What is Domain Squatting and How to Stop It?

You’ve filed the necessary paperwork to register your business or trademark, created your social media pages, and ordered signage and swag, but when you attempt to register your trademark or business name as a domain name (i.e., “your trademark.com”), your search takes you to any one of the following: (1) a webpage that reads “under construction,” “domain for sale,” or “cannot find server;” or (2) a functioning website consisting primarily of ads—potentially ads for your own competitors! Have you been the victim of domain squatting? How do you know? And what can you do?

Domain Squatting Defined — When is it illegal Cybersquatting?

According to the Anti-cybersquatting Consumer Protection Act, domain squatting (also known as “cybersquatting”) is registering, trafficking in, or using an Internet domain name with a bad faith intent to profit from the goodwill of a trademark belonging to someone else. 15 U.S.C. § 1125(a). In other words—buying Internet domains with the names of existing businesses with the intent to sell the domains to those business for a significant profit, or profit from advertising on behalf of the trademark owner’s competitors.

The key in such cases is intent, and courts have found “bad faith” sufficient to constitute domain squatting in a variety of situations, including the purchase of a domain name (1) for the sole purpose of preventing another from using it; (2) to impede a competitor; (3) to profit from an assumed association between the domain owner and the owner of the trademarked content; and (4) to profit from posting advertisements for the direct competitors of the trademark owner.

While often targeting celebrities or global companies like Madonna, Julia Roberts, or Microsoft, domain squatters also go after smaller business by utilizing business license registries or other business databases to identify newly formed businesses, because these domains typically can be purchased cheaply and sold for significant profit. For most squatters, the profit is worth the risk—a majority of businesses would rather pay the asking price to purchase the domain than re-file the licensing documentation, revise and reorder marketing and advertising, or replace logos or signage for a newly launched business.

Stopping Illegal Domain Squatting

So, what can be done? First, be proactive. To the extent possible, include the selection and purchase of domain names in the earliest stages of business or trademark development and secure your domain name before you invest in all other aspects of business registration, marketing and advertising—including similar names and common misspellings of your domain. You can also consider purchasing premium protection services, such as Protected Registration through Go Daddy, which will ensure that your registered domain names automatically renew and cannot be changed or canceled without the listed registrant submitting documentation.

Using the Anti-Cybersquatting Consumer Protection Act (ACPA) to Recover Domains

If it appears that early negotiation and purchase is not possible—perhaps because the domain is already in the clutches of a squatter demanding an exorbitant purchase price—you can consider legal action, including (1) a formal cease and desist letter providing notice to the domain owner of his or her potential trademark infringement and demanding he or she cease all use of your mark and transfer the domain to you; (2) a proceeding brought through the Internet Corporation of Assigned Names and Numbers (“ICANN”) international system of arbitration; or (3) a federal lawsuit for violation of the Anti-Cybersquatting Consumer Protection Act (“ACPA”). Which route to recovery you chose will likely depend on your resources and the relief you seek. Cases brought before ICANN typically take considerably less time than a federal suit, do not require an attorney to file, and can be significantly less expensive. However, a proceeding before ICANN will not provide a financial remedy of any kind. Conversely, a lawsuit for violation of the ACPA can be more time-consuming and costly, but will allow for some type of financial recovery, such as damages, if you prevail.

Key Takeaways for Stopping Domain Squatting

Before forming a business, investigate whether the brand/business name is available as a trademark, domain registration, and a business name. If a third party is cybersquatting on your brand in bad faith, options available include negotiating to purchase the domain, filing a UDRP proceeding, and filing a trademark infringement lawsuit and/or a claim for violation of the Anti-Cybersquatting Consumer Protection statute in federal court.

For more insights on domain squatting issues, see our Trademark Services Overview and eCommerce Industry Legal Solutions.

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