Employee Acted in Bad Faith by Holding Domain "for Ransom"

A designer, manufacturer, and importer of men’s clothing was entitled to an award of $152,000 in damages from a former employee for violating the Anticybersquatting Consumer Protection Act, the U.S. Court of Appeals in San Francisco has held. The domain name for the designer’s website –www.eq-Italy.com –had been registered under the employee’s name. The site was in use from 1999 to 2005, when the employee left the company and took down the website, except for a notice directing “fashion related questions” to be sent to him at his e-mail address.

Although there was no evidence that the employee had done anything wrong by registering the domain name to himself, he later acted in bad faith by attempting to use the domain name to gain leverage in a dispute with the designer over commissions, the court said. In order to establish the requisite “bad faith intent to profit,” it was not necessary for the employee to have used or intended to use the website to sell goods; it was bad faith to hold the domain name for ransom.

A jury reasonably concluded that “eq-Italy.com” was confusingly similar to the designer’s registered EQ mark, the court decided. There was evidence that the mark was distinctive and that actual confusion had resulted from the former employee’s alteration of the website. The damages award was supported by financial statements for the relevant timeframe –which showed declines in sales by the designer, despite generally good performance by competitors in the men’s clothing market –and testimony that the designer spent over $31,000 recreating its website.

DSPT International, Inc., 9th Cir., ¶61,708.