A recent report on the contestable issue of trademark ‘bullying’ has been released by the US Department of Commerce but, unfortunately, its substance and conclusion fail to identify the exact extent of the problem. The report acknowledges that in some cases trademark owners seek to enforce their rights through channels of intimidation and bullying, but it declares that “after careful review of the available information regarding trademark litigation tactics and comments received from concerned intellectual property stakeholders, it is unclear whether small businesses are disproportionately harmed by enforcement tactics that are based on an unreasonable interpretation of the scope of an owner’s rights”. So, is the report worthless?

Sort of. The fact that the US Department of Commerce instigated such a report, in the first place, is certainly a positive step towards accepting that there might be a problem to begin with. But, the fact that the report considers ‘trademark bullying’ as an issue that does not even warrant the willingness of the US DoC to continue to identify ways to combat it, negates the whole idea behind this initiative. But for a moment, let’s go along with the conclusions of the report and let’s say that trademark bullying only occurs periodically and in a small scale. Does this make it better or justifies it better? The problem exists and it is the responsibility of the organs that shape trademark law to terminate it. It would have been much better if the report where to at least suggest an effort to this end.

However, more importantly the report suffers from two major flaws – one procedural and one substantive.

The report was instigated by the US Department of Commerce, which has a vested interest in reaching the results that it did. The US DoC is the umbrella for trademarks and the place big trademark firms turn to when they want additional forms of protection. It has the ears of the trademark community and one should not really look as back as 6 months ago, when the same trademark community that presumably this report is referring to, went to the US DoC demanding that the ICANN trademark policies for new gTLDs are amended and expanded to protect their interests. The DoC complied. So a case can be easily made here relating to the true willingness of the US DoC to produce a report that accurately reflects the extent of the problem.

On the substantive side, the report makes a very interesting reading. It often repeats that idea that a trademark constitutes a property right and affirms the right of trademark owners to police their trademarks. Although many could question the association of trademarks with dominium characteristics, currently trademarks are regarded as limited property rights, making the right to police more subjective than it generally is. In any event, the right to police a trademark is, as Eric Goldman says, “massively overstated”. But, for me, the main substantive flaw in the report is the lack of considering trademark bullying also in the context of domain name disputes. I think that it is specifically in the context of domain names that trademark intimidation exceeds the permissible boundaries of sending a simple ‘cease and desist’ letter and becomes bullying. And, it is most certainly in this same context that trademark owners often overstate their rights and seek to expand them much beyond what trademark law allows them to. It is, finally, in this context that the party subjected to the trademark bullying most often does not have the means, the resources or often the understanding of the processes. It is really unfortunate that the report does not suggest ways to address the way trademark owners view their rights on domain names and the great lengths they are willing to go into securing what they perceive as their right. In this context, the report should have sought to include, in addition to Small and Medium Enterprises (SMEs) legitimate registrants, entrepreneurs and innovators and should have considered the data in the ChillingEffects Clearinghouse as nothing less than evidence of an ongoing problem.

But, this report can be of great use. Its doubtful conclusions can and will be used as justification within ICANN not to address the problem. The UDRP is currently undergoing its first ever review in ten years. The process has been set in motion and it moving towards its various procedural steps. When we eventually reach the stage of talking about the experience of trademark owners, domain name registrants and the whole constitution of the UDRP, we cannot do that without mentioning the problem of trademark bullying. I fear that the conclusions of this report will prevent us from even putting it on the table.

In a space of two days, two ICANN-related documents made their appearance: GAC’s response to the ICANN Board’s questions in relation to the scorecard and the new gTLD Applicant Guidebook responding to the GAC’s document. The issue of Rights Protection Mechanisms was apparently so significant that the GAC submitted its clarifications in a separate document from all other issues.

In relation to the RPMs, the latest version of the Guidebook seeks to strike an unsuccessful compromise in some issues and provides some significant changes to the previous version. However, for me two things stand out more than the others and I don’t suggest that the other issues are not of some concern: inclusion of all types of IP rights in the Trademark Clearinghouse and the ‘loser pays’ model of the Uniform Rapid Suspension System.

Inclusion of all types of intellectual property in the Trademark Clearinghouse!

The GAC’s responses in relation to the Clearinghouse provide some great insight regarding the vision the trademark holders in association with the various governments – most certainly those that have already indicated their wish for strict forms of IP protection – have for such a mechanism.

In particular, the GAC provided some clarification regarding its proposal for the inclusion of all types of intellectual property rights within the Clearinghouse. According to the answers submitted to the Board, the GAC explains that such an inclusion “would obviate the necessity to develop separate mechanisms for these types of intellectual property”. Exactly when did we discuss and further decide that copyrights and patents would require a similar mechanism? Where did ICANN acquire the legitimacy to authorize the creation of a mechanism for types of intellectual property other than trademarks? Well, we all know that ICANN does not have the legitimacy to even suggest policy for other types of IP rights (personally, I even contest its legitimacy to create policy for trademarks) and in any discussions we had about potential inclusion of other IP rights in the Clearinghouse even the trademark community failed to sell such a proposal. Simply, there are no valid arguments that would justify ICANN opening up the Clearinghouse to any forms of IP that can be valid or legitimate.

So, this begs the question: why does the GAC insist on it? I can think of one answer: by including all types of IP rights in the Clearinghouse, the IP community will have the opportunity to use the Clearinghouse for all kinds of purposes, e.g. for blacklisting domain names and registrants. This is not a Hollywood science fiction scenario (and, if it is, I certainly claim copyright before I get bullied into surrendering it). Both in the US (COICA) and UK (Policy dealing with domain names used in criminal activity), Congress and NOMINET respectively, are exploring ways concerning the take down of domain names that facilitate the infringement of copyright and the promotion/sale of rogue pharmaceuticals and counterfeit goods. We all know and have read the arguments with this kind of regulation – free speech, human rights and fair use are all at stake. We also know that certain governments do not pay attention to these concerns and continue to pretend that the only real victim here is the IP community. But, whereas such regulatory initiatives were limited to certain jurisdictions and national sovereignties, now they might become international policy. My point is this: if all types of IP rights were to be included, what would stop the Clearinghouse from using its database in a way far and beyond its original scope? What would prevent the Clearinghouse to start a separate ‘blacklist’ that lists those domain names that legislation like COICA addresses? How can we ensure that the database that will be created under COICA will not be fed into the Clearinghouse?

In all this, ICANN does not appear to take the GAC’s considerations on board, but does not appear to either categorically reject them. ICANN chooses to be vague on this issue. In section 3.2.4, ICANN’s final version of the Clearinghouse states: “The proposed standards for inclusion in the Clearinghouse are: other marks that constitute intellectual property”, which might simply be addressing what GAC refers to as ‘local rights’, although, even in this case, local rights are subject to cultural relativism and are highly contested because of their highly national nature; and, then in section 3.6 “Data supporting entry into the Clearinghouse of marks that constitute intellectual property of types other than those set forth in sections 3.2.1-3.2.3 above…”, which sort of gives the Clearinghouse carte blanche into accepting other forms of IP rights; and, finally, the way the term ‘ancillary services’ is used in the final version of the Guidebook is also alarming. The original vision of ‘ancillary services’ was to put to rest the debate as to whether common law marks should be included in the Clearinghouse; and, because the community could not decide, the idea was to allow the inclusion of common law marks through an ‘ancillary services’ mechanism. Now, ancillary services are divorced from their association with what types of trademarks should be included and could be interpreted as allowing the Clearinghouse to provide services – classed as ‘ancillary - for other types of intellectual property.

This provision in the Clearinghouse is vague and opaque – and we all know vague policies can mean one thing: wide, discretionary and potentially bias interpretations. At least, this is the case with ICANN’s policies and I hope I get to be wrong.

The ‘Loser Pay’s model in the Uniform Rapid Suspension System (URS)

In light of news hitting the Internet that trademark bullying is not only a rumor but a current practice exercised by big and powerful trademark owners, ICANN has submitted in its recent version of the URS a provision for a ‘loser pays’ all model to domain name disputes. According to the provision: “A limited ‘loser pays’ model has been adopted for the URS. Complaints listing twenty-six (26) or more disputed domain names will be subject to an Response Fee which will be refundable to the prevailing party. Under no circumstances shall the Response Fee exceed the fee charged to the Complainant”.

Although the reality is indeed that if someone registers this amount of domain names corresponding to a certain mark, that someone is most probably a cybersquatter, ICANN does not explicitly state whether these 26 domain names should come from the same individual. ICANN only states that the Complaint should list 26 or more domain names, but it does not clarify whether the complaint should be against the same respondent. So, again here, this provision can be read as allowing the Complainant to bring one complaint for several domain names which concern the same mark but are registered by different registrants. Can this be the case? There is nothing to suggest otherwise and, if the discretion panels normally exercise in such policies is indicative, nothing stops the URS from being expanded to such a procedural allowance.

But, the ‘loser pays’ model, even if this limited, creates a much bigger problem. It feeds into trademark intimidation and bullying, sort of legitimizing it if you wish. The fact is that, so far, trademark bullying occurred through the fear of court litigation and its associated costs. The message to registrants was clear: we will sue you if you don’t comply and, if we do, you end up engaging and paying a lot of money, which we can afford and you can’t. So, its better to surrender your domain name now that you still have the time. All this was happening at a national level. Now, with this provision, the same practice will also happen at an international level with the blessings of ICANN.

Imagine, for instance, someone who has registered 26 variations of a trademark for free speech purposes. Will that someone be subject to a URS and, more importantly, to a potential ‘loser pays’ model?

This provision will certainly disincentivize legitimate registrants from responding, encouraging further the existing culture of defaults and creating an unbalanced and biased system. Needless to say that the URS is not equipped for such a provision. The URS lacks the checks and balances that exist in traditional adjudication as it promotes speed. You cannot have a system that wishes to award such costs and not have some checks that ensure this takes place according to due process. Systems, like the UDRP and this one, are prone to bias and abuse as they are conceived to protect certain rights – so why feed into this bias?

So, ICANN has entered again a very dangerous territory. The compromise solution that ICANN provided (remember that the GAC originally did not want to put a cap in the ‘loser pays’ model) is as problematic. The criterion that ICANN uses is not clear and the provision is certainly open to the widest interpretations possible. I hope I am mistaken here, but this system can easily backfire and it will certainly allow many mark holders to use also the URS as a tool for intimidation and bullying.