Friday, December 23, 2011

Snafu Caused Loss of Domain Name: Now What?

Dear Rich: I had a URL (domain name), connected to a network of 3 sites. Due to an email account error, the registration was lost. The day it went public and I found out it got bought. I have been running the domain name for a mortgage network and I've owned this site since 2004. I noticed the place-holder page put up for the domain is for a company that is in the Cayman Islands so I am sure it is a crook who bought it for cybersquatting or to steal it. I have sent the company a letter saying they must release it or they will get a cease and desist and I will file with ICANN. What are my rights, what can I do? We're sorry to hear about your domain name loss. Apparently there are companies out there who wait for domain names to expire and then snap them up. Sometimes, the purchase is made in order to sell it back to the previous owner (who is often unaware that the domain has even expired). Sometimes, it's purchased because the new buyer believes that the domain still has some SEO value and so, it can be sold to a third party who can milk it for a few percentage points in Google Analytics.
Is it cybersquatting? Cybersquatting is when someone buys and sells a domain name with the bad faith intent to profit from another company's trademark. (We explain it in more detail, here.) For example, it would likely be cybersquatting if (1) the company set up a site that diverted your customers, (2) the company, in advertising the domain name for sale, mentioned that the potential buyer could trade off your previous traffic, or (3) the company set up a page with Google Ads listing you and your competitors. If the company contacted you, unsolicited, after buying the domain and offered to sell it back to you at a much higher price, that would likely be cybersquatting, too. It would not be cybersquatting if the company set up a non-competitive site for another company or if the company did nothing but set up a  blank page. That's because there's no proof of bad faith intent. After all, it's not illegal to simply buy and sell domain names (without bad faith).
Should you proceed to ICANN? You are unlikely to get the domain name back by sending threatening letters. Most domain name dealers are not cowed by legal letters. They know you can only get the domain name back by (1) filing a federal cybersquatting lawsuit (probably way too expensive for you), or (2) by seeking domain name arbitration at ICANN. If you go the ICANN route, your filing expenses are, at minimum, $1500. It takes six months, requires a considerable amount of paperwork and documentation and may cost more if lawyers are involved. Remember, it's not enough to say that the company bought your domain name, you need to prove bad faith. And of course, there's no guarantee you'll prevail (although complaining parties prevail in 84% of the cases). Many people don't want the wait or the uncertainty of ICANN so they simply contact the new owners and pay for the domain name -- often forking over a sum between $2,000 and $3,000 because that's how much they would likely end up paying in time and money for an ICANN arbitration.