Dreyfus

Registrars’ liability

Registrars and registries play an important role in operating domain names. Even though they do not register domain names maliciously and with intent to cause prejudice to a trademark, they nevertheless are not required to review registration applications before reserving the names. This explains the common cybersquatting practices. Although they have a prima facie neutral status as technical service providers, they are in fact at the very heart of cybercrime cases.

Registrars made aware of consumer protection

“The courts held that a registrar has to carry out its mandate in accordance with its accreditation agreement with the ICANN and its liability is thus limited to the framework of the agreement” (Marques et Internet, Nathalie Dreyfus). Following this logic, in a cybersquatting case for instance, the registrar approves the domain name registration and derives financial benefits from the registration even though the trademark owner’s prior rights are being prejudiced.

Its status as technical service provider implies that there is no general statutory requirement to monitor content or search for circumstances revealing unlawful acts and doings (Article 6, I, § 7 of the Law no. 2004-575 dated June 21, 2004 for a Digital Republic). By contrast, “a presumption of knowledge of the disputed facts weighs on the technical service provider as soon as information containing factual and legal grounds has been notified to them” (Marques et Internet, Nathalie Dreyfus). Indeed, when the technical service provider is informed of infringement (by letter of formal notice in compliance with the strictformality required by Article 6, I, 5 of the Law for a Digital Republic), they are legally bound to act promptly in order to deactivate the contentious domain name, failing which they may be held liable because they are presumed to have been aware of the facts in dispute.

In spite of the absence of statutory requirements and even though no notification had been made, the Tribunal de Grande Instance de Paris, in a 2006 judgement, jointly sentenced the registrant and the registrar in a cybersquatting case. Without contemplating the latter’s liability with respect to its’ client, the court found the registrar guilty of aiding and abetting with respect to unlawful activities being carried out by the registrant. Not only was the registrar ordered to suspend the disputed domain names but it was also instructed to pay for irrecoverable expenses and damages granted to the company for which the registrant was responsible, in solidum (Tribunal de Grande Instance, Paris, April 10, 2006, Sté Rue du Commerce v. Sté Brainfire Group et Sté Moniker Online Service In.). In this case, the registrant was owner of the domain names “rueducommerc.com” and “rueducommrece.com” in order to redirect web surfers who made a typo when performing a search for similar worded websites (typosquatting). However, this example is just a mere exception to the registrars’ discretionarily acknowledged liability.

Generally, registrars cannot be held liable even though some legal practitioners advocate for minimum of liability.

At all events, things are evolving and some diligent registrars have joined forces as a top level domains conformity and verification consortium : The Verified Top Level Domains Consortium. This Consortium’s mandate focuses on protecting the online consumer. Indeed, in order to build web surfers’ trust by using websites that are likely to collect personal data, including sensitive data, this Consortium ensures that the domain names are being used for honest and non-fraudulent purposes.

This Consortium was created in May 2016 by eight registrars which managed the registration of 15 vTLDs (verified TLDs) of various sectors such as pharmacy <.PHARMACY> on behalf of the national pharmacists association, or finance <.BANK>. The registrars providing domain name verification services may join the Consortium provided that they obtain consent of the founding members.

This Consortium of registrars has the responsibility to ensure that the registrant complies with various conditions alreadylaid down by them before registering a domain name. In the case of <.PHARMACY>, the activity bearing this top level domain shall imperatively demonstrate a legitimate interest. This implies that the consumer will not be misled by the domain name extension. Furthermore, verifications will be carried out in the long term so that registrants may keep their domain names only if they comply with these requirements.

On account of the regulation performed by this entity and its’ will to work towards more regulation and security, it is possible to hope for changes in the registrars’ legal framework as the neutrality privilege  cannot be combined with a regulatory duty.

The WHOIS operated by registries showed flaws despite the willingness of registrars to ensure increased security

The increase in the number of domain names is a direct consequence of Internet democratisation. In that sense, the Internet offers more visibility for companies and even allows some individuals in bad faith to register domain names for resale at a high price to other individuals or entities who, in turn, have a legitimate interest.

When ICANN was created in 1998, the Clinton administration ordered the implementation of a highly accurate WHOIS database. The purpose was to index all registrants and to be able to contact them. Today, registries are responsible for operating the WHOIS database and its extensions.

Despite the publication, in December 2016, of a report (report of the WHOIS Accuracy Reporting System) pointing to this database performance, resolutions are yet to be passed to fill the gaps. This report has addressed the operational capacity of the WHOIS over 12 000 registered domain names with 664 different registrars. This sample comprised the old and new gTLDs only and excluded the ccTLDs (national domain names).

The study consists of two stages. Firstly, the formats of the e-mail address and phone number are verified. Then a test e-mail is sent to check if it is effectively delivered to the address specified in the WHOIS. In 97% of the cases, at least one of the details were valid with respect to its format and the test message is successfully delivered. North America has the most accurate information, whereas Africa conveys the most insufficient WHOIS information. The report, however, does include a weakness as no follow-ups are performed, and effective receipt of the message by the registrant is not mentioned. The test message only reports the existence of a valid address; as a consequence, receipt of the test message on a junk e-mail address, despite the validity of the address format, does not appear in the remaining 3% having specified inaccurate informations according to the report. Even if the specified WHOIS e-mail address is a junk e-mail address, as long as the address format is valid, the registrant’s address will be included in the 97% of domain name registrants who specified accurate details. In that context, in spite of erroneous information, this situation contributes to reinforcing WHOIS operativeness and accuracy.

Consequently, the real major challenge is to be able to effectively contact the registrant. However, even though the WHOIS does contain information, oftentimes the addresses lead nowhere because sauid information is inaccurate. Accordingly, the WHOIS is not as effective as seemingly stated by the report.

While domain names are growing in importance, information security and transparency are not always a priority for the main actors. Developments in the legal framework would thus be welcome.

To be continued…

Turkey has just adopted an Industrial Property Code, and it has come into force on January 10, 2017. Prior to that date, Turkish Industrial Property rights were regulated by ordinances dating back to 1995. These ordinances were progressively quashed by the Turkish Constitutionnal Court because the area had yet to be shaped by the legislative channel,  which had remained silent thus far. The last ordinance was quashed on January 6, 2017. In this context, the Code has finally filled a legal void and provided a solution to those rulings. However, its’ Article 1 provides for a smooth transitional period where the ordinances will continue to apply to filings until said Code enters into force.

Apart from changing the Turkish authority’s denomination (now referred to as the Turkish Patent and Trademark Office), the Code provides several new features.

New features brought to trademarks

Firstly, the Code expands scope by expressly providing the opportunity to protect colour and sound trademarks.

Several changes have also been implemented concerning grounds for refusal to register a trademark. Hence, abstract distinctiveness is now an absolute ground for refusal. By contrast, registration of a later trademark without opposition by the earlier owner now becomes a relative ground for refusal when it used to be absolute. Henceforth, it is possible to register the later trademark by letter of consent from the owner, which has first been certified by a Turkish public notary. The Code also includes a relative ground for refusal enshrined in caselaw, namely the inclusion of trade names’ trademarks.

As regards to oppositions, the time frame has been reduced from 3 to 2 months. In addition, it is now possible to request proof of actual use of the trademark from the opponents, provided that it was registered for more than 5 years (whereas previously one could just submit the filing receipt in order to submit an opposition)

As for renewals, it is now possible for the applicant to renew his own trademark for part of his products and services.

The Code also expands the scope of legal action for infringement actions. On one hand, the civil suit shall be open to the trademark owner who, initially, could only take action for annulment. Similarly, the latter may now take action to obtain an order against the use of a trademark as a commercial or company name. Moreover, regarding the counterplea, the earlier owner’s non-use may be raised and the other ongoing applications will no longer stay the proceedings. On the other hand, a criminal suit may now be brought against an offering of services on the grounds of infringement, whereas under the former legal framework it used to be limited to products. Besides, the destruction of the counterfeited goods can now also be ordered.

The new features on designs

The extent of the scope of protection has been expanded: the section entitled “industrial designs” has now been renamed “designs”. . Non-registered design are now protected for for 3 years from their first introduction to the public.

The timeframe for opposition has been reduced from 6 to 3 months. Finally, the Office now has the authority to examine design novelty.

New features brought to patents

The major innovation regarding patents is the withdrawal of the non-examined patent system in order to comply with EU legal provisions.

New features brought to trademark and patent agents

For the first time, Turkish standards mention their officials and set a legal framework for them. These agents must be registered with a registry. In the event of non-compliance with disciplinary rules (not yet adopted), they may be sentenced to sanctions ranging from a warning to temporary detention or inhibition.

In conclusion, the new Code has set the necessary rules for industrial property in Turkey. Difficulties may arise, however, with regard to practicals concerning the application of criteria for proof of actual use, and concerning the applicable procedure for declaring forfeiture during the transitional period. For now, it is necessary that we wait and monitor development in the field, possible solutions and especially implementation procedures.

The sale of counterfeit products currently represents 2.5% of global imports according to the OECD, amounting to more than USD 460 billion. Up to 5% of goods imported into the European Union are counterfeited goods. The sale of these counterfeit products concerns a range of industries, from luxury products and technological products to consumer goods.

The harm caused to the trademarks is significant and goes far beyond the financials, because it has been linked to  organized crime and presents a threat to the users’ security and health.

Today the situation has worsened by the very rapid growth of the Internet which allows counterfeiters to achieve global reach, but especially, anonymity; the trade in counterfeit products through the Internet seized by the French customs amounts to 20% of imports against 1% in 2005

In addition, counterfeiters know how to use the very best marketing practices in order to achieve their goals: optimisation of search engines, purchase of advertising to direct the consumer to their site, use of spams and cybersquatting of domain names are only a few of their practices.

A multi-level strategy must then be implemented in order to decrease the sale of counterfeit products at delivery points but also at promotion sites.

The impact of online counterfeiting for businesses

• Loss of 5 to 9% of the gross turnover
• Damage to business and the trademark image
• Fraudulent use of the trademark by a third party and identity theft (of the trademark, the logo and a similar domain name), which may lead to the recovery of personal data or client banking information by counterfeiters
• Risk of confusion through the reproduction of the trademark and similar domain names: Internet users may thus hardly distinguish between the company’s official home page and the counterfeit home page, making loss of visibility a serious issue.
• Decrease in effective marketing investments
• Other issues related to the consumer’s security and health caused by use of defective counterfeit products, especially in the pharmaceutical industry.

How to reverse the trend of businesses on online counterfeiting

There are many ways for victims of such practices to limit or to stop these counterfeiters.

Step 1. Identifying the problem

The endangered business must assess the entire issue quantitatively, on national and international levels as well as on all types of websites (ecommerce websites, auction websites, BtoC, BtoB…).

By creating awareness in all business departments for the monitoring of counterfeiting activities (legal, marketing…), the business optimises its available resources and its chances of prompt detection, which also implies limited damages and faster recovery.

Step 2.  Actively fighting the counterfeiting activities

Ruthlessness with counterfeiters helps deter them from counterfeiting our business products. They will naturally be more inclined to attack passive businesses, which seem to be easier targets.
Delivery points or promotion areas should not be neglected, particularly with respect to the safeguard of marketing investments made by the business.

Even though these counterfeiting activities must be actively counteracted, it is essential to prioritise these actions by identifying the main locations where the offences are being carried out so as to act precisely where they are located.

The business may also fight against the sale of counterfeit products online by informing its clients on the official selling points and the risks of buying from alternative sites.

Finally, the business may be assisted by intellectual property protection and enforcement solutions providers, or even have the assignment delegated to their provider.

In Russia, no specific procedure is provided for the settlement of country code top-level domain (ccTLDs) disputes. A special defense strategy must therefore be adopted to fight cybersquatting in Russia.

Cybersquatting on the rise in Russia

The number of Internet users in Russia is increasing  year after year. In 2015 alone, the number of Russian users who surfthe Net on mobile devices increased by 90%. Consequently, the number of domain name registrations is growing rapidly.

Indeed, the rules on country code top-level domain name registration have become more flexible over recent years, and today one can easily register a domain name in .ru ou .рф, since registration of gTLDs in non-latin based scripts was enabled in 2009. This has led to an increase in the number of Russian cybersquatters as well as a surge in fraudulent domain name filings.

The fight against cybersquatting in Russia: a step-by-step guide

In order to take action against a cybersquatter in Russia, one must first ensure themselves that the intellectual property rights in question are in force in Russia: the Russian territory is not automatically covered by a European Union trademark.

One must therefore serve a formal notice to the fraudulent party. In the absence of a reply, a lawsuit under Russian law can be filed. Note that a formal notice should be sent prior to any action in a commercial court. However, sending a formal notice is not a necessary prerequisite if the dispute is brought before a court of common law.

In Russia, the UDRP procedure is not applicable to domain name disputes for domaine names such as <.ru> ou <.рф>, contrary to domain names in new generic top-level domains (new gTLDs) such as <.moscow> .

Trademark owners can  initiate proceedings against infringers in two different courts: commercial courts, which have jurisdiction over cases against individual business owners or legal entities as well as any commercial disputes, and common law courts, which have jurisdiction over disputes between private individuals.

In Russia, a domain name is not treated as a subject of intellectual property in its own right as are trademarks or corporate names. There is no special law to prevent the violation of trademark laws via domain names. One should therefore rely on trademark laws or alternative liability regimes in order to enforce the corresponding intellectual property rights.

Holder of a degree in Operations and Industrial Management, Katarina is part of Anja’s team and specialises in Intellectual Property and Information Technology as a paralegal.

With her extensive knowledge of the English language, Katarina can assist you on your international issues.

With an outstanding level of know-how and expertise, Katarina can assist clients in the following areas:

• Audit, advice and consulting: exploitation strategy and valorisation of your rights on the Internet
• Strategy for company online presence
• Management of your domain names: registration, renewal and opposition actions
• Negotiation and contract drafting
• Audit and pre litigation consulting
• Arbitrary litigation
• Litigation in cases of counterfeit and unfair competition
• Trademark and design Law
• Social networks
• Phishing

It is our pleasure and pride to announce that Dreyfus is adopting the Respect Zone label alongside the Respect Zone association, in order to actively promote respectful behaviour on the internet.

Join us under this label in order to fight against cyber-violence, discrimination, antisemitism, sexism, homophobia, glorification of terrorism, stigma surrounding the handicapped and harassment.

It is perfectly simple: all you need to do is visit Respect Zone’s home page http://www.respectzone.org, make sure you respect the Terms of Use and download the Respect Zone logo in order to become an advocate for respect on the Wild Wild Web!

Dreyfus & Associés is proud to attend the 139th annual meeting of INTA (International Trademark Association) that will take place in Barcelona from May 20-24, 2017.

We will be present at booth 27 and happy to talk with you about the topics that bring us together: Trademarks and Intellectual Property.

Please do not hesitate to contact us: contact@dreyfus.fr

On December 7, 2016, the Conseil d’Etat(tenth Chamber), issued a judgment which confirms that the domain name is in fact an intangible asset.

The issue of the classification of property as expenses or assets

Intellectual property cannot be easily classified in a company’s balance sheet. an option is available for the owner of the property: he can record it as an expense in the company’s profit and loss account, or as an intangible asset under the fixed assets of the company.

This is a major issue because the corporate tax base will not be the same for companies depending on whether the property is an expense or an intangible asset. Profit will be diminished if the property happens to be an expense for the business, compared to if it were an asset. Profit, naturally, is the result of the difference between revenue and expenses.

Requirements for intangible asset qualification

To be qualified an intangible asset, the property must meet three criteria:

– the property must be a regular source of profit and thus generate revenues regularly;
– the property must be sufficiently durable; it must thus remain in the business for some time;
– it must be transferable. To qualify as an intangible asset, meeting these three requirements is mandatory.

If any of these conditions is not met, the property will be requalified as an expense.

The eBay case, an illustration of the issue surrounding classification

According to the Conseil d’Etat, a domain name is an asset insofar as it meets these three requirements.

eBay was subject to a tax audit because their domain name did not appear on its balance sheet. eBay was initially liable to pay additional corporate income tax and additional contributions to this tax for the years ended December 31, 2003 and 2005, as well as corresponding penalties. The internet Empire subsequently filed a complaint with the Paris Administrative Court on March 20, 2012 in order to obtain relief from these tax surcharges.

eBay also brought action before the Administrative Court of Montreuil (Tribunal Administratif de Montreuil) to obtain relief from the withholding tax which the company had to pay as well as corresponding penalties for the years ended 2004 and 2005.

Following the dismissal of these applications by the Administrative Court of Paris (TA Paris du 1-2 dated March 20, 2012, no. 1001793) and by the Administrative Court of Montreuil (TA Montreuil,dated February 9, 2012, no. 1000879), the Administrative Court of Appeal dismissed both of the claimant’s applications (CAA Paris, April 30, 2016, no. 12PA02246 and 12PA02678). The company then brought the appeal before the Conseil d’Etat.

The Conseil d’Etat confirmed the calculation of the tax administration as well as the judgments of first instance and of appeal considering that the domain name “ebay.fr” met the three requirements for qualification as intangible asset.

First of all, the domain name confers to its owner exclusive rights to use it, making it a significant source of revenue. In this particular case, the domain name “ebay.fr”, registered with the AFNIC (Agence française pour le nommage Internet en coopération) is duly owned by EBay France but the right to use had been granted to EBay International AG. In fact, eBay France had granted a free license to its parent company. The tax authorities nevertheless considered that eBay France indirectly transferred its profits to its parent company by granting this right of use without levying fees. This was, therefore, a regular source of revenue for eBay France which it failed to report, as a consequence of analysing the situation as a mere necessity for administrative approval.

Furthermore, this exclusive right of use must be renewed each year with the AFNIC (in accordance with the provisions of the AFNIC naming policy), against payment of applicable fees necessary to carry out this formality. As a result, the asset’s lifespan in the company is sufficient to satisfy the requirement of sustainability: as long as the domain name is renewed, the exclusive right in favour of the owner shall remain in force.

Finally, the renunciation to renewthe domain name “ebay.fr” by iBazar, by way of compensation by the Ebay group, enabled EBay France to register this domain name immediately. As a result, this action was perceived by the administrative courts as a rights transfer from iBazar to eBay to use this domain name. This renunciation by a company to renew the domain name so that another may benefit from it, against payment of a fee, could be said to be a transfer of ownership and therefore an assignment.

In this case, a domain name that did not appear in the balance sheet was considered fraudulent and gave tax authorities the opportunity to recover eBay France. In the case, eBay France was this domain name’s registrant but its use was managed by eBay International AG. The fact that it meets all the three requirements for qualification as an intangible asset should have placed the domain name in eBay France’s balance sheet.

The Court of Justice of the European Union (CJEU), July 21, 2016, C-226/15, Apple and Pear Australia Ltd/Star Fruits Diffusion

In this case, the Court of Justice of the European Union recalls the extent and limits of the powers and functions of the European Union Intellectual Property Office (EUIPO) and of the national courts seized as European trademark courts.

Background

In 2009, the Belgian company Carolus C filed an application with the EUIPO for registration of the word sign “English Pink” as a Community trademark. In 2010, Apple and Pear Australia Ltd and Star Fruits Diffusion, filed a notice of opposition with the EUIPO based on three earlier trademarks, including the word mark “Pink Lady”.

Meanwhile, Apple and Pear and Star Fruits Diffusion brought an action for infringement against Carolus C, before the Tribunal de commerce de Bruxelles (Commercial Court, Brussels), in its capacity as a Community trademark court.

The Belgian trademark court annulled the “English Pink” trademark, ordering Carolus C to refrain from using the mark in the EU.

In view of the fact that, the Tribunal de commerce de Bruxelles (Commercial Court, Brussels) gave its decision before the EUIPO had decided on the opposition ruling, the European Union Trademark Office could thus have taken into account the judgment of the Belgian trademark court of the EU.

The EUIPO nevertheless rejected the opposition on the grounds that the marks were not visually, conceptually or phonetically similar. The appellants therefore applied to the General Court of the European Union for annulment of  the decision of the EUIPO.

The General Court of the EU granted the application for annulment on the ground that the EUIPO, although not bound by the decision of the Belgian Community trademark court, did not take into account the potential impact of this judgment on the outcome of the opposition proceedings.

The General Court of the EU however objected to the registration of the contested trademark on the grounds that it does not have jurisdiction to substitute itself to the assessment of the Board of Appeal.

Solution

Since the applicants found the decision of the EU Court unjustified, they then appealed to the CJEU.

The CJEU in turn rejected the appeal and recalled first of all that EUIPO is the EU body with exclusive jurisdiction to authorise or refuse the registration of an EU trademark.

The Court also held that EU trademark courts have jurisdiction to give judgment prohibiting the pursuance of infringement actions of a Community trademark extending throughout the territory of the European Union.

Consequently, any proceedings brought before the  EUIPO will have a subject matter different to an infringement action before a national EU trademark court.

Since the proceedings involve different subject matters, the EUIPO is not bound by final judgments of national EU trademark courts.

On the other hand, EUIPO should assess the potential impact of any judgment given by an EU national trademark court on the outcome of proceedings brought before it.

The defense strategy and timeline should therefore be established carefully in order to defend a Community trademark right.