Wilson Sonsini Beats Cybersquatting Case Against GoDaddy

, The Litigation Daily

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Executives at Petroliam Nasional Berhad, the Malaysian state-owned petro-giant better known by its trademark Petronas, were upset when they learned that Web users typing the company's name on search engines might find themselves redirected to a pornographic website.

Petronas' first instinct was to go after the individual who had registered two domain names that included the word "petronas" in the URLs. But when that proved too difficult, it turned its attention to the domain name registrar, Scottsdale, Ariz.-based GoDaddy.com, for its part in the alleged "cybersquatting"—the act of intentionally registering or using a domain name confusingly similar to a trademark.

Now after four years of litigation, Petronas has come away empty-handed. In an opinion Wednesday, a panel of the U.S. Court of Appeals for the Ninth Circuit ruled that registrars can't be held liable for facilitating their customers' cybersquatting under the 1999 Anti-cybersquatting Consumer Protection Act. The text of the ACPA, which amended the Lanham Trademark Act of 1946 to include a statutory cause of action against so-called cyber squatters, "makes no express provision for secondary liability," the court concluded. To extend liability as Petronas sought to do "would expand the range of conduct prohibited by the statute from a bad faith intent to cybersquat on a trademark to the mere maintenance of a domain name by a registrar."

The opinion, as the first at the appellate level to deal with the issue, should help several hundred U.S.–listed registrars deflect future ACPA claims, including two of GoDaddy's largest U.S. rivals, eNom Inc. and Network Solutions LLC, both of which submitted amici to the appeals court in support of GoDaddy.com.

In 2009 Petronas sent cease-and-desist letters to GoDaddy.com requesting that it yank two domain names on the basis that they infringed on the company's trademark. GoDaddy.com refused, responding that disputes regarding domain names had to be resolved with the original registrant via arbitration before the Internet regulatory body ICANN (Internet Corporation for Assigned Names and Numbers), and that further, under the law, GoDaddy.com wasn't liable. Petronas then sued GoDaddy.com for direct and contributory cybersquatting under the ACPA and for trademark infringement under the Lanham Act.

Though the Ninth Circuit had previously ruled that domain name registrars are immune from liability for cybersquatting, Petronas' attorney, Perry Clark, a former Kirkland & Ellis partner who has a solo IP litigation practice, argued that the case covered only domain name registration—not the forwarding service at issue where multiple URLs are redirected to a website.

U.S. District Judge Phyllis Hamilton in Oakland threw out the direct claim on a motion to dismiss. In its summary judgment motion on the ACPA claim, GoDaddy.com argued that it couldn't be held responsible for infringement and that to have to evaluate each registrant would threaten its viability as a business. (GoDaddy.com has more than 50 million domain names in its registry, including nearly half of all U.S.–registered domain names.) It also argued that Petronas didn't have a cause of action under the ACPA, but even if it did, GoDaddy.com's role—forwarding users to the porn site via automated back-end services—didn't rise to the threshold of aiding and abetting.

Hamilton dismissed the case on the threshold question in 2012. But, like more than a half-dozen other district judges adjudicating similar cases over the past 12 years, she indicated that contributory claims were allowed under the ACPA. Petronas appealed on the threshold question. Oral arguments, held in early October, were described by our sister publication The Recorder.

"We're obviously disappointed and are reviewing our options," said Clark. "We are also a little surprised that there is no cause of action under the ACPA, because every other judge with similar claims has found a contributory cybersquatting cause of action under the act."

John Slafsky, the Wilson Sonsini Goodrich & Rosati lawyer who led GoDaddy.com's defense, referred us to the company's general counsel, Nima Kelly, who said that the company was pleased that the Ninth Circuit "refused to sanction a cause of action for 'contributory cybersquatting' against registrars, and that they recognized that registrars cannot ascertain customers’ subjective intent when registering domain names."

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