Dealing with Cyber Squatters from Legal River on Vimeo.

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Cyber Squatting – Cliff Hyra from Legal River on Vimeo.

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In this post, I discuss how to deal with cybersquatters. Cybersquatters register domain names similar to a domain name or trademark of an established business for profit. They may profit by selling the domain name to the established business or, more commonly, by monetizing the traffic generated on the domain by the popularity of the established business.

Typosquatters

A typosquatter is a type of cybersquatter who registers domain names that are common typos of a popular existing website, capturing Internet users who mistype the website domain name when entering it into the address bar. When the domain name is mistyped by Internet users seeking that website, they are instead directed to the typosquatters website. This website is typically automatically generated and will be full of pay-per-click advertisements from Google Adwords or other online advertisement programs for websites similar to the one the user was originally looking for.

In the Google Adwords program, an advertiser pays Google to get Internet users to click on the advertiser’s ads and visit its website. Google then automatically places the ads in search results and on websites wherever its system decides that such clicks are most likely to come from. A Google advertiser may therefore find its ads placed on the websites of typosquatters.

The typosquatter is paid some amount of money, generally a few cents to a few dollars, for every user who clicks through one of its links. Users looking for the popular website who end up at the typosquatter’s site instead will many times see a link back to the site they were originally looking for and just click it. The typosquatter is paid a couple dollars for the click, and the owner of the popular website pays a few dollars to Google Adwords for the click on their advertisement.

Thus, the typosquatter diverts existing customers of the popular website, who are attempting to navigate directly to that website, and channels them back to the website through sponsored links to generate income for themselves at the expense of the website owner.

In another common scenario, a user who inadvertently is diverted to the typosquatter’s site is likely to see a sponsored link to a competing website and navigate there instead. The popular website in that case has lost an existing customer to the competition, due to the actions of the typosquatter.

The Cybersquatter Business Model

In the early days of the Internet, cybersquatting was an activity participated in by a large number of individuals and small entities. Today, cybersquatting activity is concentrated in a small number of large, efficient cybersquatting companies.

These companies use automated software to determine which domain names are receiving or are likely to receive traffic, register those domain names, and throw up an automatically generated website with sponsored links as described above. If the domains are not returning enough income to cover the cost of registering and parking them, they are canceled. Otherwise, they will be added to the company’s portfolio, even if they are only generating a few dollars each year.

These companies may have hundreds of thousands of domains in their portfolio, generating large amounts of passive income for the owners. These domains are treated as assets with income streams, and are bought and sold freely between companies.

Cybersquatting is a big business that has grown with the Internet, and a big problem for companies with a significant online presence. Have you encountered a cybersquatter? Tell me about it in the comments.

In one situation a client of mine (a large organization) had registered www.theirtrademark.org, but had not registered any other spellings or domain name extensions.  Needless to say, there was a long list of similar domain names that had been registered by others- www.theirtrademark.com, www.theirtradmark.com, www.theirtrademark.net, etc., etc.

A good way to avoid this is to go ahead and register all the different domain name extensions when you first start using the trademark- they cost about $10/year.  But no matter what you do, someone could always come up with a creative domain name that is confusingly similar to your trademark to profit from your brand. What do you do in that situation?

uDRP

Well, there is a solution that is somewhat expensive (much more than $10/yr!) but much less expensive than litigation.  This method is to file an arbitration complaint under the Uniform Domain-Name Dispute-Resolution Policy (uDRP).  Every registrar and registrant must agree to this policy and is bound by it.  You file a complaint with one of the designated arbitration organizations and an arbitration panel decides whether the domain name is confusingly similar to your trademark and was registered in bad faith.  If so, the arbitration panel can award the domain to you and the registrar (GoDaddy.com, or the like) automatically transfers the domain from the cybersquatter to you.

The lowest arbitration panel fee is about $1300 and you can add to that whatever your attorney charges you to prepare the complaint.  The entire process from complaint to transfer can be completed in a few months.

Negotiation

Since the total cost may run to $3000 or more including attorney’s fees, you may be able to save some money negotiating with the cybersquatter/registrant directly.  You should be able to contact the registrant using the whois information for the domain.  Often, especially in egregious cases, it is possible to negotiate a transfer for less than the cost of arbitration.

Usually, I contact the registrant, identify myself as a lawyer representing the trademark owner, and politely explain the situation and that the owner of a registered trademark is legally entitled to the use of a corresponding domain name.  I then request that the domain be transferred without mentioning any fee.  Often this is effective and you will get your domain back practically free! Other times, a payment may be required.

So I again recommend identifying domain names you may be interested in early on and registering them.  Otherwise, it might cost you a few thousand dollars to acquire each one.