up staring at a page of hard-core pornography because someone snatched up the “dosney” domain in anticipation that just such a mistake would be made. In a similar case, a 12-year old California boy was denied privileges at his school when he entered “zelda.com” in a web browser at his school library, looking for a site he expected to be affiliated with the computer game of the same name, but ended up at a pornography site.

In addition to these types of direct harm to consumers, cybersquatting harms American businesses and the goodwill value associated with their names. In part this is a result of the fact that in each case of consumer confusion there is a case of brand-name misappropriation and an erosion of goodwill. But, even absent consumer confusion, there are many cases of cybersquatters who appropriate brand names with the sole intent of extorting money from the lawful mark owner, of precluding evenhanded competition, or even very simply of harming the goodwill of the mark. For example, a couple of years ago a small Canadian company with a single shareholder and a couple of dozen domain names demanded that Umbro International, Inc., which markets and distributes soccer equipment, pay $50,000 to its sole shareholder, $50,000 to a charity, and provide a lifetime supply of soccer equipment in order for it to relinquish the “umbro.com” name. Warner Bros. was reportedly asked to pay $350,000 for the rights to the names “warner-records.com”, “warner-bros-records.com”, “warner-pictures.com”, “warner-bros-pictures”, and “warnerpictures.com”. And Intel Corporation was forced to deal with a cybersquatter who registered the “pentium3.com” domain and used it to post pornographic images of celebrities.

It is time for Congress to take a closer look at these abuses and to respond with appropriate legislation. The Committee substitute we will consider today will provide important refinements to the underlying bill in order to address these problems by clarifying the rights of trademark owners with respect to cybersquatting, by providing clear deterrence to prevent such bad faith and abusive conduct, and by providing adequate remedies for trademark owners in those cases where it does occur. The substitute reflects the text of a bill that Senator Leahy and I introduced earlier today, with Senators Abraham, Torricelli, DeWine, and Kohl as cosponsors. I want to thank the Ranking Member, Senator Leahy, who has worked closely with me to develop a bill that carefully balances the rights of trademark owners with the interests of Internet users. I also want to thank Senator Abraham and the sponsors of the underlying bill, with whom we have worked in cooperation to bring this draft to completion.

While the substitute bill shares the goals of, and has some similarity to, the underlying bill, it differs in a number of substantial respects. First, like Senator Abraham’s legislation, this bill allows trademark owners to recover statutory damages in cybersquatting cases, both to deter wrongful conduct and to provide adequate remedies for trademark owners who seek to enforce their rights in court. The substitute goes beyond simply stating the remedy, however, and sets forth a substantive cause of action, based in trademark law, to define the wrongful conduct sought to be deterred and to fill in the gaps and uncertainties of current trademark law with respect to cybersquatting.

Under the substitute amendment, the abusive conduct that is made actionable is appropriately limited to bad faith registrations of others’ marks by persons who seek to profit unfairly from the goodwill associated therewith. In addition, the substitute balances the property interests of trademark owners with the interests of Internet users who would make fair use of others’ marks or otherwise engage in protected speech online. The substitute amendment also limits the definition of domain name identifier to exclude such things as screen names, file names, and other identifiers not assigned by a domain name registrar or registry. It also omits criminal penalties found in Senator Abraham’s underlying legislation.

Second, the substitute amendment provides for in rem jurisdiction, which allows a mark owner to seek the forfeiture, cancellation, or transfer of an infringing domain name by filing an in rem action against the name itself, where the mark owner has satisfied the court that it has exercised due diligence in trying to locate the owner of the domain name but is unable to do so. A significant problem faced by trademark owners in the fight against cybersquatting is the fact that many cybersquatters register domain names under aliases or otherwise provide false information in their registration applications in order to avoid identification and service of process by the mark owner. The substitute amendment will alleviate this difficulty, while protecting the notions of fair play and substantial justice, by enabling a mark owner to seek an injunction against the infringing property in those cases where, after due diligence, a mark owner is unable to proceed against the domain name registrant because the registrant has provided false contact information and is otherwise not to be found.

Additionally, some have suggested that dissidents and others who are online incognito for legitimate reasons might give false information to protect themselves and have suggested the need to preserve a degree of anonymity on the Internet particularly for this reason. Allowing a trademark owner to proceed against the domain names themselves, provided they are, in fact, infringing or diluting under the Trademark Act, decreases the need for trademark owners to join the hunt to chase down and root out these dissidents or others seeking anonymity on the Net. The approach in the substitute is a good compromise, which provides meaningful protection to trademark owners while balancing the interests of privacy and anonymity on the Internet.

Third, like the underlying Abraham bill, the substitute amendment encourages domain name registrars and registries to work with trademark owners to prevent cybersquatting by providing a limited exemption from liability for domain name registrars and registries that suspend, cancel, or transfer domain names pursuant to a court order or in the implementation of a reasonable policy prohibiting the registration of infringing domain names. The substitute goes further, however, in order to protect the rights of domain name registrants against overreaching trademark owners. Under the substitute, a trademark owner who knowingly and materially misrepresents to the domain name registrar or registry that a domain name is infringing is liable to the domain name registrant for damages resulting from the suspension, cancellation, or transfer of the domain name. In addition, the court may award injunctive relief to the domain name registrant by ordering the reactivation of the domain name or the transfer of the domain name back to the domain name registrant. Finally, the substitute also promotes the continued ease and efficiency users of the current registration system enjoy by codifying current case law limiting the secondary liability of domain name registrars and registries for the act of registration of a domain name.

Finally, the substitute amendment includes an explicit savings clause making clear that the bill does not affect traditional trademark defenses, such as fair use, or a person’s first amendment rights, and it ensures that any new remedies created by the bill will apply prospectively only.

Let me say in conclusion that this substitute is an important piece of legislation that will promote the growth of online commerce by protecting consumers and providing clarity in the law for trademark owners in cyberspace. It is a balanced bill that protects the rights of Internet users and the interests of all Americans in free speech and protected uses of trademarked names for such things as parody, comment, criticism, comparative advertising, news reporting, etc. It reflects many hours of discussions with senators and affected parties on all sides. Again, let me thank Senator Leahy for his work in crafting this particular measure, as well as Senator Abraham for his cooperation in this effort, and all the other cosponsors of this amendment. I look forward to the Committee’s favorable consideration of this legislation today and to working with my colleagues here to get this bill through the Senate, and enacted into law.

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