    [Senate Hearing 106-687]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 106-687

     CYBERSQUATTING AND CONSUMER PROTECTION: ENSURING DOMAIN NAME INTEGRITY

    =======================================================================

                                    HEARING

                                   before the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                       on

                                    S. 1255

    A BILL TO PROTECT CONSUMERS AND PROMOTE ELECTRONIC COMMERCE BY AMENDING
    CERTAIN TRADEMARK INFRINGEMENT, DILUTION, AND COUNTERFEITING LAWS, AND
                               FOR OTHER PURPOSES

                                   __________

                                 JULY 22, 1999

                                   __________

                              Serial No. J-106-39

                                   __________

             Printed for the use of the Committee on the Judiciary

                        U.S. GOVERNMENT PRINTING OFFICE
    67-164 CC                   WASHINGTON : 2000

                           COMMITTEE ON THE JUDICIARY

                         ORRIN G. HATCH, Utah, Chairman

    STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
    CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
    ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
    JON KYL, Arizona                     HERBERT KOHL, Wisconsin
    MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
    JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
    SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
    JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
    BOB SMITH, New Hampshire

                 Manus Cooney, Chief Counsel and Staff Director

                     Bruce A. Cohen, Minority Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------

                        STATEMENTS OF COMMITTEE MEMBERS

    Abraham, Hon. Spencer, U.S. Senator from the State of Michigan...     1
    Hatch, Hon. Orrin G., U.S. Senator from the State of Utah........     3
    Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont...    41

                        CHRONOLOGICAL LIST OF WITNESSES

    Statement of Anne H. Chasser, president, International Trademark
      Association, Washington, DC; Gregory D. Phillips, Howard,
      Phillips & Andersen, Salt Lake City, UT; and Christopher D.
      Young, president and co-founder, Cyveillance Inc., Arlington,
      VA.............................................................     5

                   ALPHABETICAL LIST AND MATERIALS SUBMITTED

    Chasser, Anne H.:
        Testimony....................................................     5
        Prepared statement...........................................     6
    Phillips, Gregory D.:
        Testimony....................................................    10
        Prepared statement...........................................    12
    Young, Christopher D.:
        Testimony....................................................    44
        Prepared statement...........................................    46

                                    APPENDIX
                             Questions and Answers

    Responses of Anne H. Chasser to questions from Senators:
        Hatch........................................................    59
        Leahy........................................................    60
        Abraham......................................................    61
    Responses of Gregory D. Phillips to questions from Senators:
        Hatch........................................................    62
        Leahy........................................................    67
        Abraham......................................................    70
    Responses of Christopher D. Young to questions from Senators:
        Hatch........................................................    71
        Leahy........................................................    72
        Abraham......................................................    72

                     Additional Submissions for the Record

    Prepared statement of Jessica Litman, professor of law, Wayne
      State University...............................................    73
    Letter to Senator Hatch from A. Michael Froomkin, University of
      Miami, school of law, dated July 22, 1999..77

     CYBERSQUATTING AND CONSUMER PROTECTION: ENSURING DOMAIN NAME INTEGRITY

                                  ----------

                            THURSDAY, JULY 22, 1999

                                           U.S. Senate,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 2:07 p.m., in
    room SD-628, Dirksen Senate Office Building, Hon. Spencer
    Abraham presiding.
        Also present: Senators DeWine and Leahy.

    OPENING STATEMENT OF HON. SPENCER ABRAHAM, A U.S. SENATOR FROM
                         THE STATE OF MICHIGAN

        Senator Abraham. We will come to order, and we welcome
    everybody and thank our panel that I will introduce in just a
    moment or so. Senator DeWine, we appreciate his being here,
    too.
        This is a hearing on Cybersquatting and Consumer
    Protection: Ensuring Domain Name Integrity. I would like to
    just make a few opening statements here, and then if any other
    members join us, we will offer the minority an opportunity to
    respond. Senator DeWine, if you have an opening statement, we
    will allow you as well.
        We are here today to hear evidence on a new form of high-
    tech fraud that is causing confusion and inconvenience for
    consumers, increasing costs for people doing business on the
    Internet, and posting substantial threat to a century of pre-
    Internet American business efforts. The fraud is commonly
    called ``cybersquatting,'' a practice whereby individuals, in
    bad faith, reserve Internet domain names or other identifiers
    of online locations that are similar to or identical to
    trademarked names. Once a trademark is registered as an online
    identifier or domain name, the cybersquatter can engage in a
    variety of nefarious activities--from the relatively benign
    parody of a business or individual, to the obscene prank of
    redirecting an unsuspecting consumer to pornographic content,
    to the destructive worldwide slander of a centuries-old brand
    name. This behavior undermines consumer confidence, discourages
    Internet use, and destroys the value of established brand names
    and trademarks.
        Our economy, and its ability to provide high-paying jobs
    for American workers, is increasingly dependent upon
    technology. Electronic or e-commerce, in particular, has been
    an engine of great economic growth for the United States.
    Between businesses, e-commerce has grown to an estimated $64.8
    billion for 1999 alone. Ten million customers shopped for some
    product using the Internet in 1998. International Data
    Corporation estimates that $31 billion in products will be sold
    over the Internet in 1999. And 5.3 million households will have
    access to financial transactions like banking and stock trading
    by the end of this year. If we want to maintain our edge in
    this emerging marketplace, then we must address the problems
    which endanger the continued growth of electronic commerce.
        Cybersquatting has already caused significant damage in
    this area. Even computer-savvy companies buy domain names from
    cybersquatters at extortionate rates to rid themselves of a
    headache with no certain outcome.
        For example, Gateway computers recently paid $100,000 to a
    cybersquatter who had placed pornographic images on the website
    www.gateway20,000. But rather than simply give up, several
    companies, including Paine Webber, have instead sought
    protection of their brands through the legal system. However,
    as with much of the pre-Internet law that is applied to this
    post-Internet world, precedent is still developing, and at this
    point one cannot predict with certainty which party to a
    dispute will win and on what grounds. In fact, one of our
    panelists will provide us with a firsthand account of this
    shortly.
        Whether perpetrated to defraud the public or to extort the
    trademark owner, squatting on Internet addresses using
    trademarked names is wrong. Trademark law is based on the
    recognition that companies and individuals build a property
    right in brand names because of the reasonable expectations
    they raise among consumers. If you order a Compaq or Apple
    computer, that should mean that you get a computer made by
    Compaq or Apple, not one built by a fly-by-night company
    pirating the name. The same goes for trademarks on the
    Internet.
        To protect Internet growth and job production, Senators
    Torricelli, Hatch, McCain, and I recently introduced an
    anticybersquatting bill which has received strong public
    support. A number of suggestions have convinced me of the need
    for substitute legislation which addresses the issue of in rem
    jurisdiction and which eliminate provisions dealing with
    criminal penalties, and I have been pleased to work with
    Senator Leahy and Senator Hatch to that effect.
        As it now stands, the substitute legislation would
    establish uniform Federal rules for dealing with this attack on
    interstate electronic commerce, supplementing existing rights
    under trademark law. It establishes a civil action for
    registering, trafficking in, or using a domain name identifier
    that is identical to, confusingly similar to, or dilutive of
    another person's trademark or service mark, if that mark is
    inherently distinctive or has acquired distinctiveness.
        The substitute will incorporate substantial protections for
    innocent parties, keying liability on the bad faith of a party.
    Civil liability would attach only if a person had no
    intellectual property rights in the domain name identifier; the
    domain name identifier was not the person's legal first name or
    surname; and the person registered, acquired, or used the
    domain name identified with the bad-faith intent to benefit
    from the goodwill of another's trademark or service mark.
        And just to be clear of our intent here, this substitute
    legislation specifies the evidence which may be used to
    establish the bad faith of an individual.
        Under this legislation, the owner of a mark could bring an
    in rem action against the domain name identifier itself. This
    will allow a court to order the forfeiture or cancellation of
    the domain name identifier or the transfer of the domain name
    identifier to the owner of the mark. It also reinforces the
    central characteristics of this legislation--its intention to
    protect property rights. The in rem provision will eliminate
    the problem most recently and prominently experienced by the
    auto maker Porsche, which had an action against several
    infringing domain name identifiers dismissed for lack of
    personal jurisdiction over the cybersquatting defendant.
        Finally, this legislation provides for statutory civil
    damages of at least $1,000, but not more than $100,000 per
    domain name identifier. The plaintiff may elect these damages
    in lieu of actual damages or profits at any time before final
    judgment.
        The growth of the Internet has provided businesses and
    individuals with unprecedented access to a worldwide source of
    information, commerce, and community. Unfortunately, those bad
    actors seeking to cause harm to businesses and individuals have
    seen their opportunities increase as well. In my opinion,
    online extortion in this form is unacceptable, it is
    outrageous, and it is dangerous to both business and consumers.
    I believe that these provisions will discourage anyone from
    squatting on addresses in cyberspace to which they are not
    entitled.
        With that, I welcome each member of our panel and look
    forward to hearing their testimony, and to working with,
    really, any and all members of this committee as we move
    forward to try to advance this legislation.
        At this point I would like to enter into the record the
    statement of Senator Hatch, Chairman of the full Committee on
    the Judiciary.
        [The prepared statement of Senator Hatch follows:]

      Prepared Statement of Hon. Orrin G. Hatch, a U.S. Senator From the
                                 State of Utah

        Let me begin by welcoming everyone here today. As is apparent the
    title of our hearing, we are here to discuss an issue that has a great
    impact on American consumers and the brand names they rely on as
    indications of source, quality, and authenticity. For the Net-savy,
    what we are talking about is ``cybersquatting,'' of the deliberation,
    bad-faith, and abusive registration of Internet domain names in
    violation of the rights of trademark owners. For the average consumer,
    what we are talking about is basically fraud, deception, and the bad-
    faith trading on the goodwill of others.
        The problem of brand-name abuse and consumer confusion is
    particularly acute in the online environment. While trademarks serve as
    the primary means of ensuring the quality and authenticity of goods and
    services, consumers in the real world may also look to other
    indicators. For example, when one walks in to the local consumer
    electronics retailer, they are fairly certain who they are dealing with
    and they can tell by looking at the products and even the storefront
    itself whether or not they are dealing with a reputable establishment.
    these protections are largely absent in the electronic world, where
    anyone with Internet access and minimal computer knowledge can set up a
    storefront online. In many cases what the consumer sees on the site is
    their only indication of source and authenticity, and the Internet
    domain name that takes them there may be the primary source indicator.
    Cybersquatting makes a potentially dangerous situation worse by
    fostering consumer confusion and deteriorating consumer confidence in
    brand name identifiers and electronic commerce generally.
        There are many other examples of how cybersquatting harms
    consumers. Take, for example, the child who in a ``hunt-and-peck''
    manner mistakenly types in the domain for ``dosney. com'', looking for
    the rich and family-friendly content of Disney's home page, only to
    wind up staring at a page hard-core pornography because someone
    snatched up the ``dosney'' domain in anticipation that just such a
    mistake would be made. Or imagine logging on to what you is your
    favorite online retailer only to find out later that the site was not
    that retailer at all, but rather a facade for an unscrupulous
    individual who is collecting your credit card and other personal
    information for unknown and possibly nefarious purposes.
        In addition to the consumer harm, we must also look at the harm
    caused to American businesses by cybersquatters. In each case of
    consumer confusion there is a case of brand-name misappropriation and
    an erosion of goodwill. Even absent consumer confusion, there are many
    many cases of cybersquatters who appropriate a brand name with the sole
    intent of extorting money from the lawful mark owner, precluding
    evenhanded competition, or harming the goodwill of the mark. It is time
    for Congress to take a closer look at these abuses and to respond with
    appropriate legislation.
        I look forward to hearing from our witnesses today as they relay
    their experiences relating to domain name abuses and help us to
    understand better the problems of online consumer confusion that are
    perpetuated by brand-name misappropriation in cyberspace.

        Senator Abraham. I will ask Senator DeWine if he has any
    comments.
        Senator DeWine. Mr. Chairman, I do not have an opening
    statement. I just want to thank you for holding this hearing. I
    think it is a very important topic, and I look forward to
    hearing the testimony of the witnesses.
        Senator Abraham. I thank you for being here, Senator.
        At this point we will turn to our panel. First we will hear
    from Ms. Anne Chasser, who is president of the International
    Trademark Association, INTA. Ms. Chasser is a recognized expert
    in trademark law and is well published in the field. Her
    association represents trademark owners worldwide and has been
    an active participant in the WIPO and the I-CANN processes
    relating to domain names and Internet administration.
        Our next witness is Mr. Gregory Phillips of Howard,
    Phillips & Andersen, who is a trademark practitioner on the
    front lines of the battle against cybersquatting. Mr. Phillips
    has represented a number of clients who have had problems with
    cybersquatters, most notably Porsche automobiles and Chanel and
    Calloway Golf.
        Our final witness is Mr. Christopher Young, who is
    president and CEO of Cyveillance--did I get that right?
        Mr. Young. That is close.
        Senator Abraham. OK; we will let you do it the right way in
    a second here. It is a private company that helps trademark
    owners police their marks online. Mr. Young has been featured
    as an expert on e-commerce issues on CNNfn and several notable
    magazines, newspapers, and journals.
        We appreciate all three of you being here to help us to
    clarify this a little bit more. We will turn to you, Ms.
    Chasser, and we appreciate your participation.

        STATEMENTS OF ANNE H. CHASSER, PRESIDENT, INTERNATIONAL
      TRADEMARK ASSOCIATION, WASHINGTON, DC; GREGORY D. PHILLIPS,
         HOWARD, PHILLIPS & ANDERSEN, SALT LAKE CITY, UT; AND
     CHRISTOPHER D. YOUNG, PRESIDENT AND CO-FOUNDER, CYVEILLANCE,
                          INC., ARLINGTON, VA

                      STATEMENT OF ANNE H. CHASSER

        Ms. Chasser. Thank you. Good afternoon, Mr. Chairman. On
    behalf of the 3,600 members of the International Trademark
    Association, I want to thank you for the opportunity to appear
    before you today to support the legislation designed to curb
    cybersquatting. We appreciate your efforts, as well as the
    efforts of Senator Hatch and Senator Leahy, to bring this issue
    to the attention of the Congress. I want to especially thank my
    fellow Buckeye, Senator DeWine, for also attending. Thank you.
        Cybersquatting can be referred to generally as the
    registration and trafficking in Internet domain names with bad-
    faith intent to benefit from another's trademark. It is an
    activity that has emerged with the growth of the Internet and,
    in particular, the use of the Internet as a vehicle for
    commercial activity.
        There has been a lot said about the impact of e-commerce on
    the global marketplace. There is no doubt that business on the
    Internet is here and it is here to stay. We can, therefore, not
    ignore the fact that consumers who use the Internet to purchase
    goods or learn about a particular product look for some type of
    clarity, something that tells them that they have reached their
    intended destination in cyberspace. That something, Mr.
    Chairman, is trademark. Trademarks are the link in the
    commercial chain.
        A trademark is a basic mode of communication, a means for a
    company to convey a message of quality, consistency, safety,
    and predictability to the consumer in an easy-to-understand
    form. It is usually one of the most significant property assets
    of a company. Cybersquatters seek to capitalize on this
    familiarity and value by registering or trafficking in domain
    names that are worded exactly like a trademark or a variation
    of a trademark. They do this with little or no investment of
    their own and with something significantly less than good
    intentions.
        Some cybersquatters, Mr. Chairman, try to extract payment
    from the rightful owner of the mark, essentially holding the
    mark as ransom. For example, Warner Brothers reports that
    cybersquatters offered to sell them such domain names as
    bugsbunny.net and daffyduck.net for over $350,000.
        Others offer domain names for sale publicly to third
    parties. The University of California at Los Angeles, UCLA, was
    surprised at one point to learn that ucla.com was on the
    auction block. Still other cybersquatters use marks,
    particularly those famous or well-known, as addresses for
    pornographic sites. Mobil Corporation reported to INTA that
    their MOBIL 1 trademark was used to direct people to a site
    containing adult material.
        Finally, there are those cybersquatters who use the domain
    name to engage in commercial fraud. AT&T reports that a
    cybersquatter registered attphonecard.com and then solicited
    credit card information for those visiting the site.
        Cybersquatting is on the rise. Moreover, remedies under
    traditional trademark law cannot deal adequately with the
    number of instances of cybersquatting. For example, existing
    law does not deal with cases where cybersquatters are
    warehousing domain names, essentially holding an inventory of
    trademarks that he won't use but intends to sell to the
    rightful owner at extortionate prices. There are also recent
    cases where there is no one to initiate legal action against
    because cybersquatters have given false or misleading contact
    information to the registration authority.
        For anticybersquatting legislation to be effective and
    even-handed, Mr. Chairman, it must accomplish, at a minimum,
    four objectives. First, it must explicitly prohibit
    cybersquatting in all of its forms, in particular the
    registration or trafficking of Internet domain names with bad-
    faith intent to benefit from another's trademark.
        Second, there must be clear remedies for trademark holders,
    including the availability of injunctive relief and the ability
    to recover actual or statutory damages. Third, there must be a
    protection of the public interest, including the legitimate use
    of domain names that meet fair use and freedom of expression
    standards, thereby protecting the first amendment.
        Finally, it should provide clear guidance in order to
    determine whether an alleged case of cybersquatting is indeed a
    case of bad-faith activity or one with good-faith and honest
    intentions. This balance approach, we believe, will ultimately
    prove satisfactory. It is one that we hope will be adopted in
    the end, and we look forward to working with you and others,
    Mr. Chairman, to make this happen.
        Senator Abraham. Thank you very much.
        [The prepared statement of Ms. Chasser follows:]

                     Prepared Statement of Anne H. Chasser

                                  introduction
        Good afternoon, Mr. Chairman. My name is Anne Chasser. I am the
    President and Chairperson of the Board of the International Trademark
    Association (``INTA'').
        INTA appreciates the opportunity to appear before the Committee to
    offer support for effective, yet even-handed legislation designed to
    curb ``cybersquatting.'' \1\ We thank you, Mr. Chairman, as well as
    Senator Leahy and Senator Abraham, for helping to bring this issue to
    the attention of the Congress.
    ---------------------------------------------------------------------------
        \1\ See, Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227 (N.D. Ill.
    1996) (referring to the defendant as a ``cybersquatter'').
    ---------------------------------------------------------------------------
        Cybersquatting is an activity that has emerged with the growth of
    the Internet, and while there is no formal or established definition
    for the term, it can be referred to generally as the registration and
    trafficking in Internet domain names with the bad-faith intent to
    benefit from another's trademark. Cybersquatters seek to capitalize on
    the investment made by trademark owners and the goodwill associated
    with the trademark. In the words of Francis Gurry, Assistant Director
    General for the World Intellectual Property Organization (``WIPO''),
    cybersquatting is ``an abusive practice'' that undermines ``consumer
    confidence.'' \2\
    ---------------------------------------------------------------------------
        \2\ Courtney Macavinta, ``Domain Restrictions Target
    Cybersquatters,'' CNET News.com, (May 3, 1999) http://www.news.com/
    news/Item/o,4,35983,00.html.
    ---------------------------------------------------------------------------
        The testimony I present here today will explain the nature of
    cybersquatting and offer suggestions as to what types of provisions
    anti-cybersquatting legislation should contain. In addition, I will
    refer to real life examples of ``cybersquatting,'' many of which
    involve trademarks readily familiar to the average American consumer.
    By the end of my presentation, I am confident that you will conclude
    that there is nothing entrepreneurial, enterprising, or noteworthy
    about being a cybersquatter, and that something must be done to ensure
    that trademark owners and consumers receive adequate protection from
    these bad-faith actors.
                        the nature of ``cybersquatting''
              If the Internet is about getting rich quick, they don't come
            any faster than `cybersquatters.'' \3\
    ---------------------------------------------------------------------------
        \3\ ``High Stakes in Name Game,'' On the Spot--Domain Name News
    http://www.onthespot.com/squatters.htm (quoting the Financial Times
    March 10, 1999).

        That is what cybersquatting is all about--getting rich quick off of
    the hard work and investment of trademark owners, and in the words of
    one intellectual property attorney, the practice is ``just exploding.''
    \4\ Piracy of trademarks in cyberspace has been on the rise since 1996,
    when e-commerce itself began to evolve as a factor in the overall
    global economy. Early cases include Intermatic, Inc. v. Toeppen,\5\ in
    which the term ``cybersquatter'' was coined. In that particular case,
    the defendant registered intermatic.com based on the plaintiff's
    registered trademark for INTERMATIC. The defendant, in addition to this
    domain registration, also had registered approximately 240 other domain
    names, many based on trademarks of well-known businesses, including
    deltaairlines.com, eddiebauer.com and neiman-marcus.com.
    ---------------------------------------------------------------------------
        \4\ Andrew Zajac, `` Domain Names @Hoard.Com: Cybersquatters Buy Up
    Internet Addresses for Profit,'' Chicago Tribune, June 27, 1999, at C1
    (quoting Keith Medansky).
        \5\ 947 F. Supp. 1227 (N.D. Ill. 1996).
    ---------------------------------------------------------------------------
        Today, a growing number of trademarks, famous or not, are still
    subject to cybersquatting. However, it is particularly the famous marks
    which have been prime targets of cybersquatters, who are fast becoming
    the ``pirates'' of the new millennium. WIPO, in addition to identifying
    cybersquatting as a global problem, recognized in its interim report on
    the domain name process that, indeed, ``[f]amous and well-known marks
    have been the special target of a variety of predatory and parasitical
    practices on the Internet.'' \6\
    ---------------------------------------------------------------------------
        \6\ World Intellectual Property Organization, The Management of
    Internet Names and Addresses: Intellectual Property Issues, December
    23, 1998.
    ---------------------------------------------------------------------------
        Why do cybersquatters conduct themselves in this manner? Based on
    research, as well as first-hand reports from our members, INTA has
    found that ``cybersquatting'' takes place for a number of reasons,
    including the following:

      (1) To extract payment from the rightful owner of the mark. These are
        the most prevalent cases, since it takes only $70 to register a
        domain name with Network Solutions, Inc. (the registration
        authority for .com, .net, and .org), and the potential financial
        windfall (should a trademark owner opt to purchase the domain) is
        much greater.

       Warner Bros. was offered warner-records.com; warner-bros-
            records.com; warner-pictures.com; warner-bros-pictures; and
            warnerpictures.com for the selling price of $350,000. Another
            cybersquatter offered to sell to Warner Bros. 15 domain names,
            including bugsbunny.net and daffyduck.net.

       Glaxo Wellcome reports that it has been contacted by various
            individuals concerning registrations for domain names such as
            zovirax.com.

       The Mobil Oil Corporation reports that when the merger
            between Mobil and Exxon was announced on December 1, 1998, it
            was contacted by a cybersquatter who offered to sell the
            combined Exxon Mobil the domain names exxonmobil.com and exxon-
            mobil.com.

       Although not a trademark issue per se, Baltimore Orioles
            superstar Cal Ripken was asked to pay $100,000 for
            calripken.com.\7\
    ---------------------------------------------------------------------------
        \7\ See, Laura Lorek, ``Beware of Cybersquatters,'' Ft. Lauderdale
    Sun Sentinel, May 25, 1997, at 1E http.//www.sun-sentinel.com/money/
    09080008.htm.

    ---------------------------------------------------------------------------
      (2) To offer the domain name for sale publicly to third parties.

       Omega Protein Corp. took action against persons who
            registered hundreds of trademarks as domain names for the
            purpose of reselling them.\8\
    ---------------------------------------------------------------------------
        \8\ Omega Protein Corp. v. Flom, No. H-98-3114 (S.D. Tex. filed
    September 18, 1998).

       In documents filed in the United States District Court for
            the Eastern District of Virginia, Porsche stated that
            www.porschgparts.com had been put up for sale by the party who
            had registered it as a domain name.\9\
    ---------------------------------------------------------------------------
        \9\ Porsche Cars North America, Inc. and Dr. Ing. H.C.F. Porsche
    A.G. v. Porsch.com. et. al., complaint filed by Porsche Cars North
    America, Inc. before the Eastern District Court for the Eastern
    District of Virginia, January 6,1999, http:/www.mama-tech-com/pc.html.
    The magnitude of the problem for trademark owners is reflected in the
    district court's opinion dismissing the action on procedural grounds.
    See, Memorandum Opinion of the court delivered on June 8, 1999.
    Decision can be found at http:/www.mama-tech.com/pc.html#mo and can be
    cited as 1999 WL 378360 (E.D. Va..).

       The University of California at Los Angeles (commonly
            referred to as ``UCLA''), took action against a cybersquatter
            who registered www.ucla.com and then put up a ``for sale'' sign
            with a number to call. Shortly after counsel for UCLA sent a
            letter to the cybersquatter, it became a pornographic site. The
            party operating the pornographic site was found to have several
    ---------------------------------------------------------------------------
            addresses and phone numbers, none of which were legitimate.

       Right now, you can log-on and find marypoppins.com on sale
            for $500 and thegodfather.com for $1,500.\10\
    ---------------------------------------------------------------------------
        \10\ See generally, http:/www.GetYourOwnName.com.

      (3) To use famous and well-known marks as domain names for
    ---------------------------------------------------------------------------
        pornographic sites or otherwise capitalizes on customer confusion.

       One of the best examples was given by Senator Abraham in his
            introductory remarks for S. 1255, a case where Gateway recently
            paid $100,000 to a cybersquatter who had placed pornographic
            images on the Web site www.gateway20000.com.\11\
    ---------------------------------------------------------------------------
        \11\ 145 Congressional Record, S. 7334 (daily ed. June 21, 1999)
    (statement of Senator Spencer Abraham on the introduction of S. 1255,
    106th Congress (1999)).

       The Mobil Oil Corporation reports that its trademark, MOBIL
            1, was used in a domain name to direct Web surfers to a
    ---------------------------------------------------------------------------
            pornographic site. The domain name was mobil1.com.

       On September 23, 1998, as part of the WIPO study on
            trademarks and domain names, a representative of Intel
            Corporation reported that a cybersquatter had registered
            www.pentium3.com, placed nude photos of celebrities on the
            page, and stated that he was willing to sell the domain name to
            the highest bidder. At the time Intel's representative
            testified, the highest bid was $9,350.\12\
    ---------------------------------------------------------------------------
        \12\ Anne Gundelfinger, ``Testimony before the WIPO Panel of
    Experts'' (September 23, 1998) http://wipo2.wipo.int/process/eng/sf-
    transcript5.html.

    ---------------------------------------------------------------------------
      (4) To engage in consumer fraud, including counterfeiting activities.

       AT&T reports that a cybersquatter registered the domain
            names attphonecard.com and attcallingcard.com and established a
            Web site soliciting credit card information from consumers.
            AT&T was concerned because its brand name was being used to
            lure consumers to a Web site that might be used fraudulently to
            obtain financial information from unsuspecting consumers.

        The problem of cybersquatting has expanded beyond the generic top
    level domains (``gTLDs''), such as .com, to the country code top level
    domains (``ccTLDs''). For example, Bell Atlantic reports that another
    party registered and offered telecommunications services to the public
    using www.bellatlantic.uk (.uk is the country code for the United
    Kingdom). Some of the lesser known ccTLDs have actually become piracy
    havens in which the local agent offers to sell domain names to the
    highest bidder, without any consideration of trademark rights. Other
    ccTLD registration authorities ``reserve'' names of famous marks and
    offer to sell them back to the rightful trademark owner.
        Despite the problems it presents to trademark owners and consumers,
    cybersquatting, is not illegal per se. In other words, there are no
    laws in any jurisdiction, national or otherwise, that explicitly
    prohibit the practice. Courts, particularly those in the United States
    where cybersquatting is an especially pressing issue, have typically
    utilized traditional concepts in trademark law to provide some
    trademark owners with remedies for harm caused by piracy on the
    Internet. For example, in one case, the court ruled that the
    defendant's attempt to sell a domain name to the owner of a famous
    trademark was akin to a ``use in commerce'' and was therefore covered
    by the Lanham Act's dilution provision.\13\
    ---------------------------------------------------------------------------
        \13\ See, Panavision Int'l, L.P. v. Toeppen, 945 F. Supp. 1296
    (C.D. Cal. 1996) (Defendant's attempt to arbitrage the panavision.com
    domain name constitutes commercial use under the Lanham Act).
    ---------------------------------------------------------------------------
        Unfortunately, some cybersquatters have read these cases carefully
    and have taken the necessary precautions to insulate themselves from
    liability. Cybersquatters register famous trademarks in bulk, but in
    most cases, do not post an active Web site. This activity is
    traditionally referred to as ``warehousing.'' In addition,
    cybersquatters are now careful not to offer the domain name for sale in
    any manner that could result in liability under current case law.\14\
    ---------------------------------------------------------------------------
        \14\ See, Juno Online Services v. Juno Lighting, Inc., 979 F. Supp.
    684 (N.D. Ill. 1997) (mere registration of a domain name is not
    trademark infringement or misuse even if the use of another's trademark
    is deliberate).
    ---------------------------------------------------------------------------
        Finally, some cybersquatters provide false and misleading contact
    information, making it impossible for the trademark owner to initiate
    legal action. We know, for example, Mr. Chairman, that Chanel, Inc. has
    written to you about the www.chanelparis.com domain name. For the
    benefit of all Senators, in that instance, a fictitious name and street
    address in Cairo, Egypt were given to the registrar. As a consequence
    of false information being given to the registration authority, many
    courts have been unable to provide assistance to trademark owners.\15\
    ---------------------------------------------------------------------------
        \15\ See, Porsche Cars North America, Inc. and Dr. Ing. H.C.F.
    Porsche A.G. v. Porsch.com. et. al. (the court said that the Trademark
    Dilution Act cannot be read to permit in rem actions).
    ---------------------------------------------------------------------------
        For many trademark owners, the lack of clear anti-cybersquatting
    mechanisms have left them without adequate and effective judicial
    remedies. Even though cybersquatters are trafficking in domain names,
    trademark owners in many cases cannot sue without proof of use or an
    offer of sale or because in rem actions against domain names are not
    permitted. Consequently, trademark owners are forced to engage in a
    continual monitoring program--waiting to see if the cybersquatter
    begins to use their domain name, offers it for sale to the public,
    provides legitimate contact information to the registration authority,
    or fails to renew the registration with the registration authority.
        It is also important to keep in mind that even in cases where a
    trademark owner can sue, costs associated with litigation, and the
    difficulty of receiving damages in standard trademark infringement and
    dilution actions have a chilling financial effect. Frequently,
    trademark owners weigh the costs and choose to pay off a cybersquatter
    in exchange for the domain name registration. Instances of
    cybersquatting continue to grow each year because there is little risk
    for cybersquatters who continue their abusive practices.
                         anti-cybersquatting legislation
        According to Commerce Secretary William Daley, ``electronic
    commerce will be the engine for the economic growth in the next
    century.'' \16\ Recently released numbers suggest that the future cited
    by Secretary Daley may already be upon us. A study by the University of
    Texas' Center for Research in Electronic Commerce, which was sponsored
    by Cisco Systems and cited by the Department of Commerce in its report
    entitled The Emerging Digital Economy II, indicates that 1998 total e-
    commerce was $102 billion.\17\
    ---------------------------------------------------------------------------
        \16\ United States Department of Commerce, The Emerging Digital
    Economy II, http://www.ecommerce.gov/ede/secretary.html.
        \17\ See, Anitesh Barua, Jay Shutter, & Andrew Whinston, ``The
    Internet Economy Indicators,'', Initial report results issued June 10,
    1999 (http://www.internetindicators.com); see also, The Emerging
    Digital Economy II, supra note 17.
    ---------------------------------------------------------------------------
        INTA believes that the progress made thus far, as well as that
    which is anticipated, will not be truly realized unless there is a
    legal mechanism in place that specifically addresses cybersquatting.
    The objectives of this mechanism should be the limitation of consumer
    confusion in cyberspace, the protection of the investment made by
    trademark owners, and the maintenance of goodwill associated with the
    trademark. If adequately protected, Mr. Chairman, trademarks can serve
    as road maps for the ``information superhighway,'' helping to build a
    sound global marketplace for the 21st Century.
        Prior to receiving your invitation to testify, INTA had begun to
    consider the question of an anti-cybersquatting statute. In a
    resolution adopted May 26, 1999, the Association's Board of Directors
    indicated that anti-cybersquatting mechanisms, including national
    legislation, should, at a minimum, include the following:

      1. Provisions that explicitly prohibit cybersquatting, specifically,
        the registration and trafficking of an Internet domain name with
        the bad-faith intent to benefit from another's trademark.

      2. Clear remedies for trademark holders, including the availability
        of injunctive relief and the ability to recover actual or statutory
        damages.

      3. Protection of the public interest, including allowing for
        legitimate uses of domain names that meet fair use/freedom of
        expression standards.

        The legislation should focus on trafficking in or registration of
    even a single domain name with the bad-faith intent to benefit from
    another's trademark, and the remedies included therein should be
    available to all trademark owners, whether they be large or small. In
    addition, there must also be carefully crafted language that helps to
    guide a court in making a determination as to who is a bad-faith
    cybersquatter and who adopts a domain name in good faith. This will
    help to ensure that the new law is fair and equitable.
                                   conclusion
        Thank you again, Mr. Chairman, for the opportunity to appear today
    to talk about an issue which is so vitally important to both the
    trademark community and consumers who use trademarks as a means for
    identifying products in an increasingly crowded marketplace. This
    marketplace, incidentally, as we have shown here today, now exists both
    in the real world, as well as in cyberspace. We look forward to working
    with you, Senator Leahy, and others both in the Congress and in the
    private sector, on effective, yet even-handed anti-cybersquatting
    legislation.
                    the international trademark association
        INTA is a not-for-profit membership organization, which just
    recently celebrated its 121st anniversary at its annual meeting in
    Seattle, Washington. Since the Association's founding in 1878,
    membership has grown from 17 New York-based manufacturers to
    approximately 3,600 members from the United States and 119 additional
    countries.
        Membership in INTA is open to trademark owners and those who serve
    trademark owners. Its members are corporations, advertising agencies,
    professional and trade associations, and law firms practicing trademark
    law. INTA's membership is diverse, crossing all industry lines and
    spanning a broad range of manufacturing, retail and service operations.
    All of INTA's members, regardless of their size or international scope,
    share a common interest in trademarks and a recognition of the
    importance of trademarks to their owners, to the general public, and to
    the economy of both the United States and the global marketplace.

        Senator Abraham. Mr. Phillips.

                    STATEMENT OF GREGORY D. PHILLIPS

        Mr. Phillips. Thank you, Mr. Chairman. Porsche Cars
    appreciates the opportunity of providing testimony to this
    committee. My other clients support this as well.
        Porsche is a member of the Private Sector Working Group,
    which is a diverse group of famous trademark holders who are
    concerned about consumer fraud, counterfeiting, and other
    confusion on the Internet. Members in the Private Sector
    Working Group include Bell Atlantic, AT&T, Disney, Microsoft,
    Viacom, America Online, and Dell Computer, and they all support
    this legislation.
        WIPO recently concluded in its report that existing
    mechanisms for resolving conflicts between trademark owners and
    domain name holders are often viewed as expensive, cumbersome
    and ineffective. The sheer number of instances precludes many
    trademark owners from filing multiple suits in one or more
    national courts.
        I will focus my remarks on the plight of Porsche, but I
    want this committee to know that Porsche's situation is not
    unique; it is illustrative and typical of what other people are
    facing on the Internet. I think the best description of the
    reason for what I call cyberpiracy and the need to capitalize
    on the goodwill and reputation of famous trademarks recently
    appeared in a front-page article in the ``Wall Street Journal''
    on April 13, 1999.
        The article wrote,

              With the rapid explosion of Web sites hawking
            everything from pornography to bibles, competition for
            the world's estimated 147 million Web users is fierce.
            Site creators spare no strategy to get noticed, and
            trading on famous names which are queried relentlessly
            by Web surfers is a key one.

        I think more powerful than anything I could say is some
    exhibits that I have attached to my testimony that I think
    demonstrate this problem very graphically. First of all,
    Exhibit 1 is a list of over 300 domain names that have been
    registered that use Porsche or a variation of Porsche. We had
    128 on January 6 of this year when we filed our lawsuit. Every
    week, we get between 5 and 25 new domain names. Porsche is a
    very unique and famous name. People seem to want it out there.
        Exhibit 2, which I understand has been censored, is the Web
    site that appears at porschecar.com. It is a pornographic Web
    site. We have had many of our customers complain about that Web
    site and wonder why Porsche isn't doing something about it. And
    I will explain that we haven't been able to find the registrar
    of that domain name.
        Exhibit 3 to my testimony is a Web site from
    bestdomains.com in Australia, where they sell domain names. It
    starts out, ``What's in a name? Ask Coca-Cola.'' The first
    domain name that is listed is 911porsche.com. ``Porsche. Do I
    need to say anything more?'' $60,911--that is what they are
    selling it for, almost as much as the price of a new Porsche.
        If you look at Exhibit 4, you will see the ``who is'' page
    for a company that operated a porn site, porsch.com, without
    the ``e.'' The registrant there was so brazen that he
    registered the domain name under ``Domain 4 sale & company.''
    He also provided a fictitious address when he registered that
    domain name so that we could not find him to effect service of
    process in trying to get that domain name back.
        Exhibit 5 is a three-page list of domain names that were
    recently up for auction that we received from one of our
    dealers, including domain names from Acura through Volkswagen
    or Volvo, offering them for thousands of dollars.
        Exhibit 6 is a good example of a warehouser. This is a
    gentleman down in Texas, and we were only able to print out 50
    domain names because the ``who is'' stops at 50. But as you can
    see by looking at that, he has got everything from Pepsi
    Bottler, McDonald's Restaurant, Mercedes Benz USA, McDonald's
    Corp. And if you look at the next page, Exhibit 7, that is
    where you go to his Internet Web site and you make an offer to
    purchase these domain names. The list goes on and on.
        I think, Mr. Chairman, you hit the nail on the head when
    you talked about the need for in rem and statutory provisions.
    Cyberpirates are sophisticated. They know how to insulate
    themselves from legal process. They register domain names using
    fictitious information. The cyberpirate who had porsch.com used
    an address for a Federal office building up in New York.
    Companies use offshore companies. They transfer these to people
    in Iran, to Belarus. Malaysia is now a favorite address of
    cyberpirates.
        In conclusion, Mr. Chairman, the cost of cybersquatting and
    cyberpiracy is enormous. Companies like Porsche, Chanel and
    Pfizer have much better things to do with their resources than
    to chase cyberpirates. They can make better cars, better
    perfume, and they can make better drugs.
        The Internet is no longer the domain of the academics, the
    tekkies; it is becoming a major player in the commercial world.
    It needs to be subject to the rules of the commercial world.
    The same way that Congress recently amended the copyright laws
    to protect against new forms of digital infringement provides a
    good example of what Congress needs to do. It needs to amend
    the trademark laws to outlaw cyberpiracy.
        Senator Abraham. Mr. Phillips, thank you very much.
        [The prepared statement of Mr. Phillips follows:]

                   Prepared Statement of Gregory D. Phillips

                                  introduction
        Good afternoon, Mr. Chairman and distinguished members of this
    Committee. My name is Gregory D. Phillips. I am outside trademark
    counsel for Porsche Cars North America, Inc.
        In my testimony, I will be focusing on the intolerable and
    unbearable problems faced by Porsche Cars and its consumers with
    cybersquatting, cyberpiracy, and cyberabuse. Porsche Cars' problems,
    however, are not unique, and are similar to problems faced by other
    famous trademark holders and their consumers. Porsche Cars is a member
    of the Private Sector Working Group on Trademarks and Domain Names. The
    Private Sector Working Group consists of a diverse group of leading
    companies and associations representing famous trademark holders from a
    broad cross section of the world's economy. Companies like Porsche,
    Bell Atlantic, AT&T, Disney, Viacom, Chanel, Warner Lambert, American
    Express, Ford, Microsoft, AOL, and many others. Our consumers rely on
    the Internet to find the genuine brands they are seeking and to
    communicate and engage in electronic commerce. The unprecedented
    formation of the Private Sector Working Group occurred because we
    cannot permit United States consumers, our clients, to continue to be
    subject to the fraud and confusion from the ever increasing problems
    caused by cyberpiracy.
        Porsche and other members of the Private Sector Working Group are
    currently battling many thousands of infringement matters in which
    their famous trademarks have been misappropriated by pirates who seek
    to defraud the public in hopes of exploiting trademarks on the
    Internet.
        Cyberpiracy damages brand equity, increases consumer fraud, causes
    customer confusion and is linked to other serious problems such as
    counterfeiting and pornography. Consumers of these companies are being
    confused and defrauded as they attempt to purchase genuine products
    from brand-name companies, or as they are diverted away to pornographic
    and other unrelated web sites.
        Not only are consumers and society being harmed by consumer fraud
    and confusion resulting from cyberpiracy, but consumers and society are
    also being harmed because companies such as Porsche are being forced to
    devote a dramatically increasing share of their resources to battle
    cyberabuse. Companies such as Porsche are now spending more of their
    legal budgets on dealing with cyberabuse than all other legal expenses
    combined. Rather than devoting their resources to making better cars,
    perfume, or drugs that will benefit society, companies such as Porsche,
    Chanel, and Pfizer are needlessly wasting resources in fighting fraud,
    monitoring the Internet, and in litigation.
                           the reason for cyberpiracy
        As the Internet has grown in commercial importance, the theft of
    Internet domain names diluting world famous trademarks such as
    Porsche' has increased dramatically. The Wall Street Journal
    recently described the reason for this phenomenon:

              With the rapid explosion of Web sites hawking everything from
            pornography to Bibles, competition for the attention of the
            world's estimated 147 million web users is fierce. Site
            creators spare no strategy to get noticed--and trading on
            famous names, which are queried relentlessly by Web surfers, is
            a key one.

    Wall Street Journal, ``Net of Fame,'' p. 1, April 13, 1999.

        Recently, the World Intellectual Property Organization (``WIPO''),
    an entity organized under the auspices of the United Nations to protect
    intellectual property, noted that ``[f]amous and well-known marks have
    been the special subject of predatory and parasitical practices by a
    minority of domain name registrants acting in bad faith.'' WIPO Interim
    Report on the Internet, December 23, 1998, at p. iii .\1\ ``These
    practices include the deliberate, bad faith registration as domain
    names of well-known and other trademarks in the hope of being able to
    sell the domain names to the owners of those marks, or simply to take
    unfair advantage of the reputation attached to those marks.'' Id. at p.
    6 (emphasis added).
    ---------------------------------------------------------------------------
        \1\ WIPO's Final Report was recently issued and is available at
    . The WIPO Final Report's explication of the
    problems faced by famous trademark holders is virtually identical to
    that set forth in the WIPO Interim Report.
    ---------------------------------------------------------------------------
        The trademark Porsche' is a perfect example of the types
    of trademarks that are misappropriated by cyberpirates. Because
    Porsches is one of the most famous and unique trademarks in the world,
    countless registrants have included Porsche' in their
    Internet domain names. Attached hereto as Exhibit 1 is a partial list
    of the over 300 Internet domain names that have been registered without
    Porsche's permission or consent. As you can quickly see from the list,
    the sheer number of domain names misappropriating the trademark
    Porsches is overwhelming.
        Porsche has determined that registrants misappropriate Internet
    domain names that include Porsche' for a variety of
    purposes, including, but not limited to,

      (1) To Use Such Names For Pornographic Sites. For example, the
        Internet domain name PORSCHECAR.COM is presently being used as a
        pornographic web site. The home page of this pornographic web site
        depicts a naked woman and a snake in the ``Sex Zoo,'' advertises
        the infamous Pamela Anderson-Tommy Lee Honeymoon video, and also
        depicts a woman copulating with an ape. A copy of the home page of
        the web site is attached as Exhibit 2.

      (2) To Extract Payment From Porsche. For example, the registrant of
        PORSCHESALES.COM recently offered to sell this domain name to
        Porsche for $25,000. The registrant of PORSCHECREDIT.COM and
        PORSCHECREDITCORP.COM recently called the President of Porsche Cars
        North America, Inc. and attempted to extort a substantial sum from
        Porsche for transferring the names to Porsche.

      (3) To Offer The Domain Name For Sale to Third Parties. For example,
        several domain names using Porsche' were recently being
        sold by The Best Domains, an Australian company. The domain name
        911PORSCHE.COM was being offered for sale for $60,911, the domain
        name 996PORSCHE.COM was being offered for sale for $15,500, and the
        domain name PORSCHEAUTOPARTS.COM was being offered for sale for
        $20,500. The Best Domains Web Site states:

              What's in a Name? ASK COCA-COLA. A domain-name is your own
            Internet address. This address, [sic] should say it all. When
            advertising it should be catchy and easily recognizable like
            all your other advertising. There are 10,000 NEW addresses
            registered every day. When those addresses listed below are
            gone THEY'RE GONE it [sic] will be even harder. REMEMBER your
            Internet address IS a business asset and has value. All these
            addresses listed below WILL go up in value.'' Id. (emphasis in
            original).

      A copy of the print out of this home page is attached hereto as
        Exhibit 3.

      Some of the cyberpirates are so blatant that they actually register
        the name with a for sale sign in their domain name registration
        with Network Solutions. For example, the domain name PORSCH.COM,
        another hardcore pornographic site was registered under the
        fictitious name ``Domain 4 sale & company.'' A copy of the Network
        Solutions Whois listing for the registrant of this domain name is
        attached as Exhibit 4. As discussed more fully below, the address
        listed for this registrant is fictitious. Also attached as Exhibit
        5 is a copy of a domain name auction sheet that Porsche recently
        received offering for sale numerous Internet domain names involving
        famous and well known automobile companies, including Porsche.
      Instances of cyberabuse are not limited to car companies. Recently,
        Porsche discovered that one Beswick Adams had registered the
        Internet domain name DRINGHCFPORSCHE.COM, the correct name of
        Porsche AG. In addition to this domain name, Mr. Adams had
        registered numerous other famous trademarks as domain names ranging
        from MCDONALDSRESTAURANT.COM to COCA-COLACORPORATION.COM. A partial
        list of Mr. Adams' Whois listing is attached hereto as Exhibit 6.
        The list is only partial because Network Solutions' Whois listing
        only lists the first 50 registered domain names for any particular
        registrant. Mr. Adams sells these domain names at
        WWW.BESWICKADAMS.COM where one can make an offer to purchase these
        Internet domain names. A copy of Mr. Adams' offer sheet is attached
        hereto as Exhibit 7.

      (4) To Divert Traffic to The Registrant's Internet Web Site Selling
        Products Unrelated to Porsche Products by Capitalizing on Consumer
        Confusion. For example, the domain name PORSCHE-CARRERA.COM directs
        Internet traffic to the web page for Marv-Stev Sales & Promotions
        Inc. where Power Rangers, Beetleborgs, Tamagotchi, and Mystic
        Knights toys are being sold. A copy of the web site at PORSCHE-
        CARRERA.COM is attached hereto as Exhibit 8.

      (5) To Divert Internet Traffic to Unauthorized Web Sites Selling
        Porsche Related Products. The domain name EVERYTHINGPORSCHE.COM,
        for example, diverts Internet users to an unauthorized web site
        that sells parts for Porsche automobiles. The operator of the web
        site is not an authorized Porsche Dealer and sells both genuine and
        non-genuine Porsche 5 parts. The web site uses a counterfeit of the
        world famous Porsche Crest' in the wallpaper of the web
        site. The wallpaper is not visible from the printed hard copy. A
        copy of this web site is attached hereto as Exhibit 9.

      (6) To Engage in Consumer Fraud, Including the Sale of Counterfeit
        Porsche Products. For example, the domain name BOXSTER.NET, another
        famous Porsche trademark, directs Internet users to a web site that
        advertises and sells shirts and coffee mugs that bear counterfeits
        of Porsche's trademarks and trade dress. A copy of this web site is
        attached hereto as Exhibit 10. This type of site associated with
        counterfeiting activities defrauds consumers, harms electronic
        commerce and deprives trademarks owners like Porsche of substantial
        revenues that should be associated with genuine goods and services.
    the need for cyberabuse legislation that includes in rem jurisdictional
                                   provisions
        In many ways, Porsche feels like Sysyphus, the ancient King of
    Corinth, condemned to roll a heavy rock up a hill in Hades only to have
    it roll down again. Porsche will successfully halt the misappropriation
    of the trademark Porsche' in one situation, only to have
    several new misappropriations surface. Legislation that will deter
    cyberpirates is absolutely essential to lessen the intolerable and
    unnecessary burden on society caused by cyberabuse. Legislation that
    allows famous trademark holders to have an effective remedy is also
    essential. One necessary component of any effective legislation is an
    in rem jurisdictional provision where a trademark holder can file a
    lawsuit against the domain name itself, rather than the registrant.
        Not surprisingly, cyberpirates and cybersquatters often provide
    false and fictitious information as to their identity when they
    register a new domain name diluting or infringing a famous trademark.
    Cyberpirates do so in order to insulate themselves from liability and
    to make it impossible for trademark holders to effect service of
    process. As WIPO recently recognized, such registration practices and
    the ``absence of reliable and accurate contact details leads to a
    situation in which the intellectual property rights can be infringed
    with impunity, on a highly visible public medium.'' WIPO Interim Report
    at 14-15.
        As a result of the exponentially escalating problem of cyberpiracy,
    and the practice of false and fictitious registration of domain names,
    WIPO has concluded that:

              existing mechanisms for resolving conflicts between trademark
            owners and domain name holders are often viewed as expensive,
            cumbersome and ineffective. The sheer number of instances
            precludes many trademark owners from filing multiple suits in
            one or more national courts.

    Id. at 33.

        Porsche's difficulties in locating cyberpirates is illustrative of
    how easy it is for cyberpirates to use the anonymity of the Internet to
    harm Porsche and insulate themselves from liability for their actions.
    With electronic registration of a domain name just a push of the button
    away, and with the registration process being completely automated,
    cyberpirates are able to register domain names with false and
    fictitious contact information making service of process on such
    cyberpirates impossible. The cyberpirate who registered PORSCHE.COM is
    a perfect example. In 1996, Porsche discovered that PORSCHE.COM and
    several similar domain names had been registered by Heinz Porsche
    Langeneckert Consulting of New York, a subsidiary of The Zone One Group
    Ltd. This corporate name was completely fictitious, and the mailing
    address and telephone number for this entity were also fictitious.
    Indeed, the mailing address was for some federal offices in New York
    City. Porsche was contacted by one Lee X. Chen who informed Porsche
    that he would transfer PORSCHE.COM to Porsche for a substantial payment
    plus an ongoing monthly payment of $2,400.
        Porsche attempted to send several letters to Mr. Chen and/or Heinz
    Porsche Langeneckert Consulting of New York at the address on the
    Network Solutions, Inc. application. These letters were all returned.
    Porsche then filed suit against Mr. Chen, Heinz Porsche Langeneckert
    Consulting, and Network Solutions, Inc. in the United States District
    Court for the Eastern District of Virginia. Of course, Porsche was
    unable to serve Mr. Chen with legal process because the information
    that he had provided to Network Solutions, Inc. was false.
        Finally, Porsche and another company whose trademark had been
    pirated by Mr. Chen, NUSKIN, located in Provo, Utah, hired a private
    investigator to locate Mr. Chen and these fictitious entities. Service
    of process was finally effected upon Mr. Chen's father. After Porsche
    had spent several thousand dollars in unsuccessfully locating Mr. Chen,
    the District Court finally determined that notice of the lawsuit sent
    to Mr. Chen's false address provided to Network Solutions, Inc., to Mr.
    Chen's E-mail address provided to Network Solutions, Inc., to the
    facsimile number provided to Network Solutions, Inc., and service of
    process on Mr. Chen's father was sufficient for the Court to enter both
    a preliminary and permanent injunction.
        Other examples that Porsche has encountered further illustrate the
    problem. Some registrants create offshore corporations which then
    register the domain names. For example, several of the domain names
    using the trademark ``PORSCHE'' (e.g., ``PORSCHE944.COM,''
    ``PORSCHE993.COM'' ``PORSCHE996.COM'') \2\ were originally registered
    by a law firm in Seattle for an offshore company, Holler Enterprises,
    Inc., Apartado Postal 4818, San Pedro Sula, Honduras, and then sold to
    third-parties. Other registrants located in the United States have
    transferred their registrations to entities located in countries such
    as Iran (e.g., PORSCHEDEALERS.COM).
    ---------------------------------------------------------------------------
        \2\ 944, 993, and 996 refer to specific Porsche model numbers.
    ---------------------------------------------------------------------------
        The registrants of pornographic Web Sites (e.g., PORSCH.COM and
    PORSCHECAR.COM) use fictitious addresses (e.g., a non-existent suite
    number) to insulate the registrants from service of process. Several of
    the Domain Names used false or incorrect information when the Domain
    Names were registered with Network Solutions, Inc. including
    FORUMULAPORSCHE.COM, PORSCHEDIRECT.NET, PORSCHESALES.COM,
    PORSCHEMAIL.COM, PORSCHECARSALES.COM, PORSCHELYNN.COM, PORSCHE944.COM,
    and PORSCHEPHILES.ORG.
        Porsche respectfully submits that the only effective way to deal
    with problems such as false and fictitious information is through
    legislation that makes the act of cybersquatting illegal, provides for
    statutory damages, and, importantly, recognizes the concept of in rem
    jurisdiction whereby Porsche can sue the Internet domain names
    themselves, rather than file suit against the registrants personally.
        Porsche recently filed such an in rem lawsuit in the Eastern
    District of Virginia against 128 Internet domain names on the theory
    that Porsche is entitled to cancellation and forfeiture of domain names
    that dilute Porsche's world famous trademarks in violation of the
    Federal Trademark Dilution Act, 15 U.S.C. Sec. 1125(c). By proceeding
    in rem, Porsche voluntarily limited itself to claims to the res itself,
    and agreed to forego any claims for damages and attorneys' fees against
    the cyberpirates who registered the domain names.
        Unfortunately, the court dismissed Porsche's lawsuit because the
    court could find no specific in rem jurisdictional provision in the
    Lanham Act allowing such a lawsuit. Porsche Cars North America, Inc. et
    al. v. PORSCH.COM,--F.Supp.--, 1999 WL 378360 (E.D.Va. 1999). Although
    the court recognized the ``dilemma'' Porsche faced in battling
    cyberpiracy and acknowledged that ``the mere act of registration [of
    unauthorized domain names] creates an immediate injury by preventing
    Porsche from utilizing those domain names itself in order to channel
    consumers to its own web site,'' the court in effect held that the
    Lanham Act would need to be amended by Congress to allow for such in
    rem jurisdiction. Porsche has appealed the ruling to the Fourth Circuit
    Court of Appeals.
      congress must provide world-wide leadership in protecting consumers
                                from cyberabuse
        Some critics assert that Congress has no business enacting
    legislation to protect commerce on the Internet, a world-wide resource.
    Companies such as Porsche AG and Chanel, who have United States
    affiliates, employ thousands of United States Citizens, and whose
    largest market is the United States, but who do business throughout the
    world, are looking for the United States Congress to provide leadership
    in providing protection on the Internet. Moreover, the Internet was
    created in the United States by citizens of the United States. Network
    Solutions, Inc., the registrar of Internet domain names and the entity
    that maintains and controls the master computer that contains all
    Internet domain names is located in the United States. In a very real
    sense, the Internet is a United States resource over which the United
    States has jurisdiction.
        United States consumers, United States companies and foreign
    companies doing business in the United States, and electronic commerce
    as a whole must be protected from malicious and willful acts of
    cyberpiracy that occur over this valuable world-wide resource. This
    problem demands that the United States Congress provide guidance and
    leadership in high tech, cutting edge, intellectual property matters
    throughout the world. As the Internet increases in commercial
    importance, the United States must ensure that commerce can be safely
    and appropriately be conducted on the Internet throughout the world.
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        Senator Abraham. Before we turn to you, Mr. Young, we have
    been joined by our committee's ranking member, Senator Leahy,
    and I will turn to him for an opening statement. I also just
    would indicate, by, I gather, prior agreement, that we will
    leave the record open for any other members who couldn't be
    here today to submit any opening statements or comments they
    want.
        And we would also request if anybody wishes to submit
    questions for the witnesses who couldn't be here today that
    they do so by the close of business tomorrow so that you all
    would have a chance to respond. We are hoping to get the
    responses done by the close of business Tuesday.
        So with that said, I will turn to our committee ranking
    member, Senator Leahy, of Vermont.

      STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
                            STATE OF VERMONT

        Senator Leahy. Thank you very much, Mr. Chairman. Like you
    and the rest of us, we have about four hearings going on at the
    same time, but this is an important issue and one I have
    thought a lot about.
        We know that trademarks are an important tool of commerce.
    In fact, the exclusive right to the use of a unique mark helps
    companies compete in the marketplace. It can distinguish their
    goods and services from their competitors. It helps consumers
    identify the source of a product and they can link it with a
    particular company.
        The use of trademarks by companies and the reliance on
    trademarks by consumers is just going to become that much more
    important as the global marketplace becomes bigger, and it is
    becoming bigger and more accessible with electronic commerce.
    The reason is obviously simple. When you have a trademarked
    name, if it is used as a company's address in cyberspace, well
    then a customer, whether they are in Michigan or Vermont or Sri
    Lanka, will know where to go online to conduct business with
    that company.
        The growth of electronic commerce is having a positive
    effect on small rural States like mine. A Vermont Internet
    Commerce report I commissioned earlier this year found that
    Vermont gained over 1,000 new jobs as a result of Internet
    commerce, with the potential that there would be another 24,000
    jobs over the next 2 years. Mr. Chairman, for a State the size
    of Michigan, that may not seem like a large number, but for a
    State of only 600,000 people, 24,000 new jobs just from this
    one source in 2 years is an enormous difference for us.
        But along with that good news, the same report identified a
    number of obstacles. One obstacle is that, ``Merchants are
    anxious about not being able to control where their names and
    brands are being displayed.'' The report also says, consumer
    confidence in shopping online has to be bolstered.
        Both merchant and consumer confidence is undermined by
    cybersquatters or cyberpirates who abuse the rights of
    trademark holders by purposefully and maliciously registering
    as a domain name the trademark name of another company. It
    diverts and confuses customers. It denies the company the
    ability to establish an easy-to-find online address.
        Enforcing trademark law in cyberspace can help. I have long
    been concerned about this. In fact, when the Congress passed
    the Federal Trademark Dilution Act of 1995, I said, `Although
    no one else has yet considered this application, it is my hope
    that this antidilution statute can help stem the use of
    deceptive Internet addresses taken by those who are choosing
    marks that are associated with the products and reputations of
    others.'' Last year, I authored an amendment that was part of
    the Next Generation Internet Research Act on this same issue.
        These are serious matters. Both the Internet Corporation
    for Assigned Names and Numbers, I-CANN, and WIPO are also
    making recommendations. The Federal Trademark Dilution Act has
    been used as I predicted to stop misleading uses of names, but
    we have a long way to go. Cybersquatting is an important issue
    both for trademark holders and for the future of electronic
    commerce on the Internet.
        But we also have to tread very carefully to ensure that any
    remedies do not impede or stifle the free flow of information
    on the Net. Because the United States has been the incubator in
    many ways of the World Wide Web, the world is going to watch
    very carefully what we do.
        So I am hopeful, Mr. Chairman, that you and I and Chairman
    Hatch, Senator Torricelli and all can work together on this. I
    will put my whole statement in the record, but I think that we
    will find on this issue especially the rest of the world is
    going to watch very carefully what we do, so we want to make
    sure we do it right.
        Thank you very much.
        [The prepared statement of Senator Leahy follows:]

            Prepared Statement of Patrick J. Leahy, a U.S. Senator
                           From the State of Vermont

        Trademarks are important tools of commerce. The exclusive right to
    the use of a unique mark helps companies compete in the marketplace by
    distinguishing their goods and services from those of their
    competitors, and helps consumers identify the source of a product by
    linking it with a particular company. The use of trademarks by
    companies, and reliance on trademarks by consumers, will only become
    more important as the global marketplace becomes larger and more
    accessible with electronic commerce. The reason is simple: when a
    trademarked name is used as a company's address in cyberspace,
    customers know where to go online to conduct business with that
    company.
        The growth of electronic commerce is having a positive effect on
    the economies of small rural states like mine. A Vermont Internet
    Commerce report I commissioned earlier this year found that Vermont
    gained more than 1,000 new jobs as a result of Internet commerce, with
    the potential that Vermont could add more than 24,000 jobs over the
    next two years. For a small state like ours, this is very good news.
        Along with the good news, this report identified a number of
    obstacles that stand in the way of Vermont reaching the full potential
    promised by Internet commerce. One obstacle is that ``merchants are
    anxious about not being able to control where their names and brands
    are being displayed.'' Another is the need to bolster consumers'
    confidence in online shopping.
        Both merchant and consumer confidence in conducting business online
    are undermined by so-called ``cybersquatters'' or ``cyberpirates,'' who
    abuse the rights of trademark holders by purposely and maliciously
    registering as a domain name the trademarked name of another company to
    divert and confuse customers or to deny the company the ability to
    establish an easy-to-find online location. A recent report by the World
    Intellectual Property Organization (WIPO) on the Internet domain name
    process has characterized cybersquatting as ``predatory and parasitical
    practices by a minority of domain registrants acting in bad faith'' to
    register famous or well-known marks of others--which can lead to
    consumer confusion or downright fraud.
        Enforcing trademark law in cyberspace can help bring consumer
    confidence to this new frontier. That is why I have long been concerned
    with protecting registered trademarks online. Indeed, when the Congress
    passed the Federal Trademark Dilution Act of 1995, I noted that:

              [A]lthough no one else has yet considered this application,
            it is my hope that this antidilution statute can help stem the
            use of deceptive Internet addresses taken by those who are
            choosing marks that are associated with the products and
            reputations of others.

    (Congressional Record, Dec. 29, 1995, page S19312)

        In addition, last year I authored an amendment that was enacted as
    part of the Next Generation Internet Research Act authorizing the
    National Research Council of the National Academy of Sciences to study
    the effects on trademark holders of adding new top-level domain names
    and requesting recommendations on inexpensive and expeditious
    procedures for resolving trademark disputes over the assignment of
    domain names. Both the Internet Corporation for Assigned Names and
    Numbers (I-CANN) and WIPO are also making recommendations on these
    procedures. We should make sure that any anti-cybersquatting
    legislation we pass does not frustrate these efforts.
        The Federal Trademark Dilution Act of 1995 has been used as I
    predicted to help stop misleading uses of trademarks as domain names.
    One court has described this exercise by saying that ``attempting to
    apply established trademark law in the fast-developing world of the
    Internet is somewhat like trying to board a moving bus * * *''
    [Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997)]
    Nevertheless, the courts appear to be handling ``cybersquatting'' cases
    well. As Professor Michael Froomkin notes in his written testimony,
    ``[i]n every case involving a person who registered large numbers of
    domains for resale, the cybersquatter has lost.''
        For example, courts have had little trouble dealing with a
    notorious ``cybersquatter,'' Dennis Toeppen from Illinois, who
    registered more than 100 trademarks--including ``yankeestadium.com,''
    ``deltaairlines.com,'' and ``neiman-marcus.com''--as domain names for
    the purpose of eventually selling the names back to the companies
    owning the trademarks. The courts reviewing his activities have
    unanimously determined that he violated the Federal Trademark Dilution
    Act.
        Enforcing or even modifying our trademark laws will be only part of
    the solution to cybersquatting. Up to now, people have been able to
    register any number of domain names in the popular ``.com'' domain with
    no money down and no money due for 60 days. Network Solutions Inc.
    (NSI), the dominant Internet registrar, announced yesterday that it was
    changing this policy, and requiring payment of the registration fee up
    front. In doing so, the NSI admitted that it was making this change to
    curb cybersquatting.
        In light of the developing case law, the ongoing efforts within
    WIPO and I-CANN to build a consensus global mechanism for resolving
    online trademark disputes, and the implementation of domain name
    registration practices designed to discourage cybersquatting, we should
    be precise about the problems we need to address before we legislate in
    this area.
        I am concerned that the S. 1255, the ``Anticybersquatting Consumer
    Protection Act,'' introduced by Senators Abraham, Torricelli, Hatch and
    McCain, would have a number of unintended consequences that could hurt
    rather than promote electronic commerce. This bill would make it
    illegal to register or use any ``Internet domain name or identifier of
    an online location'' that could be confused with the trademark of
    another person or cause dilution of a ``famous trademark.''

       The definition is overbroad. The bill covers the use or
            registration of any ``identifier,'' which could cover not just
            second level domain names, but also e-mail addresses, screen
            names used in chat rooms, and even files accessible and
            readable on the Internet. As Professor Froomkin points out,
            ``the definitions will make every fan a criminal.'' How? A file
            document about Batman, for example, which uses the trademark
            ``Batman'' in its name, which also identifies its online
            location, could land the writer in court under this bill. This
            bill is simply overbroad; cybersquatting is not about file
            names.

       The bill threatens hypertext linking. The Web operates on
            hypertext linking, to facilitate jumping from one site to
            another. S. 1255 could disrupt this practice by imposing
            liability on operators of sites with links to other sites with
            trademark names in the address. One could imagine a trademark
            owner not wanting to be associated with or linked with certain
            sites, and threatening suit under this proposal unless the link
            were eliminated or payments were made for allowing the linking.

       The bill would criminalize dissent and protest sites. A
            number of Web sites collect complaints about trademarked
            products or services, and use the trademarked names to identify
            themselves. For example, there are protest sites named
            ``boycott-cbs.com'' and ``www.PepsiBloodbath.com.'' While the
            speech contained on those sites is clearly constitutionally
            protected, S. 1255 would criminalize the use of the trademarked
            name to reach the site and make them difficult to search for
            and find online.

        The bill would stifle legitimate warehousing of domain names. The
    bill would change current law and make liable persons who register
    domain names similar to other trademarked names, whether or not they
    actually set up a site and use the name. The courts have recognized
    that companies may have legitimate reason for registering domain names
    without using them and have declined to find trademark violations for
    mere registration of a trademarked name. For example, a company
    planning to acquire another company might register a domain name
    containing the target company's name in anticipation of the deal. This
    bill would make that company liable for trademark infringement.
        Cybersquatting is an important issue both for trademark holders and
    for the future of electronic commerce on the Internet. Yet the Congress
    should tread carefully to ensure that any remedies do not impede or
    stifle the free flow of information on the Internet. In many ways, the
    United States has been the incubator of the World Wide Web, and the
    world closely watches whenever we venture into laws, customs or
    standards that affect the Internet. We must only do so with great care
    and caution. Fair use principles are just as critical in cyberspace as
    in any other intellectual property arena. I am hopeful that Chairman
    Hatch and I, along with Senators Abraham and Torricelli, will be able
    to work together to find a legislative solution that works.

        Senator Abraham. Senator Leahy, I want to just thank you,
    and we have enjoyed working with you and your staff, as we do
    on a lot of projects, to move the legislation from its initial
    form to the substitute we are working, and look forward to
    continue doing that through the committee and hopefully onto
    the floor and beyond.
        We stopped with Mr. Young and so I will return to you, and
    appreciate your patience as we address the always challenging
    scheduling dilemmas of members here as they come and go from
    the committee. Thank you for your patience and we will turn to
    you.

                   STATEMENT OF CHRISTOPHER D. YOUNG

        Mr. Young. Thank you, Mr. Chairman, Senator Leahy, for the
    opportunity to give this committee a perspective on
    cybersquatting from the front lines of the Internet.
        Cyveillance is in support of legislation to prevent
    cybersquatting on the Internet. In fact, for nearly 2.5 years,
    which is a long time in Internet years, Cyveillance has been
    scouring the Internet on behalf of our clients, who represent
    market leaders across several industries. Some of our clients
    include the likes of Bell Atlantic, Levi Strauss, Dell
    Computer, Chanel, companies like that. And we have confirmed
    through many of our investigations that cybersquatting and
    other types of fraud are rapidly growing on the Internet.
        During the course of our work, we have encountered
    countless cybersquatters who are preying on the public and
    leveraging the goodwill of major brands that consumers know and
    trust. The very fact that Cyveillance is a growing company
    exemplifies how prevalent cybersquatting and other Web-related
    issues have become. Cyveillance has helped market leaders in
    telecommunications, computers, apparel, pharmaceuticals, among
    other industries, deal with cybersquatting and other Internet
    issues that impact their e-businesses.
        The act of cybersquatting, as it is commonly know, began
    its ascent as early as 1993, when a host of major corporations
    including Coca-Cola, Hertz Rentals, Delta Airlines, among
    others, learned that third parties had already registered their
    domains and would gladly sell them back to the rightful owners
    for a substantial fee.
        Today, the Web is still the wild, wild west, with few rules
    or guidelines. ``Cybersquatting'' was coined as an analogy to
    the situation in the mid- to late 1800's when people attempted
    to lay a claim to land on which they were living or on which
    they squatted. On the Internet, which is today's new frontier,
    cybersquatters are trying to stake their claim on domain names
    that do not belong to them for their own personal or financial
    gain.
        Cybersquatters essentially do this for two main reasons.
    The first is they want to sell it back to the original owner
    for a profit. The second reason they do it is to drive traffic,
    meaning users, to their Web sites to sell them goods or
    services, whether those services be counterfeit, unauthorized,
    or even pornographic in nature.
        Many of you may be familiar with an infamous called
    www.whitehouse.com. It is a pornographic site that uses a
    popular name to attract unsuspecting consumers trying to reach
    whitehouse.gov, which is the legitimate White House Web site.
        Businesses are affected by all these different objectives.
    Consumers are the real victims, however, of cybersquatters who
    aim to do business on the Internet. Cybersquatters really
    intentionally use popular brand names or slight misspellings of
    these names to capture site traffic from confused Internet
    users.
        What I would like to do today is I actually brought some
    examples from the Internet itself so that I could illustrate
    some of the things that are taking place out there on the
    Internet. The first example that I have for you is an example
    of a popular male baldness drug. It is called Propecia.
        If you look in the upper left-hand corner of the monitor,
    you will see that the domain name is www.propeciasales.com.
    That address has been registered by a company called KwikMed,
    which is not the manufacturer nor the owner of the trade name
    Propecia, and they are doing so to sell that drug.
        The second example that I have is www.dellspares.com. Now,
    this site is intentionally put up to confuse consumers that are
    searching for products that are manufactured by Dell Computer
    Corporation. And based on feedback that we have gotten from our
    client, Dell, this particular site is not an authorized
    reseller of Dell Computer products. Another example that I have
    got is another Dell example, dellbackup.com, a second example
    of a site that is not an authorized reseller of Dell products
    or peripherals.
        The fourth example that I have is www.bellatlantics.com,
    and this site is selling Internet domain name hosting services,
    et cetera. It is put up there to compete with Bell Atlantic's
    Internet-hosting services. And as you can see, and as Bell
    Atlantic will tell you, this is not an affiliate or reseller of
    Bell Atlantic products or services.
        These are just a few examples of the kinds of
    cybersquatting that takes place on the Internet that could be
    used to draw unsuspecting consumers who are seeking to purchase
    the products or services of legitimate branded companies.
        In conclusion, Cyveillance supports legislation that allows
    consumers and corporations to conduct e-business safely on the
    Web. My only caution is that in adopting such legislation, we
    do so in a manner that doesn't stifle the growth of the
    Internet.
        Thank you very much.
        [The prepared statement of Mr. Young follows:]

                   Prepared Statement of Christopher D. Young

        Mr. Chairman, My name is Christopher Young, and I'm the president
    and co-founder of Cyveillance}TM, the leading provider of e-
    Business intelligence. We provide critical market feedback that
    Internet-savvy companies need to survive in today's competitive e-
    Business world. We use our proprietary technology called
    NetSapien}TM to look deep within sites across the Internet
    and extract key business information for our customers. Our NetSapien
    technology is operational around the clock, downloading and analyzing
    over one million pages of data from the Internet each day, seven days a
    week, to provide comprehensive coverage of Internet activity to our
    clients. For nearly two and a half years, Cyveillance has been scouring
    the Internet on behalf of our clients, who represent the market leaders
    across several industries, and we have confirmed through our many
    investigations that cybersquatting and other types of fraud are
    proliferating on the Internet.
        I appreciate very much the opportunity to appear before this
    Committee and to voice our support for the Hatch-Leahy substitute bill.
    With more than 800 million pages of data, the World Wide Web is a
    priceless resource for nearly 70 million Americans. According to a
    study released this month by Navidec, 53 percent of U.S. Internet
    consumers have made an online purchase this year. This figure is up
    from 26 percent in 1997. Last year's holiday season was infused with
    stories on the record numbers of consumers turning to the Web for their
    shopping needs, and the forecasts are even more optimistic for the
    upcoming online holiday shopping season.
        Consumers are clearly taking full advantage of the instant access
    to goods, services and other resources afforded by the Internet. But
    during the course of our work, we have encountered countless
    cybersquatters who are preying on the public by leveraging the goodwill
    of major brands that consumers know and trust. The very fact that
    Cyveillance is a growing company exemplifies how prevalent
    cybersquatting and other Web-related issues have become. Cyveillance
    has helped market leaders in telecommunications, computers and apparel
    manufacturing, among other industries, deal with cybersquatting and
    other Internet issues that impact their e-Businesses.
        The act of cybersquatting, as it is commonly known, began its
    ascent as early as 1994, when a host of major corporations, including
    Coke, Hertz, MTV and many others learned that third parties had already
    registered their domains and would gladly sell them back to the
    rightful owner for a substantial fee. Today, the Web is still the
    ``wild West'' with few rules or guidelines. Cybersquatting was coined
    as an analogy to the situation in the mid- to late- 1800s when people
    attempted to lay claim to land on the new frontier by ``squatting'' on
    the land. On the Internet, today's new frontier, cybersquatters are
    trying to stake their claim on domain names that do not belong to them,
    for their own personal/financial gain. Typically, the most sought-after
    domains are well-known brands that companies have spent decades and
    billions to build and establish. Additionally, because the Internet is
    the great equalizer, an individual or a small, no-name company can look
    as big on the Internet as any market leader. For these very reasons
    consumers are at risk and must always be on guard when using the
    Internet. Cybersquatters have been working quickly--and effectively--to
    buy addresses and put up sites to ultimately confuse the consumer.
        Cybersquatters essentially hijack a well-known company's name so
    they can

      (1) sell it for a profit;

      (2) drive traffic to sell goods or services [counterfeit,
        unauthorized, ancillary or unrelated sales and pornography] or

      (3) voice an opinion.

        Businesses are affected by all three of these objectives, but
    consumers are the real victims of the cybersquatters who aim to do
    business on the Internet. Cybersquatters intentionally use popular
    brand names or slight misspellings of these names in an attempt to
    capture site traffic from confused Internet users.
        To better illustrate these points, please permit me to show a few
    examples of cybersquatting. These examples, which Cyveillance has
    uncovered using our NetSapien technology, show blatant abuse of
    household brand names.
        The examples I will shown are just a small sample of what is on the
    Web today. The Web is a constantly changing medium with hundreds of
    thousands of pages being added and deleted every day. Consumers, who
    are embracing the Web in record numbers, deserve adequate protection
    against cybersquatters who are trying to swindle them and create
    confusion by associating brand names with undesirable or illegal
    activity. Cyveillance estimates that more than 80 percent of Fortune
    1000 companies suffer from some type of brand abuse. Moreover, in a
    recent Cyveillance study on counterfeiting, we found that between 10
    percent and 20 percent of Web sites selling luxury goods are peddling
    counterfeit wares. With odds like these, it is the consumer who will
    ultimately suffer.
        Cyveillance supports legislation that allows consumers and
    corporations to conduct e-Business safely on the Web. Thank you
    gentleman for your time and consideration on this issue.
        [See exhibits.]
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        Senator Abraham. I thank all three panelists. Let me just
    try to maybe give each of you a chance to elaborate perhaps on
    this. One of the things that probably members would want to
    know is the extent to which this is happening. Can any of you
    really comment on that in terms of a sense of whether the
    cybersquatting crime, if you would--if people are increasing
    the frequency of this behavior? Is this something that is
    mushrooming or is it something where a few people kind of did
    this and are now kind of being chased around by your
    organizations or companies, or is this something that is a
    growing problem?
        Mr. Young.
        Mr. Young. Our perspective is that the issue is increasing
    tremendously. What you used to see was that someone would
    register just the correct spelling of a popular company's name.
    Now, what you are seeing is that individuals or groups will
    seek to register every possible combination of a name, whether
    there be misspellings or spaces between words, et cetera, so
    that they can stake claim to some of these names. I think Greg
    can give you some great examples from Porsche and the numerous
    different combinations that take place.
        Mr. Phillips. Back in 1997, it was frequent, but
    infrequent. In 1998, it started growing, maybe 2 to 5 a week.
    In January of this year, we had 128. Now, we are up over 300,
    and I think it is just growing exponentially. People out there
    realize that they can make a lot of money by cyberpiracy and
    cybersquatting and it is very easy money for them, and there is
    no deterrent out there so they are doing it in droves.
        Ms. Chasser. And we are seeing also an increase, but we are
    also seeing a greater sophistication among the cybersquatters
    that they are identifying ways to insulate themselves from
    liability and getting around the safeguards that have been
    established.
        Senator Abraham. Is the principal profit just the idea that
    you kind of sell back these names or you can extort money out
    of the person whose domain you really have invaded?
        Ms. Chasser. I think ``ransom'' or ``extortion'' is a good
    term for that, yes.
        Mr. Phillips. And porn operators love famous trademarks
    because they are easy to remember. They divert a lot of traffic
    to those sites. A lot of these sites, you find counterfeit
    products. On porschecarrera.com, they settle Beetle Borgs,
    Power Rangers, and what not. But they know people will want to
    go to porschecarrera.com and that is an easy name to remember.
    So a lot of it is extortion, but there are all kinds of other
    consumer fraud out there that people are able to benefit from.
        Mr. Young. The extortion piece doesn't really hurt
    consumers as much because if I don't put a site there and I
    just want to sell that address back to a large company, that
    doesn't hurt the consumer. But what hurts the consumer is if
    you look at an example like the one I showed, which was the
    Bell Atlantic example, I mean this site is actually seeking to
    sell a service to consumers, but it is not a Bell Atlantic
    service.
        We don't know whether this company is even a legitimate
    company. In fact, if I look at the language on the site, the
    money is in British pounds, so therefore the site is not even
    located in the United States. So, that is a problem for
    consumers and that is what is really going to hurt them when
    these sites leverage these popular names to drive traffic there
    and ultimately get consumers to purchase something from that
    site.
        Senator Abraham. Is it your experience that most of them
    are cleverly enough put together to prevent consumers from
    being able to distinguish the difference between them? In mean,
    in other words, are most of them well-masked?
        Mr. Young. I will give you a great example. About 2 months
    ago, there was an individual at a company called Pairgain
    Technologies who went to a Yahoo message board and posted a
    rumor that said Pairgain was going to be purchased by an
    Israeli-based company. That individual subsequently on that
    message board put the address of a site that he had constructed
    that looked exactly like the Bloomberg financial markets Web
    site.
        Investors went to that site, saw that the rumor was
    legitimized by Bloomberg, which is a reputable financial
    information and news provider, and the next day the stock was
    bid up 31 percent because of that rumor and because that site
    legitimized what was happening on the Internet.
        Senator Abraham. That example seems to me to be perhaps the
    most telling in the sense that when we started this discussion
    one thought in terms of specific sites. Somebody thinks they
    are getting A and they get B, and maybe they make an incorrect
    choice of some type. But here you are talking about utilizing
    multiple sites, in a sense, to really sort of confuse and
    benefit.
        Mr. Young. That is absolutely right. They have really
    figured out a number of different ways. Greg used pornographic
    sites. Pornographic sites are at the forefront of the ability
    to confuse consumers and drive traffic to their own Web sites.
    They do everything they can possibly do in terms of registering
    different combinations of domain names; medi-tagging, which is
    a whole different issue that I am sure we don't even want to
    get into today--medi-tagging popular brand names all in an
    attempt to drive unsuspecting consumers to their Web sites.
        Senator Abraham. Back to you, Ms. Chasser, in terms of the
    Trademark Association, how many members--you said about 3,600?
        Ms. Chasser. We have 3,600 members, yes. We represent most
    of the major trademark owners.
        Senator Abraham. Any feel for the percentage of them that
    are now engaging Cyveillance-types of firms, or maybe doing it
    internally? Are they all engaged in some form of this?
        Ms. Chasser. If I may ask my colleagues behind me, they
    probably have that answer. I don't have that answer.
        Senator Abraham. Sure.
        Ms. Chasser. The short answer is there are a significant
    number.
        Senator Abraham. Well, that is a significant answer, then.
    Thank you.
        Ms. Chasser. It is a significant number and it is growing
    very quickly. When you actually look at the amount of e-
    commerce being conducted, it was quoted last year, in 1998,
    that there was over $102 billion of business conducted through
    e-commerce, and that is being led primarily by the business on
    e-commerce, but also the major trademark owners are represented
    in that business.
        Senator Abraham. Well, in terms of your Association, this
    is, I assume, therefore, probably the thing you are hearing the
    most about.
        Ms. Chasser. Well, actually one of our priorities this year
    is Internet issues, and the amount of committee work that we
    have involved in the Internet, not only legislative issues but
    other issues involved in the Internet, is significant. So it is
    one of our major thrusts.
        Senator Abraham. Mr. Phillips, I noticed there were
    countless Porsche references here. How many different problems
    has the company got to deal with out here? I mean, I just am
    looking at all these.
        Mr. Phillips. Too many for the legal budget is the short
    answer to that. It grows tremendously, and the thing that we
    are finding is that cyberpirates are becoming more
    sophisticated. I just had a case for Calloway Golf where the
    cyberpirate understands commercial use aspects of the Dilution
    Act, so what he was going to do was put a picture of himself
    with a Calloway golf club on his Web site saying Calloway has
    lowered my handicap by 10, and wait for Calloway to come and
    try to get that domain name from him and make the argument, I
    am not engaged in commercial use, I am just telling my friends
    and family how wonderful Calloway is. Why are you beating up on
    me?
        That is how sophisticated they are getting now. They know
    what the rules are. They know how to engage in false and
    fictitious registration so that we in many cases can't even
    find them, and that is why the in rem provision that you talked
    about is so important.
        Senator Abraham. So the person doing that is basically
    trying to sell the site back, essentially?
        Mr. Phillips. They know eventually the trademark holders
    will come and ask for the site, and some of them now say, well,
    we would sure like to resolve this amicably. And we say, OK, we
    will send you the domain name transfer agreement, please sign
    that. And they say, well, there is something else. And they
    won't even go so much as to ask for money because they know the
    minute they ask for money, you have got a commercial use. So
    they are getting more sophisticated all the time, trying to get
    around the trademark laws as they exist now.
        Senator Abraham. In putting together this hearing, we
    offered members of the committee the opportunity to find
    witnesses who might speak in opposition to perspective
    legislation. We really didn't find much of that out there. I
    assume that there isn't a lobbying organization that is trying
    to protect cybersquatting.
        But I just wonder, without getting into all the details,
    have those people who are engaging in these practices--you
    imply there is a sophistication. Is there a network of sorts
    that has developed, or some other type of defensive maneuvering
    going on that the committee should be aware of among those who
    are engaged in these practices?
        Mr. Phillips. I think there is an underground network, and
    I think sometimes they use some other organizations to
    legitimize what they are doing under the umbrella of free
    speech or something else. But when you ask the leaders of those
    organizations who their members are or who they represent, they
    can never tell you.
        Senator Abraham. Well, as I said, I am sure other members
    of the committee would like to participate, can't be here
    today, but will want to submit questions. And we may have a few
    additional ones ourselves, but we did want to make sure we got
    the hearing moving here because our goal is to try to expedite
    the passage of the legislation to the extent we possibly can
    here in the Senate. So let me just thank all of our panelists
    and our audience for their participation. To the groups and
    organizations who have helped us put together today's hearing,
    I also say thanks. If we get questions, those submitted by the
    end of the day will be submitted to the panel for your response
    and we would appreciate it if you could get them back to us by
    Tuesday just so that we can be in a position, we hope, next to
    perhaps bring this legislation to the committee for
    consideration.
        With that, the hearing is adjourned.
        [Whereupon, at 2:48 p.m., the committee was adjourned.]
                                A P P E N D I X

                                  ----------

                             Questions and Answers

                                  ----------

          Responses of Anne H. Chasser to Questions From Senator Hatch

        Question 1. If a bad actor is using a famous name, an online
    consumer is at serious risk of being defrauded, are they not?
        Answer 1. Yes, absolutely. Trademarks have been an integral part of
    e-commerce. With the ``World Wide Web'' becoming ever so tangled,
    consumers, researchers, and typical ``Net surfers,'' need some type of
    assurance that they have reached their intended destination in
    cyberspace. That assurance, that sign, Mr. Chairman, is a trademark.
    Trademarks, in the form of domain names (i.e. www.oreo.com) are the
    street and house signs on the ``information superhighway'' and the
    awning of the ``cyber-shop'' as well. Ultimately, for the benefit of
    the consumer, trademarks must be safeguarded in cyberspace.

        Question 2. How big of a problem is warehousing? Could you comment
    on whether the registration of a single domain name might ever be so
    harmful as to merit a remedy?
        Answer 2. Instances of warehousing are on the rise. Cybersquatters
    are getting smarter. Bad faith warehousers know that if they do not
    ``use'' the mark in commerce, courts will not allow trademark owners to
    bring an infringement action against them. However, this in turn is
    preventing the legitimate mark owner from using the mark on what has
    undoubtedly become a new form of media.
        We find that even one action of cybersquatting should incur
    liability, and that a bill should not be limited to patterns of
    cybersquatting. Our findings are based on the following:

       A cybersquatter may be sitting on a single domain name that
            is a ``gold mine'' (imagine exxon.com);

       A mark owner may not be aware that the cybersquatter has
            engaged in a ``pattern'' of misbehavior and thus never know
            that the remedies of the bill are available; and

       A cybersquatter may initially register multiple domain
            names, then sell individual names to other cybersquatters to
            diffuse the ownership.

        Question 3. We were to prohibit multiple registrations, but exempt
    single instances, and not require truthful information to be provided
    when registering a domain name, wouldn't this provide a blueprint for
    avoiding liability by encouraging people to register each domain name
    under a different alias.
        Answer 3. Mr. Chairman, I can answer this question very simply by
    stating that a ``false information'' provision is essential if we are
    to move forward with an anti-cybersquatting bill. These days, in order
    to avoid liability, cybersquatters provide false and misleading
    information to registration authorities. Congress should send a message
    that if false information is provided, it can be used as a factor by
    the court in determining whether cybersquatting has taken place.

        Question 4. Do you read the Porsche case as an invitation to
    Congress to provide this sort of remedy [in rem] for these cases? Can
    you also comment on the need for this type of remedy and how this will
    help trademark owners better police their marks on the Internet? Can
    you also share with the Committee your thoughts with respect to the
    court's discussion of due process issues related to in rem proceedings
    and whether the Hatch-Leahy draft adequately addresses the concerns
    expressed in the Porsche case?
        Answer 4. I can tell you, Mr. Chairman, that since the Porsche
    decision there have been trademark owners calling for some type of
    ``fix'' to the problem. As for how an in rem provision will help
    trademark owners, I can say that it will help trademark owners take
    action against the nameless and faceless cybersquatters (particularly
    those who provide false and misleading information to the registration
    authorities). We are comfortable with the in rem provision in the June
    28 Hatch-Leahy draft.

        Question 5. Can you give us an example, if there is one, of a case
    where the registration of a trademark as a domain name is done for
    noncommercial purposes yet should be actionable under cybersquatting?
        Answer 5. There have been cases where the cybersquatter wanted to
    use the trademark to direct traffic to a Web site that contains
    pornography. Such an action works towards the destruction of the
    goodwill associated with the trademark. For a specific example, I
    direct your attention to the case of the MOBIL 1 trademark which was
    identified in my written statement.

        Question 6. Can you comment on the suggestion that service
    providers and registrars and registries should similarly be immune from
    liability to the trademark owner for the registration of the offending
    domain name in the first instance, absent some sort of bad faith?
        Answer 6. I can comment only to the extent that we are aware of the
    desires of select ISPs to incorporate such a provision into the anti-
    cybersquatting bill. We are working with them on acceptable language
    and look forward to an equitable and sensible resolution.
                                     ______

          Responses of Anne H. Chasser to Questions From Senator Leahy

        Question 1. NSI has changed its policy, which used to allow people
    to register domain names without paying for up to 60 days. What effect,
    if any, do you think this policy change will have on the cybersquatting
    problem?
        Answer 1. NSI's move is one which we have been advocating for some
    time. We support it. Paying up front will help in some cases of
    cybersquatting. However, there are still a great number of
    cybersquatters for whom $70 is not a lot of money, especially when they
    may try and ransom it off to a trademark owner for even larger sums.

        Question 2. WIPO and other experts have defined the cybersquatting
    problem as the abusive registration of another person's trademark as a
    second level domain.
        a. Should legislation intended to address the problem of
    cybersquatting limit itself to dealing with the registration of second
    level domain names and, if not, why not?
        Answer 2. The definition should not be limited to second-level
    domains. We must account first for changes in technology that could
    make a restrictive definition of ``domain name identifier'' obsolete.
    Second, cybersquatters are nothing if they are not clever. Once they
    realize that the statute only covers the second level, they will begin
    moving beyond, more to the left, in order to confuse the public and
    extort money from legitimate trademark owners.

        b. Please identify any other way in which a domain name may be used
    that could infringe a trademark and lead to consumer confusion?
        Answer b. The Hatch/Leahy bill is not designed to address the
    problem of ``use'' of another's trademark or service mark over the
    Internet. If someone ``uses'' another's mark in electronic commerce,
    the current statute provides a remedy under both Sections 32(1),
    trademark infringement, in the case of registered marks and 43(a),
    unfair competition, in the case of unregistered marks. The Hatch-Leahy
    bill addresses the situation where a third party registers another's
    mark as a domain name and holds it for ransom or simply blocks the
    rightful owner from using the mark. If this third party does not
    actually ``use'' the mark in commerce, under current law, the mark
    owner has no remedy.

        Question 3. Should we make sure that First Amendment free speech
    rights are fully protected and that we in no way chill the right of
    Internet users to both post and access so-called ``protest sites'' that
    are set up to protest or complain about a particular company's
    products, services or business practices?
        Answer 3. INTA believes that protection of the public interest,
    including allowing for legitimate uses of domain names that meet fair
    use/freedom of expression standards, should be included in an anti-
    cybersquatting bill.

        Question 4. Do you support S. 1255, the Anti-cybersquatting and
    Consumer Protection Act, as introduced or would you recommend that
    changes be made to this bill? If so, what changes would you suggest?
        Answer 4. INTA supports the overall intent of S. 1255, which is to
    help stem the tide of cybersquatters and to protect consumers who
    ``surf'' the Internet. However, we find that we cannot support a number
    of its provisions, especially the call for criminal sanctions.
        We find that a bill targeted towards the bad-faith registration and
    trafficking of domain names is the better way to go. The bill should
    provide a list of factors by which a court can determine whether the
    activity was done in bad-faith or with good faith intentions. There
    should also be means for trademark owners to recover the costs of
    prosecuting a cybersquatter. The bill should permit actual, as well as
    statutory damages. As noted in our answer to Question 3, there should
    also be protection for legitimate uses of domain names that meet fair
    use/freedom of expression standards.
        Senator Abraham noted that S. 1255 will be amended to account for
    these recommendations.

        Question 5. Professor Froomkin states in his written testimony
    that, ``In every case involving a person who registered large numbers
    of domains for resale, has lost.'' Do you dispute that statement?
        Answer 5. While there have in fact been a number of cases where
    litigation has stopped a cybersquatter, instances of cybersquatting are
    clearly on the rise. Trademark owners are forced to spend a great deal
    of time and effort chasing them. Cybersquatters are clever; they know
    how much litigation costs, and often set offering prices for their
    pirated domain names at levels low enough to make litigation
    unattractive. It is cheaper to pay the ransom to these thieves than it
    is to litigate. The Hatch/Leahy legislation is designed to ``chill''
    the practice of cybersquatting and to short circuit litigation.
    Claimants now must somehow demonstrate that the cybersquatter is
    somehow ``using'' the mark, and after some examination, most courts are
    able to find ``use.'' This new provision would allow courts to dispense
    with that time-consuming and sometimes expensive procedure. The mere
    act of registering another's mark as a domain name in bad faith would
    incur liability.

        Question 6a. Do you support a change in the law that would make the
    mere registration of a domain name that is another's trademark, without
    more, illegal?
        b. There are situations where a company plans to purchase another
    company and, in contemplation of the deal, registers a domain name with
    both companies' names. This name is warehoused until the deal is
    completed. Would a law that makes the mere registration of a domain
    name, which is also another's trademark, illegal and also make
    legitimate business practices such as the one I described illegal?
        Answer 6 a and b. Senator, I think I can answer both parts of your
    question at once. INTA believes that anti-cybersquatting legislation
    should cover only instances of bad-faith registration or trafficking in
    domain names. So, is it the ``mere registration'' that should be
    illegal? We say ``No''. It is bad-faith registration that should be
    prohibited. Should the example you provided in sub. ``b'' be
    prohibited? Again, we would say ``No,'' because it appear that the
    registration was done in good faith as part of a legitimate business
    activity.
                                     ______

         Responses of Anne H. Chasser to Questions From Senator Abraham

        Question 1. If a bad actor is using a ``famous name'' as a domain
    name, how would an online consumer determine whether or not the Web
    site is authentic? What problems do you foresee for consumers if famous
    marks are not protected from infringement of domain names?
        Answer 1. It may be difficult for the online consumer to determine
    whether the site is genuine, since once the cybersquatter has the
    domain name and has set up a site, he or she can do anything they want
    with it. This includes placing on the site whatever material they so
    desire.
        Famous marks have helped to generate the significant numbers we see
    in e-commerce today. To leave them vulnerable to cybersquatters will
    result in consumer confusion and damage to the online economy.

        Question 2. Would you highlight for us how big a problem
    warehousing is, and explain the harm to trademark owners caused by
    someone registering a mark and then simply letting it sit?
        Answer 2. Warehousing is becoming more prevalent as cybersquatters
    figure out ways to circumvent existing forms of trademark law. It harms
    trademark owners by preventing them from using the trademark to help
    sell their product or to provide services on the World Wide Web.

        Question 3. In your view, could the registration of a single domain
    name ever be so harmful so as to merit a remedy? Would you please
    comment on whether you think the prohibition only of ``multiple
    registrations'' would be workable in practice?
        Answer 3. If the Senator will permit me, I refer you to the answer
    I provided to Chairman Hatch on a similar question. It is as follows:

              We find that even one action of cybersquatting should incur
            liability, and that a bill should not be limited to patterns of
            cybersquatting. Our findings are based on the following:

       A cybersquatter may be sitting on a single domain name that
            is a ``gold mine'' (imagine exxon.com);

       A mark owner may not be aware that the cybersquatter has
            engaged in a ``pattern'' of misbehavior and thus never know
            that the remedies of the bill are available; and

       A cybersquatter may initially register multiple domain
            names, then sell individual names to other cybersquatters to
            diffuse the ownership.

        Question 4. Would you please comment on the positives and negatives
    of a false information provisions, and explain the impact such a
    provision would have on cybersquatting?
        Answer 4. Senator, as I indicated to Chairman Hatch, ``a `false
    information' provision is essential if we are to move forward with an
    anti-cybersquatting bill.'' To avoid prosecution by trademark owners,
    cybersquatters provided false and misleading information to registrars.
    This is a loophole which must be closed. Congress should permit courts
    to consider the provision of false information when determining whether
    cybersquatting has taken place. In our opinion, there are no negatives
    to such a provision.
                                   __________
                                   Howard, Phillips & Andersen,
                                     Salt Lake City, UT, July 27, 1999.
    Re: ``Cybersquatting and Consumer Protection: Ensuring Domain Name
    Integrity''

    The Honorable Orrin G. Hatch,
    Chairman, Committee on the Judiciary,
    The Honorable Patrick Leahy,
    Ranking Member,
    The Honorable Spencer Abraham,
    U.S. Senator, Dirksen Senate Office Building, Washington, DC.
        Dear Senators Hatch, Leahy, and Abraham: Thank you for allowing me
    to testify on behalf of Porsche Cars North America, Inc. at the July
    22, 1999 hearing.\1\ Thank you also for submitting additional
    questions, which I have answered:
    ---------------------------------------------------------------------------
        \1\ In my written testimony of July 22, 1999 I stated that the
    registrant of PORSCHESALES.COM offered to sell that domain name to
    Porsche for $25,000. I need to correct that testimony. I inadvertently
    left the hyphen out of PORSCHE-SALES.COM and Bill Hodges the registrant
    of PORSCHESALES.COM has received several inquiries regarding this
    testimony. Bill Hodges currently has our permission to use the domain
    name PORSCHESALES.COM. The registrant of PORSCHE-SALES.COM is not
    authorized to use that domain name. Porsche and I apologize to Mr.
    Hodges and to this committee about the inadvertent omission of the
    hyphen.
    ---------------------------------------------------------------------------

        Responses of Gregory D. Phillips to Questions From Senator Hatch

        Question 1. Trademarks help consumers discern quality goods from
    inferior ones and to ensure the source and authenticity of those goods
    through brand-name association. In a brick and mortar environment,
    these brand names are supplemented by additional protections, like the
    fact that the storefront serves as a strong indication of legitimacy.
    On the Internet, however, these additional protections disappear. In
    cyberspace, the only indication of source or authenticity a consumer
    has is what they see on the website when they log on, and legitimate
    and illegitimate sites may be indistinguishable in cyberspace. In fact,
    a famous mark in a domain name may be the primary source indicator for
    the online consumer. So if a bad actor is using that famous name, an
    online consumer is at serious risk of being defrauded, are they not?
        Answer 1. Absolutely. When consumers walk into a typical store or
    business, consumers can often tell by the storefront and by looking at
    the tangible products whether they are dealing with a reputable
    business. This is not so on the Internet where any huckster with
    Internet access and a little knowledge about computers can set up a
    storefront online and sell counterfeit products.
        Many cyberpirates set up storefronts like PORSCHECAR.COM and then
    sell hardcore pornography when consumers enter. For example, there is a
    website that uses a variation of the trademark Disney'. This
    website is especially pernicious because it lures unsuspecting children
    who may misspell Disney and then be trapped. Some porn sites employ
    technology, which refuses to allow Internet users to exit once they
    unknowingly enter the site until the user turns off the computer.
        Domain names are much like storefront signs or even company names.
    Recent court decisions have begun to recognize that an Internet domain
    name is the functional equivalent of a company name. For example, the
    Eastern District of Virginia recently held: ``Thus, a domain name is
    more than a mere Internet address. It also identifies the Internet site
    to those who reach it, much like * * * a company's name identifies a
    specific company.'' Cardservice International, Inc. v. McGee, 960
    F.Supp. 737, 741 (E.D.Va. 1997), aff'd, 129 F.3d 1258 (41 Cir. 1997).
    The law is well settled that the misappropriation of a trademark, or a
    variation of a trademark, in a business name dilutes and infringes
    trademarks. See, e.g., Porsche Cars North America, Inc. v. Manny's
    Porshop, Inc., 972 F.Supp. 1128 (N.D.Ill. 1997) (enjoining use of the
    name ``Manny's Porshop'' because it diluted and infringed the world
    famous trademark Porshe'); Cardservice, 950 F.Supp. at 741
    (minor differences in a domain name between the registered mark and the
    unauthorized use of the mark do not preclude liability under the Lanham
    Act).
        Even if a consumer goes to a web site and then is able to determine
    that the web site is not affiliated with the trademark holder, the
    consumer is still defrauded. A good example is a consumer traveling
    along the Interstate. The consumer sees a huge sign for a Chevron gas
    station at the next exit and takes the exit to fill up his or her car
    with his or her Chevron credit card. When the consumer takes the exit
    and goes over to the sign, the consumer is surprised to learn that
    there is no Chevron gas station, but rather finds Joe Schmoe's Gas &
    Repair. The consumer is still defrauded, inconvenienced, and harmed,
    even though the consumer quickly figures out that it is not a real
    Chevron gas station. Joe Schmoe has taken advantage of both the
    consumer and Chevron. This is exactly what cyberpirates do on
    information superhighway.
        Moreover, the trademark laws strongly condemn the practice of
    ``initial consumer confusion,'' where infringers use famous trademarks
    to attract the consumers' attention to their business, even if the
    consumer ultimately determines that the infringer's business is not
    sponsored by or affiliated with the trademark holder. The law is well
    settled that the use of a trademark or trade dress as an ``attention
    getting symbol'' or device is not fair use. E.g., Sands, Taylor & Wood
    Co. v. Quaker Oats Co., 978 F.2d 947, 954 (7th Cir. 1992), cert. denied
    507 U.S. 1042 (1993) (quoting McCarthy Sec. 11:46, at p. 11-82). As
    Judge Barry recently held in Liquid Glass Enterprises v. Dr. Ing.
    h.c.F. Porsche AG, 8 F.Supp.2d 398, fn 4 (D.N.J. 1998):

              Analysis of consumer confusion may be based upon initial
            confusion, not necessarily whether, after closer examination,
            the consumer would likely figure out that [the infringer] is a
            separate company. See Ferrari S.p.A Fabriche Automobili E Corse
            v. Roberts, 944 F2d 1235, 1245 (6th Cir. 1991) (Lanham Act
            intended to do more than protect consumers at the point of
            sale), cert. denied, 505 U.S. 1219 (1992); Mobil Oil Corp v.
            Pegasus Petroleum Corp., 818 F.2d 254, 260 (2d Cir. 1987)
            (likelihood that ``potential purchasers would be misled into an
            initial interest'' justifies finding of infringement); Clinique
            Laboratories, Inc. v. Dep Corp., 945 F.Supp. 547, 551 (S.D.N.Y.
            1996) (a ``court may find infringement has occurred based on
            confusion that creates initial customer interest, even if no
            final sale is completed as a result'').

        Question 2. Each of the witnesses raised the issue of warehousing
    of domain names. Can you highlight for us how big a problem warehousing
    is and exactly what the harm to trade mark owners is from someone
    registering a mark and then simply sitting on it? Second, could you
    also comment on whether the registration of a single domain name might
    ever be so harmful as to merit a remedy?
        Answer 2. Warehousing of domain names is an enormous problem.
    Cybersquatters warehouse hundreds, and sometimes thousands of Internet
    domain names. Warehousing causes several problems to trademark holders
    even though the cyberpirate may not have an operational web site.
    First, warehousing domain names prevents the trademark holder from
    using that domain name. The cyberpirate who registered PORSCHECLUB.NET
    claims that Porsche is not being harmed by his ``mere registration'' of
    the domain name. Porsche, however, cannot use PORSCHECLUB.NET in
    connection with the many authorized Porsche Clubs around the world who
    want to use this particular domain name. The cyberpirate who
    misappropriated CALLAWAYGOLFBALL.COM at one time had over 20,000 names.
    If Callaway Golf wants to launch a new line of products such as
    Callaway Golf Balls, Callaway Golf will be precluded from using this
    domain name even though the cybersquatter is just sitting on the name.
        Recently, William Finkelstein, General Counsel of Pepsico, Inc.
    reported to me the following experience. Pepsi was going to launch a
    new star wars theme and wanted to keep the name of one of the
    characters that Pepsi intended to use on a website confidential. Thus,
    he registered the Internet domain name by using his own name, his home
    address, and his home telephone number. Within hours of Pepsi
    announcing the theme and character, he received a telephone call from a
    cyberpirate at home who told him that Pepsi had just launched an
    advertising campaign using that exact domain name, that the cyberpirate
    had attempted to register the domain name and discovered that Mr.
    Finkelstein had already registered the domain name, and would Mr.
    Finkelstein like to join with the cyberpirate in extorting money out of
    Pepsi. If that domain name had not been registered and Pepsi had gone
    to register the domain name later, Pepsi would have been precluded from
    using the domain name for its Star War campaign even though the
    cyberpirate may not have put an operational website at the domain name.
        Second, warehousing causes intolerable monitoring problems. Famous
    trademark holders must constantly monitor such warehoused domain names
    to make certain that they are not being used for an improper purpose.
    It takes only the stroke of a key on a computer to activate a domain
    name with an operational web site. I actually received a phone call
    from a cyberpirate who told me to type in a domain name that included
    Porsche'. When I typed the domain name in, the screen was
    blank. He asked what I could see and I said the screen was blank. He
    then said, watch this, and instantaneously put up a porn site. He then
    said, watch this, and took it down. He then put it up again and asked
    how much Porsche was willing to pay to stop him from using the domain
    name. Within seconds, a cyberpirate can turn a warehoused domain name
    into a website that can irreparably harm a famous trademark holder
    throughout the world.
        Third, many savvy Internet consumers use databases such as Whois,
    Saegis, and others to look up and locate companies and organizations
    through reverse searches. Thus, if an Internet user wanted to find
    information about a Porsche Club and used Whois database to try to
    contact the Porsche Club who had registered PORSCHECLUB.NET, the user
    would discover not a Porsche Club, but the fictitious address of a
    cyberpirate.
        Finally, the registration of even a single domain name could be
    very harmful. If the cyberpirate of PORSCHE.COM had only registered
    PORSCHE.COM and not the many other domain names that he had registered
    including the NEWYORKYANKEES.COM, Porsche would have been irreparably
    harmed because Porsche could not use this web site for itself. One
    particular cyberpirate registered one domain name--
    BELLATLANTICMOBILE.COM and refused to transfer ownership back to Bell
    Atlantic. Bell Atlantic was forced to file suit and currently, the
    registration of this one domain name has prevented Bell Atlantic Mobile
    from doing business under its rightful name. If a cybersquatting law
    applied only to infringers who registered multiple domain names, these
    sophisticated criminals would simply use a different name and address
    for each domain name they register to avoid liability.

        Question 3. One of the issues that has been discussed in the
    context of cybersquatting legislation is the provision of false
    information by domain name registrants when registering domain names
    and what weight, if any, should be given to such conduct in determining
    whether the registrant should be liable to the trademark owner as a
    cybersquatter. Some would suggest that the provision of false
    information is a strong indicator of bad faith and should be explicitly
    stated as such in the legislation. Others express concern that to do so
    might unintentionally extend the penalties of the bill to those who
    provide such false information mistakenly or for reasons unrelated to
    cybersquatting. Following up on the previous question, then, if we were
    to prohibit multiple registrations, but exempt single instances, and
    not require truthful information to be provided when registering a
    domain name, wouldn't this provide a blue print for avoiding liability
    by encouraging people to register each domain name under a different
    alias?
        Answer 3. Absolutely. As set forth in the previous answer,
    cyberpirates are sophisticated and will simply use a different name and
    address for each domain name. Because cyberpirates can pay for domain
    names with credit cards, real names and street addresses are not
    necessary for registering domain names. For example, the cyberpirate
    who registered PORSCHEDESIGN.COM uses the following fictitious address:

              netcross.com.
              P.O.BOX 1178
              SANDAKAN, SABAH 90713
              MY

    This cyberpirate could change the name to Dr. David Porsche and change
    the address to the UK for the next domain name and so on.

        With regard to the unintentional error such as the innocent
    transposition of numbers in a telephone number, we must remember that a
    court will be applying the statute on a case-by-case basis. I find it
    hard to believe that a court would impose liability based upon an
    innocent transposition of a telephone number by an innocent registrant.
    If the court, however, concluded that the cybersquatter inserted
    materially false information in the application, the court could then
    correctly conclude that the cybersquatter provided fictitious
    information and was acting in bad faith. This factor would also be
    considered along with others, including the possibility that the
    cybersquatter had inserted false information in other domain name
    applications for trademarks belonging to third parties.

        Question 4. Mr. Phillips mentioned the recent Porsche case, in
    which the court failed to find authorization for in rem jurisdiction
    under the Lanham Act for trademark dilution cases. Do you read the
    Porsche case as an invitation to Congress to provide this sort of
    remedy for these cases? Can you also comment on the need for this type
    of remedy and how this will help trademark owners better police their
    marks on the Internet? Can you also share with the Committee your
    thoughts with respect to the court's discussion of due process issues
    related to in rem proceedings and whether the Hatch-Leahy draft
    adequately addresses the concerns expressed in the Porsche case?
        Answer 4. The Porsche case invites Congress to provide for in rem
    Jurisdiction. The Eastern District of Virginia recognized the
    ``dilemma'' that Porsche was facing with cybersquatting, and held that
    ``the mere act of registration [of domain names using the trademark
    Porsche'] creates an immediate injury by preventing Porsche
    from utilizing those domain names itself in order to channel consumers
    to its own web site. Customers might try to contact Porsche through
    `PORSCHE.NET,' for example, only to find that they have reached a `dead
    end' on the Web and then to conclude that the strength of Porsche's
    brand name is not as great as they first thought.'' Porsche Cars North
    America, Inc. et al. v. PORSCH.COM, et al., --F.Supp.2d--, 1999 WL
    378360 (E.D.Va. 1999).
        The court, however, ruled that because the Lanham Act does not have
    a specific in rem provision, Porsche could not proceed in rem. In other
    words, the court held that until Congress enacted an in rem provision
    in the Lanham Act, the court could not allow such jurisdiction.
        In rem jurisdiction is absolutely essential to battling
    cyberpiracy. As cyberpirates continue to use fictitious information in
    registering domain names, register domain names through offshore
    companies, transfer domain names to persons or entities in Libya, Iran,
    Belarus, or register domain names using addresses in such locations,
    famous trademark holders are left without a remedy. In its Interim
    Report, WIPO noted: ``such registration practices and the ``absence of
    reliable and accurate contact details leads to a situation in which the
    intellectual property rights can be infringed with impunity on a highly
    visible public medium.'' WIPO Interim Report at 14-15.
        In addition, the sheer number of instances of cyberpiracy prevents
    famous trademark holders from filing hundreds of in personam lawsuits.
    In this regard, WIPO recently concluded:

              existing mechanisms for resolving conflicts between trademark
            owners and domain name holders are often viewed as expensive,
            cumbersome and ineffective. The sheer number of instances
            precludes many trademark owners from filing multiple suits in
            one or more national courts.

    WIPO Interim Report at 33 (emphasis added).

        Porsche is a perfect example. Porsche simply does not have the
    resources to file 300 in personam lawsuits throughout the world against
    the 300 cyberpirates who have misappropriated the trademark
    Porsche' in domain names. Nor would such suits be successful
    in many cases because the defendants cannot be found. By proceeding
    against the infringing domain names directly, Porsche hoped to avoid
    the intractable problems associated with pursuing in personam actions
    against hundreds of defendants who would be difficult, if not
    impossible, to identify and locate. Indeed, Porsche submits that if
    Porsche were confined to the traditional mechanism of filing hundreds
    of in personam lawsuits throughout the world, its federally protected
    rights against dilution would be thwarted and it would be left without
    a remedy.
        In rem jurisdiction would also benefit the judicial system. Rather
    than clog the court system with hundreds of in personam. lawsuits
    throughout the country, famous trademark holders could file a single in
    rem lawsuit against hundreds of domain names at a time and resolve the
    issues in a single proceeding.
        Finally, the court's purported due process concerns were illusory
    and simply a half-hearted attempt to justify the court's decision. In
    an in rem lawsuit, the plaintiff's claims are necessarily limited to
    only the property. Thus, in the Porsche lawsuit, Porsche did not, and
    could not, assert claims for damages or attorneys' fees against the
    registrant. Porsche's claims were strictly limited to cancellation and/
    or transfer of the domain names. Nothing more was, nor could be, at
    stake.
        Specifically, the court asserted that ``courts generally cannot
    exercise in rem jurisdiction to adjudicate the status of property
    unless the Due Process Clause would have permitted in personam
    jurisdiction over those who have an interest in the res.'' Id. at 11-12
    (citing Shaffe, 433 U.S. at 207). Despite this initial premise, the
    court stopped short of actually concluding that accepting jurisdiction
    under these circumstances would violate due process, preferring instead
    to warn that it ``might'' do so.
        On closer analysis, the constitutional concern raised by the
    district court is a windmill of its own making for several reasons.
    First, the district court's constitutional doubt is resolved in the
    very opinion that the court cites for its concern. Thus, while the
    Court in Shaffer v. Heitner, 433 U.S. 186 (1977), generally suggested
    that the ``minimum contacts'' test applicable in in personam
    proceedings would also apply in some proceedings quasi-in rem, the
    Court went on to identify several ``circumstances in which the presence
    of property alone might support * * * jurisdiction consistently with
    the requirements of due process.'' James Wm. Moore, 16 Moore's Federal
    Practice Sec. 108.80[2] [a], at 108-109-108-110. Shaffer expressly held
    that such circumstances include cases like this one where ``claims to
    the property itself are the source of the underlying controversy
    between the plaintiff and the defendant.'' 433 U.S. at 207-08. In such
    true in rem actions, Shaffer clearly indicated that due process would
    be satisfied. Id.
        Consistent with this clarification in Shaffer, the Fourth Circuit
    and other courts consistently have held that due process is satisfied
    in true in rem proceedings designed to resolve the parties' competing
    claims to property within the district. In R.M.S. Titanic, Inc. v.
    Haver, 171 F.3d 943, 957-58 (4th Cir. 1999), for example, the Fourth
    Circuit sustained the district court's ``constructive'' in rem
    jurisdiction ``to adjudicate salvage rights'' with respect to the
    R.M.S. Titanic wreck site. In so doing, the Fourth Circuit indicated
    that ``personal jurisdiction need not be exercised in a pure in rem
    proceeding because, in the simplest of terms, a piece of property and
    not a person serves as the defendant.'' Id. at 957. The R.M.S. Titanic
    court further explained that `` [i]n rem actions only require that a
    party seeking an interest in a res bring the res into the custody of
    the court and provide reasonable, public notice of its intention to
    enable others to appear in the action to claim an interest in the
    res.'' Id.
        The district court reached a similar conclusion in Chapman v. Vande
    Bunte, 604 F. Supp. 714, 716-17 (E.D. N.C. 1985). Plaintiff in Chapman
    had entered into a contract with defendant (while both parties resided
    in Michigan) under which each party would acquire ``a one-half
    undivided interest in artifacts theretofore and thereafter removed by
    Treasure Salvors, Inc. * * * from the shipwreck believed to be the
    Santa Margarita.'' Id. at 715. After plaintiff subsequently moved to
    North Carolina and took with her property removed from the shipwreck,
    she filed an in rem action in North Carolina ``seeking sale of personal
    property * * * belong[ing] equally to the parties and the division of
    the proceeds thereof.'' Id. at 714. In rejecting defendant's argument
    that the court ``should not be allowed to inconvenience him and cause
    him attendant expense absent any contact by him with the North Carolina
    forum,'' the district court clearly indicated that true in rem actions
    are consistent with due process:

              North Carolina has a legitimate governmental interest in the
            title to any chattel brought within its borders. Each state has
            the constitutional authority to make its own laws with respect
            to persons and events within its own borders, [citation
            omitted], and any dealing with the artifacts in question in
            North Carolina is an event within said state. The presence of
            this governmental interest in the context of an in rem
            proceeding insures compliance with the Due Process Clause. * *
            * In rem jurisdiction must exist, at times, without regard to
            the contact of individuals to the jurisdictional forum. In a
            true in rem proceeding, in order to subject property to a
            judgment in due process requires only that the property itself
            have certain minimum contacts with the territory of the forum.
            * * *

    Id. at 716; accord James Wm. Moore, 16 Moore's Federal Practice
    Sec. 108.80[2][a], at 108-109-108-110 (``Presence of property within
    the forum state, by itself, generally will be a sufficient basis for
    jurisdiction in actions to determine interests in that property.'');
    Wright & Miller, 4 Federal Practice and Procedure Sec. 1072, at 440-41
    (noting that the presence of property within a state is itself a
    sufficient contact to satisfy due process ``when the property within
    the state is itself the subject matter of a dispute,'' and that ``the
    Shaffer opinion suggests that the Court had no intention to disturb the
    assertion of jurisdiction in in rem or quasi-in-rem. actions of this
    type'').

        Question 5. I think we can all agree that abusive domain name
    registrations, when done for commercial gain, should clearly be
    actionable. Can you give us an example, if there is one, of a case
    where the registration of a trademark as a domain name is done for
    noncommercial purposes yet should be actionable under a cybersquatting
    statute?
        Answer 5. As I explained above, cyberpirates are becoming more
    sophisticated, read the case law and then figure ways around it.
    Cyberpirates attempt to dress up their cyberpiracy in the cloak of
    noncommercial use. For example, the cyberpirate who had registered
    CALLAWAYGOLFCLUBS.COM told me that he had intended to put up a web page
    showing a picture of him with his Callaway Golf Clubs and letting his
    family and friends know how much his Callaway Golf Clubs had lowered
    his handicap. He would then wait for Callaway Golf to approach him to
    get the domain name. If Callaway Golf sued him before offering to buy
    the domain name, he would then argue that he was not engaged in any
    commercial activity, and that this was simply a ``fan site'' for
    Callaway Golf.
        Many times, cybersquatters simply put an ``under construction'' web
    site at the domain name, and will argue that there is no commercial
    activity on the site, the site is going to be a ``fan site,'' or other
    noncommercial speech site and the Lanham Act is not triggered.
        Even though the Eastern District of Virginia dismissed Porsche's in
    rem lawsuit, the court did hold that ``the mere act of registration [of
    domain names using the trademark Porsche'] creates an
    immediate injury by preventing Porsche from utilizing those domain
    names itself in order to channel consumers to its own web site.''
    Porsche Cars North America, Inc. et al. v. PORSCH.COM, et al.,--
    F.Supp.2d--, 1999 WL 378360 (E.D.Va. 1999).

        Question 6. i think we can also agree that an Internet service
    provider or a domain name registrar or registry that cancels or freezes
    a domain name pursuant to a court order or a reasonable policy
    prohibiting abusive domain name registrations should not be liable to
    the domain name holder for such actions. Some have suggested that
    service providers and registrars and registries should similarly be
    immune from liability to the trademark owner for the registration of
    the offending domain name in the first instance, absent some sort of
    bad faith. Can you comment on this suggestion?
        Answer 6. A registrar should not be required to monitor the
    registration of domain names. As a general matter, unless the registrar
    is engaged in bad faith or actively participates in the infringing
    conduct, the registrar should not be liable. As the number of
    registrars increases, there are certain to be some bad actors. Already,
    certain registrars for cyberpiracy havens such as Tonga encourage the
    registration of domain names using famous trademarks in country codes
    such as .TO or .CC. If registrars engage in such conduct, such
    registrars should be liable.
        The law, however, must preserve the incentives for Registrars to
    cooperate with trademark holders by creating and enforcing a policy
    designed to prohibit the act of cybersquatting. For example, when I
    contacted Network Solutions about the porn site at PORSCHECAR.COM,
    Network Solutions refused to cancel the domain name because it feared a
    lawsuit by the registrant, and even though Network Solutions
    acknowledged that the Porn site was damaging Porsche. If the registrar
    were required to adopt a policy prohibiting cybersquatting and was at
    the same time immune from claims by the registrant or trademark holder,
    Network Solutions could then cancel the domain name without risking of
    liability.
                                     ______

        Responses of Gregory D. Phillips to Questions From Senator Leahy

        Question 1. Network Solutions Inc. announced this week that it is
    changing its policy, which has been in place for over five years,
    allowing people to register domain names without paying for up to 60
    days. Many have suggested that this policy encouraged cybersquatting
    because people could register for dozens of domain names without any
    investment or payment of any money. What effect, if any, do you think
    this policy change will have on the cybersquatting problem?
        Answer 1. Prepayment is certainly a step in the right direction but
    it will not have any appreciable impact on cybersquatting.
    Cybersquatters are well funded and usually pay for the domain names up-
    front. The low fee of $70, which will likely continue to decrease as
    competition is introduced, ensures that it is still highly profitable
    for cybersquatters to misappropriate well known trademarks. Although
    the new policy, will knock out some of the cybersquatters, without
    appropriate legislation, the practice will continue. There is just too
    much money to be made in cybersquatting to risk having a domain name
    canceled because of non-payment. Moreover, most cybersquatters
    recognize that they will be holding on to the domain names for longer
    than 60 days. It simply takes longer than 60 days to obtain a return on
    the investment of cybersquatting.

        Question 2. The World Intellectual Property Organization (WIPO) and
    other experts have defined the cybersquatting problem as the abusive
    registration of another person's trademark as a second level domain
    name.

        a. Should legislation intended to address the problem of
    cybersquatting limit itself to dealing with the registration of second
    level domain names and, if not, why not?
        T3b. Please identify any other way in which a domain name may be
    used that could infringe a trademark and lead to consumer confusion.
        Answer 2a. The legislation should not be limited strictly to
    second-level domain names, but should include an appropriate definition
    of the term ``domain name identifier.'' If cybersquatting is limited
    only to second level domain names, cyberpiracy will just move to the
    left of the dot. The narrow definition could imply that all other forms
    of creative misappropriation are permissible. Cybersquatters will then
    use this loophole to find creative ways to continue confusing the
    public and extorting trademark owners.
        Answer b. For example, if a cybersquatter was selling counterfeit
    Porsche parts to U.S. consumers at Porsche.co.il (the country code for
    Israel), this use would not technically qualify as a second level
    domain. All Israeli Internet addresses are structured in this manner.
    It would not be sensible to prohibit the use of getchanel.com, yet
    permit get.chanel.com. Cyberpirates will also start registering domain
    name identifies such as PORSCHE@GEOCITIES.COM etc as sites in which to
    freely perpetrate cybercrimes.

        Question 3. As we consider legislation to address the
    cybersquatting problem, should we make sure that First Amendment free
    speech rights are fully protected and that we in no way chill the right
    of Internet users to both post and access so-called ``protest sites''
    that are set up to protest or complain about a particular company's
    products, services or business practices?
        Answer 3. The First Amendment is a vital concern and must
    absolutely be considered. To engage in protected speech or even
    anonymous speech, the Chinese dissident, however, need not use a famous
    trademark such as Porsche' to make his or her point. In
    fact, a Chinese dissident could register, even after the proposed
    legislation with a false information provision is enacted, the domain
    name CHINESEDISSIDENT.COM using fictitious information. That domain
    name does not infringe on any trademark and no trademark holder would
    ever any reason to attempt to pursue the Chinese dissident. The Chinese
    dissident can also register an anonymous e-mail address through any
    service provider such as AOL and send anonymous messages. Such an e-
    mail account in no way involves the use of a trademark in a domain
    name.
        Many times, cyberpirates use the First Amendment to shield their
    cyberpiracy. Porsche recently encountered a porn site at
    PORSCHESUCKS.NET. The cyberpirate said that the First Amendment
    protected his right to put hardcore pornography at the website. The
    cyberpirate further argued that his use of PORSCHESUCKS.NET was
    protected by the ``fair use'' doctrine. He asserted that the domain
    name was simply descriptive of the activity that took place at the porn
    site which purportedly featured the exploits of the porn star Lynn
    Porsche.
        Famous trademark holders can have no objection to parody, satire,
    editorial, criticism and other forms of expression. If a person wants
    to criticize or make fun of a company such as Porsche at his own web
    site HOLMGREEN.COM, Porsche cannot object.
        The law, however, is well settled that one cannot use a trademark
    to identify the source of the criticism. Planned Parenthood, 1997 WL
    133313, *11 (```When another's trademark * * * is used without
    permission for the purpose of source identification, the trademark law
    generally prevails over First Amendment. Free speech rights do not
    extend to labelling [sic] or advertising products in a manner that
    conflicts with the trademark rights of others.''') (quoting Yankee
    Publishing, Inc. v. News America Publishing, Inc., 809 F.Supp. 267
    (S.D.N.Y. 1992)). In short, registrants may disparage and criticize
    famous trademark holders, but they do not have the right to use the
    famous trademarks to identify their potential web sites. See Dallas
    Cowboy Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200 (2d
    Cir. 1979) (the right to convey a message does not entitle defendant to
    appropriate plaintiff's trademark in conveying that message); Walt
    Disney Prod. v. The Air Pirates, 581 F.2d 751, 758 (9th Cir. 1978)
    (``Because the defendants here could have expressed their theme without
    copying Disney's protected expression, Sid & Marty Krofft requires that
    their First Amendment challenge be dismissed.''); San Francisco Arts &
    Athletics v. United States Olympic Committee, 483 U.S. 522 (1987) (the
    First Amendment does not give defendant the right to appropriate
    plaintiff's statutorily granted ``Olympic'' designation in the name
    ``Gay Olympics'' for an event not sponsored by plaintiff).
        ``[T]he cry of `parody!' does not magically fend off otherwise
    legitimate claims of trademark infringement or dilution.'' Dr. Seuss
    Enterprises, L.P. v. Penguin Books USA, Inc. 109 F.3d 1394, 1405 (9th
    Cir. 1997). ``A defendant's claim of parody will be disregarded where
    the purpose of the similarity is to capitalize on a famous mark's
    popularity for the defendant's own commercial use.'' Grey v. Campbell
    Soup Co., 650 F. Supp. 1166, 1175 (C.D.Cal.1986), aff'd, 830 F.2d 197
    (9th Cir. 1987). Moreover, one cannot use the trademark of another in
    the context of parody or disparagement. Mutual of Omaha Ins. Co. v.
    Novak, 648 F. Supp. 905, 910 (D.Neb. 1986), aff'd, 836 F.2d 397 (8th
    Cir. 1987), cert. denied, 488 U.S. 933, 109 S. Ct. 326, 102 L.Ed.2d 344
    (1988) (enjoining ``Mutant of Omaha'' as violation of the ``Mutual of
    Omaha'' mark); Coca-Cola Co. v. Gemini Rising, Inc., 346 F. Supp. 1183
    (E.D.N.Y. 1972) (``Enjoy Cocaine'' held to violate COCA COLA trademark
    when used in same style as COCA COLA logo); American Exp. Co. v. Vibra
    Approved Laboratories Corp., 1989 WL 39679, 10 U.S.P.Q.2d 2006
    (S.D.N.Y., Apr. 19, 1989) (image of American Express card and phrase
    ``don't leave home without it'' on condoms held to dilute
    distinctiveness of AMERICAN EXPRESS marks).

        Question 4. Do you support S. 1255, the Anti-cybersquatting and
    Consumer Protection Act, as introduced or would you recommend that
    changes be made to this bill? If so, what changes would you suggest?
        Answer 4. I understand from the hearing that changes will soon be
    made to S. 1255. I would support a number of changes to the bill,
    including the inclusion of explicit recognition for the in rem cause of
    action and further clarification on the types of factors a court can
    consider to determine bad faith.

        Question 5. I am interested in your views about how well the courts
    have been handling the cybersquatting problem under current trademark
    law. Professor Froomkin states in his written testimony that, ``In
    every case involving a person who registered large numbers of domains
    for resale, the cybersquatter has lost.'' Do you dispute that
    statement?
        Answer 5. While courts have recognized in several cases that
    cybersquatting violates the trademark laws, the issue is not at all
    settled. In many cases, the courts have had to stretch existing
    concepts such as ``commercial use'' to address the problems associated
    with cybersquatting. Professor McCarthy has described this stretching
    as follows:

              When a company reserves its competitor's trademark as a
            domain name, a court may overlook the legal niceties and enjoin
            use of the domain name even though defendant has as yet no web
            site identified by the domain name. The thinking apparently is
            that it is only a matter of time until such a defendant opens a
            web site under the domain name and that web site will
            inevitably be deceptive.

    McCarthy on Trademarks Sec. 25:76 (emphasis added)

        Of significant importance is the Porsche lawsuit. In that lawsuit,
    the Eastern District of Virginia ruled that even though Porsche was
    being harmed by the mere registration of domain names using the world
    famous trademark Porsche', and even though Porsche could not
    find many of the registrants of the domain names to effect service of
    process, Porsche was not entitled to proceed in rem because the Lanham
    did not allow such in rem jurisdiction. The court invited Congress to
    amend the Lanham Act to provide for such in rem jurisdiction. Even if a
    trademark owner can prevail after spending tens of thousands of dollars
    in each case against a cybersquatter, it has been extremely rare for
    the trademark holder to recover damages or even its costs. This problem
    combined with the hundreds of infringement matters that well known
    trademark owners face each year has discouraged the use of litigation
    as an effective remedy. The legislation will help provide an important
    deterrent to the act of cybersquatting and will enable the trademark
    holder to recover losses associated with the damage to the goodwill of
    its valuable trademarks.

        Question 6. S. 1255 would make the registration of a domain name
    that is the trademark, or similar to the trademark, of another person
    illegal per se. This could make the warehousing of domain names illegal
    in many instances, and would make a significant change in current law.
        (a). Do you support a change in law that would make the mere
    registration of a domain name that is another's trademark, without
    more, illegal?
        (b). There are situations where a company plans to purchase another
    company and, in contemplation of the deal, registers a domain name with
    both companies' names. This name is warehoused until the deal is
    completed. Would a law that makes the mere registration of a domain
    name, which is also another's trademark, illegal and also make
    legitimate business practices such as the one I described illegal?
        Answer 6 (a). As set forth above in answer to Senator Hatch's
    question 2, mere registration of an Internet domain name in bad faith
    causes irreparable harm to the trademark holder and should be illegal.
    First, such bad faith registration prevents the trademark holder from
    using the domain name itself or to link to its official website.
    Second, such registration requires the trademark holder to constantly
    monitor the domain name. As set forth above, the cyberpirate who was
    displaying hardcore pornography at an inoperable website using
    Porsche' could turn the website on and off with the stroke
    of a key. Finally, mere registration causes consumer confusion and
    dilution as Internet users use the various databases to locate
    trademark holders through reverse searches.
        Answer 6 (b) No. A trademark holder would not object to the
    registration of a domain name for a proper business purpose. Thus, in
    the example that you mention, both companies would most likely
    encourage the registration of such a domain name, particularly with the
    realization that if one of the two companies did not immediately
    register the domain name, a cyberpirate would beat them to it.\2\ If
    the company that was being purchased objected to the registration of
    the domain name and filed a lawsuit, which it most likely would not,
    the purchasing company would have a good ``fair use'' defense: We
    registered this domain name in anticipation of the acquisition and to
    prevent a cyberpirate from beating us to the punch.
    ---------------------------------------------------------------------------
        \2\ Dan Noonan, in-house counsel for Dell Computers, reports that
    on July 19, 1999, Dell Computers announced the commencement of
    DELLAUCTIONS.COM. Within hours, cyberpirates had registered several
    variations of this domain name including DELL- AUCTIONS.COM and
    DELLAUTIONS.COM.
    ---------------------------------------------------------------------------
                                     ______

       Responses of Gregory D. Phillips to Questions From Senator Abraham

        Question 1. If a bad actor is using a ``famous name'' as a domain
    name, how would an online consumer determine whether or not a website
    is authentic? What problems do you foresee for consumers if famous
    marks are not protected from infringement in domain names?
        Answer 1. As set forth above in Porsche's answer to Senator Hatch's
    Question No. 1, it sometimes is impossible for a consumer to determine
    whether a website is authentic. Some porn sites that use famous
    trademarks make it virtually impossible to even exit the website
    attempting to lure in and keep unsuspecting Internet users,
    particularly children.
        Moreover, as set forth above in the Chevron example in my answer to
    Senator Hatch's Question No. 1, even if the consumer eventually
    determines that the website is counterfeit, the consumer has been
    deceived, has wasted his or her time, and the trademark holder has been
    damaged. The trademark laws strongly condemn the practice of ``initial
    consumer confusion.''

        Question 2. Would you highlight for us how big a problem
    warehousing is, and explain the harm to trademark owners caused by
    someone registering a domain name and then simply letting it sit idle?
        Answer 2. As set forth above in Porsche's Answer to Senator Hatch's
    Question No. 2, warehousing is an overwhelming problem and trademark
    holders are harmed by the mere registration of domain names.
    Warehousing prevents trademark holders from using the domain names to
    direct traffic to their sites. Warehousing forces trademark holders to
    constantly monitor the domain names because a website can be put up and
    broadcast throughout the world in a matter of seconds. Finally,
    Internet users use databases such as Whois to conduct reverse searches
    to locate companies.
        As the Eastern District of Virginia recently held: ``the mere act
    of registration [of domain names using the trademark
    Porsche' creates an immediate injury by preventing Porsche
    from utilizing those domain names itself in order to channel consumers
    to its own web site. Customers might try to contact Porsche through
    `PORSCHE.NET,' for example, only to find that they have reached a `dead
    end' on the Web and then to conclude that the strength of Porsche's
    brand name is not as great as they first thought.'' Porsche Cars North
    America, Inc. et al. v. PORSCH.COM, et al.,--F.Supp.2d--, 1999 WL
    378360 (E.D.Va. 1999).

        Question 3. Some have suggested that Congress should prohibit
    multiple registrations of another's trademark, but exempt single
    instance, allowing a cybersquatter ``one free bite at the apple.'' In
    your view, could the registration of a single domain name ever be so
    harmful so as to merit a remedy? Would you please comment on whether
    you think a prohibition only of ``multiple registrations'' would be
    workable in practice?
        Answer 3. See Answer to Question 2 of Senator Hatch. If a
    cyberpirate registered a single name such as COCACOLA.COM, PEPSI.COM,
    IBM.COM, DELLCOMPUTER.COM, AOL.COM etc., such registration would cause
    tremendous harm to these companies because these companies would be
    prevented from using these domain names themselves. A remedy would
    certainly be warranted in such a situation.
        Giving one free bite at the apple and only prohibiting multiple
    registrations will simply cause cyberpirates to register one domain
    name per fictitious name and address to avoid liability. Cyberpirates
    are sophisticated and will figure out ways to beat the system.

        Question 4. The substitute draft does not require that a domain
    name registrant provide accurate identification information. Would you
    please comment on the positives and negatives of such a provision, and
    explain the impact such a provision would have on cybersquatting?
        Answer 4. Accurate identification information is absolutely
    essential, for both trademark holders and also in the area of copyright
    piracy. Copyright holders, for example, need to be able to locate
    immediately who is operating websites where Internet users can download
    pirated copies of computer software, music, movies, and other
    counterfeit products.
        Moreover, as set forth above in Answers to Senator Hatch's
    Questions 3 & 4, cyberpirates use fictitious identification information
    to insulate themselves from legal recourse. As WIPO recently noted:
    ``such registration practices and the ``absence of reliable and
    accurate contact details leads to a situation in which the intellectual
    property rights can be infringed with impunity on a highly visible
    public medium.'' WIPO Interim Report at 14-15.
                                   conclusion
        As technology advances, and intellectual property rights in such
    technology develop, the law protecting and governing such technology
    and property rights must also advance and develop. The United States
    Senate must provide guidance and leadership in high tech, cutting edge,
    intellectual property matters throughout the world. As the Internet
    increases in commercial importance, the United States must ensure that
    commerce can be safely and appropriately conducted on the Internet
    throughout the world.
        Again, thank you for allowing Porsche to bring these important
    matters to your attention. We sincerely hope that the information
    provided in this letter assists you in enacting legislation that
    protects the invaluable rights of famous trademark holders such as
    Porsche Cars. Please let me know if we can provide any additional
    information.
                Sincerely yours,
                                   Gregory D. Phillips.
                                   __________

       Responses of Christopher D. Young to Questions From Senator Hatch

        Answer 1. Yes. If a so-called ``bad actor'' is using a famous name,
    consumers are bound to be confused. You need only to refer to the
    examples in my testimony to see how easily this could happen.

        Answer 2. Warehousing is a major issue on the Internet. My fellow
    witness from INTA is better equipped to answer the legal questions
    regarding harm to the trademark owners and remedies needed.

        Answer 3. Again, I defer to the witness from INTA to answer this
    question.

        Answer 4. NA (Question is directed specifically to Mr. Phillips)

        Answer 5. Cyveillance encounters many forms of abuses on the
    Internet, however our clients are most concerned with abuses that are
    connected to commercial uses. Because we typically focus almost totally
    on commercial uses, at the request of our clients, I am not equipped to
    discuss examples of a domain name being used for noncommercial
    purposes.

        Answer 6. Our clients have found service providers to be very
    cooperative. I cannot comment specifically on whom the liability should
    fall. This is being debated by my counterparts within INTA and
    throughout the industry.
                                     ______

       Responses of Christopher D. Young to Questions From Senator Leahy

        Answer 1. This is a positive change and may serve to dissuade some
    would-be cybersquatters.

        Answer 2(a). This is a legal question that I am not qualified to
    answer.

        Answer 2(b). As per my testimony, cybersquatters will essentially
    hijack a well-known company's name so they can:

      (1) sell it for a profit;
      (2) drive traffic to sell goods or services [counterfeit,
        unauthorized, ancillary or unrelated sales and pornographic] or
      (3) voice an opinion.

        Answer 3. It is important that freedom of speech not be hindered on
    the Internet.

        Answer 4. I am in support of S. 1255 and the Hatch-Leahy substitute
    bill.

        Answer 5. Since I am not an attorney, I defer this question to the
    other two witnesses.

        Answer 6 (a) and (b). Since I am not an expert in trademark, law, I
    wish to defer this question to the two other witnesses.
                                     ______

      Responses of Christopher D. Young to Questions From Senator Abraham

        Answer 1 . As technology improves and people become more proficient
    at Web site development, it becomes more and more difficult to tell
    whether a site is authentic or not. Unlike a street corner in any major
    city where you might see a person selling watches from a card table, on
    the Internet, any small retailer or ``bad actor'' can look as
    professional and legitimate as known companies. They can also disguise
    themselves so that they actually appear to be a company the consumer
    knows and trusts. Additionally, these ``bad actors'' are using tools
    like metatags, hidden text and other techniques (coupled with
    cybersquatting) to lure consumers surfing the Web for well-known
    brands. Our advice to online consumers is to stick to names they know.
    If famous marks are not protected from infringement in domain names,
    the abuses will only proliferate and might ultimately undermine
    consumer trust and hinder the growth of e-Commerce. At the same time,
    we need to be certain that any legislation enacted is done so in a
    manner that does not in and of itself hinder e-Commerce growth.

        Answer 2. Warehousing is a major issue on the Internet. My fellow
    witness from INTA is better equipped to answer the legal questions
    regarding harm to the trademark owners.

        Answer 3. Again, I defer to the witness from INTA to answer this
    question, with regard to the legal ramifications of multiple versus
    single registrations.

        Answer 4. It is my view that requiring a domain registrant to
    provide accurate information would be a benefit to trademark holders
    who are trying to take action against cybersquatters.

                     Additional Submissions for the Record

                                  ----------

                      Prepared Statement of Jessica Litman

        Thank you for the invitation to submit written testimony on
    ``Cybersquatting and Consumer Protection: Ensuring Domain Name
    Integrity.'' My name is Jessica Litmam I am a professor of law at Wayne
    State University. I have been teaching trademark and unfair competition
    law since 1988 and Internet law since 1996. I am a co-author of the
    second edition of JANE C. GINSBURG, JESSICA LITMAN, DAVID GOLDBERG AND
    ARTHUR J. GREENBAUM, TRADEMARK AND UNFAIR COMPETITION LAW: CASES AND
    MATERIALS (1996 & ANNUAL Supplement). This testimony reflects my
    personal views, as a scholar and teacher of trademark and Internet law,
    and in no way represents the views of Wayne State University.
        I would like to express deep reservations about S. 1255, the
    AntiCybersquatting Consumer Protection Act. S. 1255 seeks to address
    the problems created by what the courts have come to term
    ``cybersquatting''--the bad faith registration of multiple domain names
    with the intention of selling them to businesses who failed to register
    them, often at inflated prices. The practice is especially troubling
    when the domain names include trademarks owned by businesses that want
    to operate Internet domains or websites. Although only a small minority
    of cases have actually caused consumer deception,\1\ cybersquatters
    have been a major annoyance to trademark owners and to at least some
    individuals browsing the World Wide Web. Cybersquatting has in fact
    been, so troubling that it has attracted a significant number of
    efforts to solve it, not all of which have been consistent with each
    other. It is important to realize that the problem is well on its way
    to resolution without any legislative intervention. Even if It were
    not, however, the measures included in S. 1255 would not be very
    useful.
    ---------------------------------------------------------------------------
        \1\ One notable exception was Internic Technology's site at
    , which apparently defrauded a significant number of
    domain name registrants. The Federal Trade Commission launched a
    consumer fraud investigation, which resulted in the Australian
    Competition and Consumer Commission's charging Internic Technology with
    deceptive conduct. Internic Technology agreed to surrender the domain
    name and pay monetary reparation to its customers for any deception.
    ---------------------------------------------------------------------------
        When most cybersquatters accumulated their warehouses full of
    domain names, doing so wasn't criminal. Indeed, it wasn't even believed
    to be actionable. During the early years of the World Wide Web, many
    businesses had not yet considered doing business on the Internet, and
    had not investigated registering domain names corresponding to their
    trademarks, so amassing a large number of trademark domain names was
    easy. See Joshua Quittner, Billions Registered, Wired 2.10, October
    1994, at 50. Business speculators registered a bunch of potentially
    valuable domain names as a simple business proposition. Many of the
    speculators did not view their activities as extortion; rather, they
    saw themselves as investors in commodities that they believed would
    turn into valuable business assets.
        The problem of domain name speculators' bad faith registrations of
    domain names incorporating other businesses' trademarks, however, has
    been substantially reduced as a result of efforts by the Internet
    community and the World Intellectual Property Organization to make
    domain name speculation unprofitable. Network Solutions, the entity
    that registers.com domains, has adopted a trademark dispute policy
    under which it will suspend a domain name identical to a registered
    trademark upon complaint from the trademark owner, and has recently
    adopted a policy requiring domain name registrations to pay the
    registration fee in advance, thus discouraging speculative
    registration. The U.S. Department of Commerce has insisted repeatedly
    that the redesigned Internet Domain Name System must incorporate a
    dispute resolution process that gives trademark owners effective
    remedies against cybersquatters.\2\ At the request of the United States
    Government, the World Intellectual Property Organization has put
    together the contours of a dispute resolution policy that will permit
    expeditious administrative resolution of disputes between trademark
    owners and cybersquatters. See FINAL REPORT OF THE WIPO INTERNET DOMAIN
    NAME PROCESS ON THE MANAGEMENT OF INTERNET NAMES AND ADDRESSES:
    INTELLECTUAL PROPERTY ISSUES (April 30,1999). The details of the WIPO
    plan have been controversial. While representatives of trademark owners
    have been generally enthusiastic,\3\ others have criticized the WIPO
    recommendations for being unfairly slanted in favor of owners of
    registered trademarks.\4\ There seems to be little doubt, however, that
    the WIPO plan or one much like it will be implemented in all generic
    top level domains within a matter of months.
    ---------------------------------------------------------------------------
        \2\ See Memorandum of Understanding Between the U.S. Department of
    Commerce and the Internet Corporation for Assigned Names and Numbers,
    Nov. 25, 1998, URL: ; United States Department of Commerce, Management of
    Internet Names and Addresses, June 5, 1998, URL: .
        \3\ See, e.g. American Intellectual Property Law Association et.
    al., Response to WIPO Report (May 20, 1999), URL: .
        \4\ See, e.g., Diana Cabell, Comment on WIPO Final Report (May 10,
    1999), URL: ; A. Michael Froomkin, A commentary on WIPO's The
    Management of Internet Names and Address: Intellectual Property Issues
    (May 19, 1999), URL: ;
    Carl Oppedahl, Comments on WIPO Report (May 7, 1999), URL: .
    ---------------------------------------------------------------------------
        Many of the problematic domain name registrations have been the
    subject of litigation. The courts have been merciless to defendants
    perceived as cybersquatters, finding trademark infringement and
    trademark dilution even in cases where, but for the domain name
    conflict, no reasonable court would be likely to find a violation of
    the Lanham Act. See, e.g., Panavision International v. Toeppen, 141
    F.3d 1316 (9th Cir. 1998); Intermatic Inc. v. Toeppen, 40 U.S.P.Q.2d
    1412 (N.D. Ill. 1996). Anyone who feels held up by a cybersquatter can
    file suit, secure in the knowledge that the cybersquatter will lose.
    Further, courts have been quick to impose liability for bad faith
    registrations of domain names on individuals who, rather than
    warehousing domain names, have used them in competition with trademark
    owners or in the hope of diverting web traffic from a trademark owner's
    site. See, e.g., Cardservice International, Inc. v. McGee, 950 F. Supp.
    737 (E.D. Va. 1997). Finally, some businesses have registered domain
    names that are confusingly similar to trademarks or personal names in
    order to use them for pornographic web sites. Those businesses have
    without exception lost suits brought against them. See, e.g., Hasbro,
    Inc. v. Internet Entertainment Group, 40 U.S.P.Q.2d 1479 (W.D. Wash.
    1996). Thus, people who have not already invested in domain names that
    may be valuable precisely because of their similarity to other
    businesses' trademarks have little incentive to do so now, and
    trademark owners aggrieved by the bad faith registration of their
    trademarks as domain names have reliable remedies under the trademark
    law.
        The courts have imposed civil liability for bad faith registration
    even in some cases in which defendants used the domains to engage in
    expressive conduct motivated by sincere political convictions. In
    Planned Parenthood v. Bucci, 42 U.S.P.Q.2d (BNA) 1430 (S.D.N.Y. 1997),
    aff'd mem., 152 F.3d 920 (2d Cir. 1998), for example, Richard Bucci, a
    Catholic anti-abortion activist, had registered plannedparenthood.com
    and operated a website at www.plannedparenthood.com. The page opened
    with the greeting ``Welcome to the Planned Parenthood Home page'', but
    otherwise contained anti-abortion material. In a preliminary injunction
    decision, the court held that these acts constituted trademark
    infringement, trademark dilution and false designation of origin. In
    ews for Jesus v. Brodsky, 993 F. Supp. 282 (D.N.J. 1998), aff'd mem.,
    159 F.3d 1351 (3d Cir. 1998), Brodsky registered jewsforjesus.org and
    jews-for-jesus.com. He put up a website that he hoped would attract
    websurfers seeking the Jews for Jesus organization, in order to protest
    that organization's activities, and to lead potential strays back into
    the fold of traditional Jewish organizations. The Jews for Jesus
    organization successfully brought suit for trademark infringement and
    trademark dilution.
        Most of the actual disputes over trademarks and domain names don't
    involve bad faith registration of multiple domain names. Instead, there
    are two parties, both of whom want a particular domain name. One of
    them registered the domain name in good faith, and has either been
    using it or intends to do so. The other one is, typically, someone who
    has a trademark registration for a different business. See. e.g.,
    Interstellar Starship Services Ltd. v. Epix, Inc., 1999 U.S. App. LEXIS
    16536 (9th Cir. 1999); Brookfield Communications v. West Coast
    Entertainment. 50 U.S.P.Q.2d 1545 (9th Cir. 1999); Gateway 2000 v.
    Gateway.com, 1997 U.S. Dist. LEMS 2144 (W.D.N.C. 1997). Such situations
    we common, in part because U.S. trademark law permits multiple
    businesses to register the same trademark for different classes of
    products. Although courts have been quick to impose liability for bad
    faith registration, they have been far more cautious in disputes
    involving a domain name registrant who has a legitimate claim to use a
    domain name and registered it in good faith. See. e.g., Data Concepts.
    Inc., v. Digital Consulting, lnc., 150 F.3d 620 (3d Cir. 1998). In a
    number of cases, courts have refused to impose liability where there is
    no significant likelihood that anyone will be misled, even if there is
    a significant possibility of trademark dilution. See, e.g.. Gateway
    2000 v. Gateway.com, 1997 U.S. Dist. LEXIS 2144 (W.D.N.C. 1997); Toys
    ``R'' Us v. Feinberg, 26 F. Supp.2d 639(S.D.N.Y. 1998).
        S. 1255 takes the approach of assimilating cybersquatting to
    trademark counterfeiting, amending the criminal trademark
    counterfeiting law to make anyone who knowingly and in bad faith
    registers or uses a domain name or other identifier that is identical
    to, confusingly similar to or likely to dilute someones trademark
    guilty of a misdemeanor. Subsequent offenses are felonies.
        S. 1255 treats bad faith registration and use as a species of
    counterfeiting. Yet, bad faith registration of a domain name, however
    annoying, is not trademark counterfeiting. Bad faith registration and
    use of a domain name have nothing to do with trademark counterfeiting
    as that offense is commonly understood. The essence of counterfeiting
    is using spurious trademarks to defraud consumers into believing that
    defendant's products are the genuine article marketed by the trademark
    owner. Bad faith registration and use of domain names typically does
    not involve that sort of deception. Many people have speculated in
    domain names to sell them to businesses likely to want them, but those
    people would have no reason to use the domain names to fraudulently
    traffic in counterfeit products or products bearing counterfeit
    trademarks. Others have speculated in domain names in order to put
    pornographic material on the web at sites likely to be discovered by
    casual browsers. Those businesses would also have no reason to sell
    counterfeit products, or to represent even by implication that their
    adult material is affiliated with or approved by any legitimate
    business--they are just trying to get eyeballs by any possible means.
    They be bad people, but they are not trademark counterfeiters, and S.
    1255 does not require that they do anything that the courts have
    recognized before now as trademark counterfeiting; instead, it imposes
    criminal liability for the bad faith registration or use of any domain
    name or identifier of an online location that is confusingly similar to
    or likely to dilute a trademark.
        S. 1255 does not draw a workable line between cybersquatting and
    other activities. The bill would impose criminal penalties for the
    knowing or bad faith registration of a domain name or other
    ``identifier'' that is identical to, confusingly similar to or likely
    to dilute a registered trademark. That liability would fall on both
    conventional cybersquatters and other bad faith registrants. It would
    also fall on people like Richard Bucci and Steven Brodskey. Both
    gentlemen may have engaged in unwise protests, but I know of nobody who
    argues that their behavior should be treated as criminal. In Addition,
    the term ``identifier'' is defined, so broadly that it could be read to
    cover file names and email addresses as well as domain names. Thus,
    even if Richard Bucci were to relocate his abortion protest site to
    , the bill as it
    is currently drafted would apply to his activity: he would be guilty of
    knowing and bad faith use of ``an identifier of an online location.''
    Anthony Bartolo's disparagement of the GoPed' brand scooter
    at  was held by the court to be a
    premissible non-trademark use, in significant part because Bartolo's
    use of the mark ``GoPed'' was as a file name rather than a domain name.
    See Patmont Motor Werks v. Gateway Marine, 1997 U.S. Dist. LEXIS 20877
    (N.D. CA). S. 1255 does not distinguish between them, thus potentially
    subjecting expressive activity like Anthony Bartolo's to liability.
        Although section 4(a)(D)(ii)(III) attempts to exclude some good
    faith registrants from criminal liability, the exclusions are so narrow
    as to be of little use. For example, if the Dell Computer Corporation,
    which operates a website at , were accused of bad
    faith registration of a domain name that was the trademark of Bantam-
    Doubleday-Dell, it could not avail itself of the exception in
    4(a)(D)(ii)(III). Dell Computer owns a registered trademark, but its
    first use of that mark in commerce was in 1988. Bantam-Doubleday-Dell's
    registration of the Dell mark (for paperback books) issued in 1959
    based on a use-in-commerce date of 1943.
        The international efforts to devise an administrative dispute
    resolution process have struggled to draw an appropriate line between
    cybersquatting, which involves multiple bad faith registrations, and
    honest trademark disputes where the domain name has been registered and
    is being used in good faith. It is a difficult line to draw, and the
    WIPO domain dispute resolution process went through multiple iterations
    of a standard in an attempt to devise an appropriate definition for
    abusive domain name registration.\5\ An appropriate standard must
    exclude businesses with legitimate competing rights to use a domain
    name, registrants of coincidentially similar domain names, and
    individuals who, without any intent to confuse or deceive, operate fan
    sites or sites intended to criticize trademark owners or their
    products. WIPO's ultimate product remains controversial, but the United
    States government has worked hard to assure that the recommended
    dispute resolution process is adopted by all generic top level domain
    registrars. Because the standard reflected in S. 1255 is very different
    from the one adopted as a result of the WIPO process, there is a
    significant risk that the enactment of this bill will destabilize that
    effort just as it is beginning to bear fruit. The worldwide adoption of
    a uniform trademark domain name dispute resolution policy would be of
    more benefit to US trademark owners in the long run than this bill.
    ---------------------------------------------------------------------------
        \5\ See generally WIPO Internet Domain Name Process, URL: .
    ---------------------------------------------------------------------------
        In addition to treating bad faith domain name registrants as
    trademark counterfeiters, the bill would impose enhanced, arguably
    punitive, civil penalties in many cases on good faith domain name
    registrants with legitimate claims to their registered domains. Section
    3 of the bill permits a plaintiff to elect substantial statutory
    damages and attorneys fees in lieu of actual damages for any trademark
    infringement or dilution involving the registration of a domain name or
    other identifier that is either identical to a trademark or likely to
    cause confusion or dilution, even if the registration and operation of
    the domain was undertaken in good faith. (Statutory damages have until
    now been available in trademark actions only for trademark
    counterfeiting.) The attorney fee awards is available only to
    plaintiffs at plaintiffs' election. Unlike the attorney fee provision
    in the copyright law, see 17 U.S.C. Sec. 505; Fantasy v. Fogerty, 510
    U.S. 517 (1994), a prevailing defendant in a domain name trademark case
    is given no opportunity to recover attorney's fees. The combination of
    substantial civil damages requiring no proof of actual harm with the
    attorney fee provision threatens to greatly exacerbate the increasingly
    significant problem of ``reverse domain name hijacking.''
        Reverse domain name hijacking involves an attempt by a trademark
    owner to take a domain name from a legitimate good faith user,
    typically by threatening legal action. The well-publicized cases of
    two-year-old Veronica Sam's ``little Veronica'' website at  and 12 year-old Chris ``Pokey'' Van Allen's web page
    at  pitted trademark owners against children
    whose parents had registered their children's names in the .org domain.
    the registration and operation of the web sites was unquestionably
    innocent, and there was no plausible likelihood that consumers would be
    misled. Nonetheless, in both cases, the trademark owners demanded that
    the children's web sites be taken down.\6\ A flood of negative
    publicity persuaded the trademark owners in both cases to back down.
    Every week, though, I hear of a different domain name owner who just
    has received a cease and desist letter from a trademark owner that he's
    never heard of. Many of them abandon their domains rather than risk
    litigation, even when no court would be likely to hold them liable. If
    the trademark statute is amended to expose them, at plaintiff's
    election, to substantial statutory damages even where plaintiff suffers
    no harm, and to a one-way award of attorneys fees, few responsible
    attorneys would advise even those domain name holders whose legitimate
    claim to their domains seems inarguable to take that risk.
    ---------------------------------------------------------------------------
        \6\ Archie' Comics operated a web site at
    www.archiecomics.com and owned the veronica.com domain. Prema toys,
    maker of Gumby', did not and still does not operate a
    website devoted to the Gumby' line of toys and licensed
    merchandise. Neither company, thus, wanted the website for itself;
    instead, they were concerned about the risk of trademark dilution.
    ---------------------------------------------------------------------------
        Section 5 of S. 1255 would amend section 39 of the Lanham Act to
    provide a liability shield for any Internet service provider, domain
    name registrar or domain name registry who removes a domain from
    service in response to a complaint from a trademark owner or transfers
    control of that domain to the trademark owner, whether or not the
    domain registrant is ultimately found liable for infringement or
    dilution. Section 5 does not, however, codify the holdings of recent
    cases that domain name registrars can not be held liable for
    registering domain names that are infringing or dulitive. See, e.g.,
    Lockheed v. Network Solutions, 985 F. Supp. 949 (C.D. Cal. 1997). The
    provision in S. 1255 would give service providers, registrars and
    registries an irresistible incentive to do anything a trademark owner
    asks them to do, whether the trademark owner's claim has merit or not,
    since that is the surest way to avoid being liable to anyone. In
    addition, the provision would leave the wrongfully ousted domain name
    registrant without any legal remedy. The result would be to further
    exacerbate the reverse domain name hijacking problem.
        This bill would in many ways be bad for electronic commerce, by
    making it hazardous to do business on the Internet without first
    retaining trademark counsel. The bill imposes draconian penalties on
    any business that is found to have registered a domain name, or used
    any ``Internet identifier,'' in bad faith. Faced with that risk, many
    start-up businesses may choose to abandon their goodwill and move to
    another Internet location, or even to fold, rather than risk liability.
    The bill would also impede the U.S. Commerce Department's efforts to
    encourage the worldwide adoption of a uniform trademark domain name
    dispute resolution policy, which would be of more benefit to US
    trademark owners in the long run.
        I thank you again for this opportunity to submit written testimony.
    I would be happy to respond by mail or by email to any questions that
    you might have.
                                   __________
                                   University of Miami,
                                                 School of Law,
                                       Coral Gables, FL, July 22, 1999.
    Hon. Orrin G. Hatch,
    Chairman, Senate Judiciary Committee, Dirksen Office Building,
            Washington, DC.
        Dear Senators Hatch and Leahy: I regret that family commitments
    make it impossible for me to come testify in person regarding S. 1255.
    I would like to request that the following comments be submitted as
    testimony for the hearing on S. 1255 today:

        I am a Professor law at the University of Miami. I have been
    specializing in Internet Law for the last seven years. I teach courses
    in Internet Law, E-commerce, and Intellectual Property in the Digital
    Era. During the past year I have been intimately involved in
    cybersquatting policy debates, serving as the sole ``public interest
    representative'' to the World Intellectual Property Organization Panel
    of Experts on domain name issues.
        I believe S. 1255, while well-intentional, is very badly flawed in
    its current form and will do far more harm than good.

       It attempts to ``solve'' a problem that is very temporary.
            To a large extent it is already being solved by the courts, and
            domain name pre-payment and mandatory arbitration will take
            care of the rest.

       The bill purposes a solution that will cause harm to large
            numbers of innocent people.

       The definitions are badly drafted--it will criminalize file
            names (they are ``identifiers''). It will also criminalize
            third and fourth level domain names which cannot, by any
            commonly held definition (or logic), be part of cybersquatting.

       The penalties are vastly in excess of the harms in most
            cases.

       As a result, the main consequence of this bill were it to
            become law, is that it will provide a new tool for the
            unscrupulous to use to intimidate the blameless.
                    cybersquatting is a temporary phenomenon
        Cybersquatting is generally understood to have these elements:

      (1) registration [and sometimes use]

      (2) for speculative purposes, and without another legitimate purpose
        or claim of right, of

      (3) a second-level domain name which

      (4) is identical to a trademark held by another.

        there is no hand data on the extent of the cybersquatting problem.
    Testimony of hearings held by the World Intellectual Property
    Organization suggested that even accepting the complainants' definition
    of the problem, far fewer than 1 percent of all domains were alleged to
    involve cybersquatting. Other data from NSI, the .com registrar,
    suggest that the original burst of cybersquatting has peaked and its
    declining--probably because the courts have made cybersquatting
    unattractive.
        To the extent that the cybersquatting problem is not solved by
    requiring pre-payment or an on going relationship, it will be
    eliminated by the proposed WIPO rules on mandatory arbitration which
    are almost certain to become the standard for all global registrars and
    registries.
               every cybersquatter who has gone to court has lost
        There is now an impressive and growing body of case law in the US
    and other nations regarding speculative registrations of domains
    corresponding to other people's trademarks. In every case involving a
    person who registered large numbers of domains for resale, the
    cybersquatters has lost.
        On the other hand, the courts have rightly taken a more careful
    approach than S. 1255, as they are also conscious of the danger of
    ``reverse domain name hijacking''--cases where the plaintiff seeks to
    take a domain name held by a legitimate user. Several courts have
    correctly refused to find for plaintiffs where the defendant was making
    legitimate use of a domain name for purposes which in no way infringed
    on the claimant's trademark.
         the bill to take account of ``reverse domain name hijacking''
        One of the major effects of enacting statutory damages of $100,000
    is that the fear of this large number will be used to intimidate honest
    people who happen to have an attractive domain name. Students in my
    Internet Law class have received demand letters from lawyers
    representing trademark holders whose claims for their domain names,
    insofar as I was able to work out the facts, were worthless.
    Nevertheless, the letters were threatening and frightening, and I am
    sure that many non-lawyer, or non-law students would be intimidated.
    This bill will make that intimidation worse.
    the bill fails to take account of many legitimate non-tm interests in a
                                      name
        Not all of the threats will be baseless. The bill fails to protect
    a large number of perfectly legitimate uses of domain names. Among the
    groups left out are holders of common law trademarks, ``doing business
    as'' names, middle names, stage names, pen names, names of pets. The
    bill also fails to make provisions for first amendment uses of names--
    e.g. critics of a corporation whose purpose may be to attract attention
    associated with the company, but whose aims are political rather than
    unfair competition. Unfair competition, incidentally, is actionable,
    and there is no exception for unfair competition carried out with a
    misleading domain name.
        It is important that the committee understand that these concerns
    are far from fanciful. Consider the following example. Suppose I had
    been clever enough to register ``cars.com''. Cars is a generic term for
    automobiles, but it is trademarked in many other context. Suppose a
    person having a trademark on hypothetical cars brand umbrellas wants
    the domain name. They would have a trademark, I would not, and they
    would have a good arguable case for confusion, or even (given the very
    broad interpretation of the Anti-Dilution Act) for dilution. My lawyer
    would be hard pressed to promise me I would win a case, and if I were
    running a small company or a startup, I might need to give in rather
    than fight.
                 the definitions will make every fan a criminal
        The definition of an identifier in this bill is vastly over-broad.
    I will concentrate on two issues: file names, and portions of the
    domain name itself.
    File names
        The bill appears crafted to reach the name of every file readable
    on the Internet. The ``identifiers'' to which sec. 3(a) applies is not
    defined. Section (3)(a)(2)(A) refers to ``the registration or use of an
    identifier described in subparagraph (B)''. In turn, sub-paragraph (B)
    does not provide much of a definition at all.
        We do find a definition in section 4, subpara C, which speaks of
    ``an Internet domain name or other identifier of an online location,''
    a definition which sweeps far too broadly. Thus, for example, http://
    www.mydomain.net/froomkin/thingsIlove/NYYankees or http://
    www.mydomain.net/froomkin/thingsIlove/StarTrek would both involve ``an
    Internet domain name or other identifier of an online location'' which
    is arguably dilutive.
        Cybersquatting is not about file names. At most that is a standard
    Lanham Act issue, and a rather unlikely one in most cases.
    Cybersquatting is about domain names and only second (or first and
    second) level ones. The legitimate interests worth being protected here
    are (1) consumers' interest in not being misled; and (2) goodwill in
    the mark. There is simply no evidence whatsoever that either of these
    interests is affected by third, fourth or fifth level domain names.
    Would anyone think that stimpy.ir.miami.edu has anything to do with the
    cartoon character of that name? Is there any potential for confusion
    there? Or even dilution? I rather doubt it, and there is certainly no
    evidence of this, anywhere.
    Nth-Level domain names
        To understand why third, fourth, and Nth level domain names are not
    cybersquatting, one needs to understand how domain registrations work.
    It is impossible for anyone to register ``trademark.yahoo.com'' in the
    DNS. The ``registrations'' are limited to second level domains. Yahoo
    has yahoo.com. It thus has full control over what third level domains
    it wishes to create in the yahoo.com hierarchy. It may be that yahoo
    contracts with someone else to allow them to use trademark.yahoo.com,
    but that's between them and yahoo, and isn't a DNS issue at all. The
    registry and registrar are not involved. The use of
    ``trademark.yahoo.com'' is not cybersquatting by yahoo against the
    owner of ``trademark'' and is at most garden variety trademark
    infringement covered by the Lanham Act. The decision by the owner of
    yahoo.com to run a machine with the name trademark.yahoo.com does not
    in any way obstruct the owner of the trademark from having and enjoying
    trademark.com. The use of trademark.yahoo.com thus lacks an essential
    element of cybersquatting blocking the legitimate use of the trademark
    holder.
        This is a key point: not every intellectual property violation on
    the Internet is cybersquatting. Cybersquatting is the (repeated)
    registration of other people's trademarks in a manner designed to block
    them from having the second level domain that corresponds to their
    trademark, done for the purpose of holding it for ransom. That is not
    what is happening in ``trademark.yahoo.com''--although the Lanham Act
    on the Anti-Dilution Act may well have something to say to the owners
    of yahoo.com if they tried this.
                                   conclusion
        This bill is too much, too late. The courts have taken a big bite
    out of the real cybersquatting on their own, and pre-payment and soon-
    to be-adopted mandatory arbitration rules will do the rest.
                Yours sincerely,
                                   A. Michael Froomkin.