GoDaddy.com Dodges a Bullet: Ninth Circuit Holds That There Is No Secondary Liability for Cybersquatting under the ACPA

It is not all that often that a federal court of appeals sets forth a bright-line rule, much less by a unanimous panel, and even less likely in the hazy area of cyberlaw.  But in Petroliam Nasional Berhad (Petronas) v. Godaddy.com, Inc., No. 12-15584 (9th Cir. 2013) three judges of the U.S. Court of Appeals for the Ninth Circuit recently agreed that neither the text nor the purpose of the Anticybersquatting Consumer Protection Act (“ACPA”) provides support for reading in a cause of action for contributory cybersquatting, at least against domain name registrars.  The only ambiguity is whether this holding is limited to domain name registrars or expands to other “third parties” and “service providers” on the Internet.

The plaintiff, a Malaysian oil and gas company that owned the PETRONAS trademark, sued Godaddy.com, the largest domain name registrar in the world for direct and contributory cybersquatting when an unnamed third party – who had previously registered “petronastower.net” and “petronastowers.net” with another registrar – used GoDaddy’s domain name forwarding service to send visitors to those URLs to an adult website it hosted.  Although  GoDaddy had investigated the third party’s practices after plaintiff complained, it took no action because it was not the host of the adult website, and because the UDRP prevented it from participating in trademark disputes.  Dissatisfied, Petronas filed suit in the U.S. District Court, Northern District of California, only to have its case dismissed on summary judgment after limited discovery.  Petronas only appealed the dismissal of its contributory cybersquatting claim based on GoDaddy’s forwarding service.

The Court of Appeals looked at the history of the Lanham Act, noting that the Act was historically thought to create a cause of action for contributory liability because of its origins in the common law of unfair competition.  A 1999 amendment to the Lanham Act added the ACPA, which delineated two specific new causes of action aimed at cybersquatting: one for direct liability, and one for in rem relief.  Petronas argued that the ACPA includes a cause of action for contributory cybersquatting because Congress must have intended to incorporate common law principles of secondary liability by placing the ACPA within the Lanham Act.

The court firmly disagreed.  Starting with the plain text of the statute, the court explained that the ACPA prohibits the act of cybersquatting but limits the circumstances when one can be deemed a cybersquatter (i.e., when one registers, traffics, or uses a domain name with the bad faith intent to profit from the use of a protected mark).  The statute makes no mention of secondary liability, and the court held that to expand liability to those who are not considered cybersquatters under the ACPA – and who merely aid those who may be held directly liable – would expand the scope of prohibited conduct to include “mere maintenance of a domain name by a registrar, with or without bad faith intent to profit.”  The court held that Congress “chose not to impose secondary liability under the ACPA,” and noted that the legislative history supports such a conclusion.

Since the ACPA created new, distinct causes of action, and Congress did not intend to incorporate the common law of trademark (and secondary liability) into the ACPA, the court found  no general presumption of secondary liability. , Merely placing ACPA within the Lanham Act was not sufficient, in and of itself, to impute a cause of action for secondary liability in an otherwise distinct statute.  Further, while the circumstances behind the passage of the Lanham Act would allow for an inference of secondary liability, the ACPA was not passed as a result of codifying common law principles with inherent secondary liability.  Rather, the ACPA was a wholly new statute with distinct elements aimed at addressing a novel issue.

Finally, the court explained that finding a cause of action for contributory cybersquatting would be at odds with the goals of the ACPA.  The purpose of the statute was to protect consumers and provide legal clarity for trademark owners “by prohibiting the bad-faith and abusive registration of distinctive marks”; in other words, it was “narrowly tailored” to address a very specific problem.  To impose secondary liability on domain name registrars would expand the ACPA and undermine its limiting provisions aimed at sparing neutral registrars from having to enter the fray between their millions of customers, on the one hand, and innumerable trademark holders, on the other.  The court concluded that trademark owners have sufficient alternative remedies through direct and contributory trademark infringement actions without adding a cause of action for contributory cybersquatting under the ACPA.

While trademark owners may be disappointed, the court was at least clear in articulating which arrows are not in the quivers of potential ACPA plaintiffs.  Trademark owners should be aware that, at least in the Ninth Circuit, domain name registrars like GoDaddy are off-limits as “contributory” defendants under the ACPA and should seek other forms of redress.  It is less clear, however, whether other actors involved in the business of the Internet (ISPs, for example) will be subject to this judicially created safe harbor, as the court noted, without further elaboration, that the ACPA is meant to insulate “third party service providers” and “registrars or other third parties who are not cybersquatters.”  We will continue to monitor ACPA cases in order to determine how the lower courts will interpret the Petronas decision.