RDNH Finding in Electrosoft.com UDRP

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A UDRP was filed against the Electrosoft.com domain name at the National Arbitration Forum (NAF). The single member panel ruled against the complainant and found that the case was brought in bad faith. In fact, I do not recall reading a decision with a more extensive discussion about why the panelist decided this was a case of Reverse Domain Name Hijacking.

The complainant in this UDRP is a company called Electrosoft Services, Inc. It seems the company was internally represented until it brought in outside counsel to file a supplemental submission to try and prevent a RDNH finding. The domain name has long been owned by a domain investment firm who was represented by attorneys Brett E. Lewis and Michael Cilento of Lewis & Lin, LLC. The panelist was Jeffrey J. Neuman.

As one can infer from a finding of RDNH, this UDRP was doomed to fail. The complainant needs to prove all three elements of a UDRP, and it did not come close to that. In fact, it seems the complaint was filed because the complainant believes the $99,000 asking price is “exorbitant.” It looks like a classic Plan B filing where an acquisition negotiation failed so a UDRP was filed in response.

To me, the most notable aspect of this decision was the extensive discussion about Reverse Domain Name Hijacking. The panelist did a thorough job of explaining why he ruled this was RDNH. Here’s the

Reverse Domain Name Hijacking

The Rules state, “If after considering the submissions of the Panel finds that the complaint was brought in bad faith, for example in an attempt at Reverse Domain Name Hijacking or was brought primarily to harass the domain-name holder, the Panel shall declare in the decision that the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding.” See Rules at 15(e).

Respondent argues that RDNH should be found in this case based on the following: (i) Complainant knew or clearly should have known at the time it filed the complaint that it could not prove one of the essential elements requirement by the UDRP, (ii) Complainant submitted a bare bones complaint on a domain name that the respondent refused to transfer to the complainant prior to initiating an action, and (iii) Complainant should have known its case was fatally weak, and (iv) it only brought this action after it failed on three separate occasions to purchase the Disputed Domain name from Respondent.

Complainant, who filed the initial complaint presumably without the input of counsel, retained counsel for purposes of submitting an Additional Submission. In refuting RDNH, Complainant’s counsel argues that the complaint was not filed in bad faith and then attempts to introduce new evidence demonstrating that the Complainant does in fact have common law rights in the term “Electrosoft”. It then argues that with the new evidence it has established one of the required elements of its prima facie case, and thus, RDNH cannot be found.

The most instructive case on RDNH is Timbermate Products Pty Ltd v. Domains by Proxy, LLC/Barry Gork, D2013-1603 (WIPO November 3, 2013). This decision listed out the different basis upon which findings of RDNH had been made. They include cases where (i) materially false evidence was submitted, (ii) relevant evidence was omitted, (iii) Complainant misrepresented the facts, (iv) no trademark rights existed at the time of the registration of the domain name, (v) there was an ulterior purpose, namely to increase negotiating leverage in settlement discussions, (vi) Complainant knew that Complaint was doomed to failure, or where (vii) the Complainant had constructive knowledge that its Complaint would not succeed.

The Panel does not take lightly the finding of RDNH, especially in cases where a complaint was filed without the benefit of having counsel. However, after consideration of all of the evidence, the Panel is troubled by the following facts:

a) This action was taken more than 20 years after the domain name was initially acquired by the Respondent.

b) The Complainant provided no evidence to demonstrate that it was plausible that the Respondent knew or should have known about the Complainant’s common law rights at the time it registered the domain name (if indeed it had common law rights). There is no federally registered trademark, no evidence of any business activities within Complainant’s locality, no evidence of any news articles that Complainant could have seen, or any other indicia that Respondent could have even known about the Complainant at the time it registered the domain name other than the fact that it registered its business in Maryland in 1997.

c) The Complainant’s entire argument concerning the Respondent’s lack of rights or legitimate interests, and Respondent’s registration and use of the Disputed Domain Name, is based solely on the fact that the Respondent buys and sells domain names for prices which Complainant believes are too high.

d) The Respondent never initiated contact with the Complainant to sell the domain name to the Complainant. It was the Complainant that initiated contact with the Respondent and it was he who made the first offer to purchase the domain name from the Respondent. The Respondent rejected Complainant’s initial offer, which it had every right to do so. It was only after the Respondent rejected Complainant’s offers and made a counteroffer (which Complainant believed was too high), that it initiated this action.

(a) Impact of Delay

Although Panels have widely recognized that a mere delay between the registration of a domain name and the filing of a complaint does not prevent a Complainant from filing a case, nor from potentially prevailing on the merits, the Panel notes that allowing more than twenty years to lapse prior to asserting rights to the Disputed Domain Name is a factor to consider in Respondent’s favor especially when looking at Respondent’s rights and legitimate interests in the Disputed Domain Name and evaluating whether the Disputed Domain Name was registered and used in bad faith. See WIPO Overview of WIPO Panel Views on Selected UDRP Questions, Third Edition (“WIPO Jurisprudential Overview 3.0”) At Section 4.17. Moreover, it would be inconceivable that Complainant just became aware of the Disputed Domain Name since that domain name (minus the .com) is identical to the mark in which Complainant is alleging rights.

Therefore, although there is no concept of the defense of “laches” in the UDRP context, this type of extensive delay in the enforcement of its rights is a factor that may be considered in favor of the Respondent having rights or legitimate interests in the domain name. The Panel believes it also may be considered in determining whether the Complaint was filed in bad faith.

(b) No evidence of Respondent’s lack of legitimate rights or of Respondent registering and using the Disputed Domain Name in Bad Faith

Although Complainant’s counsel attempts to cure the Complaint’s deficiencies with respect to proving the Complainant’s rights common law rights to the “electrosoft” mark, Complainant’s counsel does not even attempt to cure any of the deficiencies that are glaringly obvious with respect to the second or third elements of the Policy –namely, demonstrating that the Respondent lacks rights or legitimate interests in the Disputed Domain, and that the Disputed Domain Name was both registered and used in bad faith. Even assuming arguendo that the Panel had accepted the new evidence that the Complainant had common law rights in the Disputed Domain name, Complainant’s counsel does not offer any additional evidence that Respondent knew (or even should have known) about Complainant’s rights in the Mark when it registered the Disputed Domain name, or that the Respondent was in some way taking unfair advantage of the Complainant’s goodwill when it registered and used the Disputed Domain Name.

With respect to this case, Complainant began using the tradename “Electrosoft, Inc.” in 1997 in Maryland, and in 2003 in Virginia. Complainant has no federally registered trademarks within the United States and therefore relies on its common law rights, which it has not sufficiently proven. It registered and began using its domain name, , in 2001.

Respondent, whose address is thousands of miles away, registered the domain name , according to WHOIS records, on March 8, 2000. In addition, at the time the domain name was registered, Complainant was only licensed to do business in Maryland and its primary customers are in the United States Government. Moreover, the Complainant had not established its own web presence by registering and using its own domain name, , until more than a year after the Disputed Domain Name was registered. The Panel agrees with Respondent that is would have been highly improbable, if not impossible, for Respondent to have known about the Complainant’s existence at the time it registered the Disputed Domain Name. This would automatically preclude a finding that the domain name was “registered in bad faith” as required under the Policy.

Nor does the Complainant introduce any evidence that the domain name was being used in bad faith. In addition to the Respondent being unable to know of Complainant’s existence, Complainant does not introduce any evidence that Respondent was somehow targeting Complainant nor seeking to profit from Complainant’s business goodwill. Instead, Complainant makes the argument that the respondent is using the Disputed Domain Name in bad faith because Respondent resells domain names.

There is nothing in the Policy that prohibits the purchase and sale of domain names. It is only a violation of the Policy if a registrant acquires a domain name primarily for the purpose of selling . . . the domain name registration to a Complainant who is the owner of the Trademark or to a competitor of the Complainant, for valuable consideration in excess of the registrant’s out-of-pocket costs directly related to the domain name. See Policy at ¶ 4b(i).

In fact, Panels have found that “a person who legitimately owns a domain name is entitled to sell it for as little or as much as he like or thinks he can get away with.” Robin Food B.V. v. Bogdan Mykhaylets, D2016-0264 (WIPO April 1, 2016). See also Barlow Lyde & Gilbert v. The Business Law Group, D2005-0493 (WIPO June 24, 2005) (“[s]tanding alone, there is nothing wrong with offering to sell a domain name at a high price. It is a very common business practice.”)

What is not allowed is knowingly taking advantage of a trademark owner by acquiring that name for the primary purpose of selling that name to the trademark owner. The Panel in Brooksburnett Investments Ltd. v. Domain Admin / Schmitt Sebastien, D2019-0455 (WIPO April 16, 2019) ( held that “[s]peculating in intrinsically valuable domain names represents a legitimate business interest in itself, unless the evidence points instead to a disguised intent to exploit another party’s trademark.”)

Complainant offers no evidence that Respondent acquired the domain name primarily to sell it to the Complainant. In fact, the evidence shows that there was no plausible way that Respondent knew or could have known of the existence of the Complainant at the time it registered the domain name, especially given the fact that the Complainant did not establish its presence on the Internet until a year after the domain name was registered.

(c) Plan B

As evidence of Respondent’s bad faith, Complainant submits a screenshot of the Disputed Domain Name’s website that solicits offers for this Disputed Domain Name along with a number of other domain names utilizing the term electrosoft. The Complainant also submits several chat records showing Complainant initiating contact with the Respondent, making several offers for the Disputed Domain Name, ultimately rejected by the Respondent who counteroffers a much higher price.

This is a classic “Plan B” case where complainants that are unable to purchase a domain name through negotiation file UDRP actions in a last-ditch effort to try and acquire the domain name. Complainant initiated the contact with the Respondent and made the first offer. When this was rejected, it made a second offer. Not satisfied with the Respondent’s higher counteroffer, Complainant filed this case. This alone is indeed grounds for a finding of bad faith and abuse of the administrative proceeding by Complainant, especially in light of the lack of any showing that the Respondent was targeting Complainant. See LaFrance Corp v. David Zhang, D2009-0415 (WIPO May 15, 2009) (Respondent argued that this was a Plan B case and justified a finding of RDNH). Ultimately the Panel in LaFrance did not find RDNH but did conclude that the Complaint was brought primarily to harass the domain name holder. See EBSCO Industries, Inc. v. WebMagic Staff / WebMagic Ventures, LLC, FA1703001722095 (Forum May 25, 2017) (Panel finds there is sufficient evidence [of using the UDRP as a Plan B to obtain the Domain Name] . . ., and therefore concludes that reverse domain name hijacking has occurred”); See also Cooper’s Hawk Intermediate Holding, LLC v. Tech Admin / Virtual Point Inc., FA2010001916204 (Forum Nov. 17, 2020) (finding RDNH where Complainant only filed the UDRP action after negotiations to purchase the domain name broke down).

(d) Impact of Representation by Counsel

Panels have traditionally held parties represented by counsel to a higher standard especially when deciding whether to make a finding of RDNH. Those that are not represented by counsel are much less likely to be found to have filed a UDRP in bad faith. In the LaFrance case, cited above, the original complaint was not filed by counsel for the Complainant. The Panel in LaFrance stated that, “[h]ad Complainant been represented by counsel the Panel would not have hesitated to make an RDNH finding.” Unlike LaFrance, however, here counsel was retained by Complainant after the Respondent filed its Response, and it was Respondent’s counsel that filed the Complainant’s Additional Submission.

Complainant’s counsel in this matter should have known that even if it could establish the common law rights of the Complainant in its Additional Submission, it could not have established that the Disputed Domain Name was registered and used in bad faith. In fact, Complainant’s counsel did not even try to address these other elements. By not addressing these other elements, the Panel is left to conclude that counsel for the Complainant was trying to cure only the one element it thought it could solely to advance its argument that it is inappropriate to find RDNH where a Complainant has been successful in proving one of the required elements of the UDRP. In this case, counsel for the Complainant should have recognized the deficiencies, requested that its Complaint be withdrawn without prejudice and if, in the unlikely case that the withdrawal was not accepted, make an alternative argument as to why the Panel should not find RDNH.

(c) If Complainant proves one element of its case, is an RDNH finding appropriate?

Complainant’s counsel, believing that it had cured the deficiencies in the Complaint with respect to establishing that the Complainant had common law rights in the ELECTROSOFT mark argues that a finding of RDNH is inappropriate where the complainant has satisfied at least one element of its UDRP Claim. It cites two cases as standing for this proposition: Plan.Net v. Yikilmaz, D2006-0082 (WIPO March 24, 2006) and Gallup, Inc. v. PC s.p.r.l, FA0308000190461 (Forum Dec. 2, 2003).

The panel disagrees that a finding of RDNH is inappropriate and also disagrees with Complainant’s interpretation of the cases it cites. Although it is true that in both cases the Complainant did establish one of the elements of its case, and the Panels in those cases did not find RDNH, the Panels never stated that it was because the Complainant established one of the elements that it did not find RDNH. Rather, in both of those cases, there were other factors that led the Panels to find no RDNH.

The Panel finds that even if the Complainant establishes that one (or even two) of the elements of the Policy have been met, a finding of RDNH may still be appropriate depending on the facts and circumstances of a case. For example, a complainant that owned a trademark registration for a mark that happens to be confusingly similar to a domain name owned by a registrant who also a registered trademark for the same mark (in a different class of services) would have no adverse consequences for making frivolous claims regarding the Respondent’s lack of rights or legitimate interests in the domain name. The Panel notes that adopting the proposed rule by the Complainant would significantly weaken the concept of RDNH.

For all the above reasons, the Panel does find RDNH in this case, and that the Complaint was brought in bad faith constituting an abuse of the administrative proceeding.

About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has closed eight figures in deals. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest. Reach out to Elliot: Twitter | Facebook | LinkedIn | Email

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