[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.
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    \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 [email protected] 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.


                                
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