Key Insights & Legal Implications

by Ivan Lipshitz, Adv., JMB Davis Ben-David

If you have been following my series of articles, “The Interface between Trademarks and Domain Names: The Value of Your Domain Name and How to Protect it from Abuse” which can be found here, you will no doubt be familiar with the three elements that are required in a successful complaint under the terms of paragraph 4(a) of the Uniform Domain-Name Dispute-Resolution Policy  (“UDRP” or the “Policy”). The three elements are, that: (i) the disputed domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; (ii) the respondent has no rights or legitimate interests in respect of the disputed domain name; and (iii) the disputed domain name has been registered by the respondent and is being used by him in bad faith. Failure on the part of a complainant to demonstrate even one element of the Policy will result in failure of the complaint in its entirety.

What is the position of a licensee, franchisee or distributor of products under a licensed trademark who has registered a disputed domain name and has been using it with the knowledge of, and express or implied, consent of the complainant but once the relationship ends, refuses to give up the domain name and remains listed as the registrant of the disputed domain name corresponding to the licensed mark? The answer to this question may well depend on whether or not the respondent has rights or legitimate interests in the disputed domain name and, whether the disputed domain name was registered and is being used in bad faith under the Policy, as discussed below. Similarly, what is the position where a reseller, OEM (Original Equipment Manufacturer) or dealer sells a complainant`s products, whether authorized or unauthorized, and features the complainant’s trademark within its domain name. 

I will now discuss the second and third elements of paragraph 4(a) of the Policy insofar as it relates to licensees, franchisees, distributors & resellers who may find themselves as the respondent in UDRP complaint proceedings in light of the above questions. But, first we need to understand what a license and distribution agreement is.

What is a License and Distribution Agreement?

A license and distribution agreement is a legal, written contract between two parties under which an owner of intellectual property rights such as a brand owner, patent, or trademark holder gives a third-party permission to use their intellectual property. Typically, this type of agreement defines which intellectual property is authorized for use and in which geographical territory, whether the license is exclusive or non-exclusive, the duration of such rights, quality control provisions that set forth clear standards as to the nature and quality of the licensed products/services, and royalty payments, to mention but a few of the salient provisions which a trademark license should contain.

Some examples of trademark licensing agreements might include a professional football team permitting clothing manufacturers to print team names and insignias on their merchandise, Coca-Cola allowing independent bottlers and distributors of their soft drinks to label the finished product with the COCA-COLA® trademark, or Hard Rock International which owns the global trademark for all Hard Rock brands, authorizing its independent franchisees to use the HARD ROCK® trademark in connection with the operation of their Hard Rock Cafes within a certain geographic region, and in connection with the display and sale of historic music memorabilia.

Generally, a distributor would not be entitled to register its supplier’s trademark within a domain name without the supplier’s express or implied consent.

Rights or Legitimate Interests of Licensees 

While the overall burden of proof for the second element in paragraph 4(a)(ii) of the Policy lies on the complainant in UDRP proceedings, UDRP panels have recognized that proving a respondent lacks rights or legitimate interests in a domain name may result in the often impossible task of ‘proving a negative’, requiring information that is often primarily within the knowledge or control of the respondent. As such, where a complainant makes out a prima facie case that the respondent lacks rights or legitimate interests, the burden of production on this element shifts to the respondent to come forward with relevant evidence demonstrating rights or legitimate interests in the domain name. If the respondent fails to come forward with such relevant evidence, the complainant is deemed to have satisfied the second element. In regard to UDRP proceedings where respondents have retained use of a disputed domain reproducing a licensed trademark which they were initially authorized to use as licensee or distributor in terms of a licensing agreement which had subsequently terminated, UDRP panels have generally held that the respondents` putative rights or legitimate interests were extinguished upon the termination of the license, and that the continuing use thereafter by the respondents of a confusingly similar domain name is not legitimate.

Registered and Used in Bad Faith

Generally speaking, a finding that a domain name has been registered and is being used in bad faith requires an inference to be drawn that the respondent in question has registered and is using the disputed domain name to take advantage of its significance as a trademark owned by the complainant.

Domain name cases involving a respondent who was previously licensed to use the trademark in question often present difficult issues in terms of bad faith and it is in proving the bad faith element that UDRP complainants face an uphill battle and significant challenge arising from exactly this type of scenario. The reason for this is not hard to find, as the Policy and a long line of cases have made it abundantly clear that a conjunctive finding of the bad faith element is required: a complainant must prove not only that the disputed domain was used in bad faith but also that it was originally registered in bad faith as well. (See Extreme Networks Limited, Extreme Drinks Limited v. Ex Drinks, LLC, WIPO Case No. D2013-0197). Following this line of reasoning, panels have held that in circumstances where a complainant has only consented to the respondent using the disputed domain name for the duration of the licence agreement, which it contends has now terminated, such termination, even if valid, cannot convert a good faith registration into a bad faith registration retroactively ( See:  Les Editions Jalou v. Sidharth Saigal and Chalk Media FZE WIPO Case No. D2023-1430).

Renewal of a Domain Name Registration by the same Registrant is not Bad Faith

In the recent WIPO case of 901691 Alberta Ltd. v. Sarah Noked WIPO Case No. D2022-1548, the complainant and the respondent entered into an agreement, which included licensing provisions in 2017, which continued for more than three years and then ended abruptly in early 2021. Contentious issues could not be resolved, and the respondent began carrying on a competitive business while continuing to use the disputed domain name. Although the agreement did not specifically address domain names, it did contain post-termination provisions that appear to prohibit the use of the complainant’s intellectual property (which arguably includes domain names of a confusingly similar nature). There was therefore some basis for the Panel to conclude that the respondent had engaged in bad faith use of the disputed domain name in the period after February 2021. The consensus view of a long line of UDRP cases confirms the principles set out in WIPO Overview 3.0, section 3.9 and which have found that mere renewal of a domain name registration by the same registrant is insufficient to support a finding of registration in bad faith. Thus, in the 901691 Alberta Ltd. v. Sarah Noked case, based on the available record and all the circumstances of the case, in particular the complainant’s admission that it did not believe the registration was made in bad faith, the Panel found that the complainant had failed to satisfy the requirements of paragraph 4(b) of the Policy and the complaint was dismissed.

There is also the case of Stall & Dean Manufacturing Co., Inc. v. EFF, LLC dba Stall & Dean Forum Claim Number: FA2106001950937  in which a brand owner for team sports apparel, Stall & Dean Manufacturing Co., Inc. licensed its trademark to a company called EFF, but that relationship ended. Stall & Dean filed a UDRP complaint to try to get back the domain https://www.stallanddean.com/ which was registered by the former licensee. The Panel denied the claim because it determined that the domain was originally registered in good faith as part of the licensing agreement. So even if EFF was now using the domain in bad faith, it was not registered in bad faith. The Panel ruled that the complainant had failed to show that the domain was both registered and used in bad faith and the complaint was denied.

The same situation in various forms has arisen in prior UDRP decisions. There are a series of decisions on this point. Three decisions of relevance are noteworthy: Weatherall Green and Smith v. Everymedia.com, WIPO Case No. D2000-1528; PatisFrance S.A. v. Paris Gourmet of New York, WIPO Case No. D2006-0074; and Century 21 Real Estate LLC v. LukaIvanovic, Fresh Realestate, WIPO Case No. DME2020-0008. In all three cases, there was no evidence probative of bad faith at the time the original domain name registration took place. 

All these cases support the legal principle that licensing disputes fall outside the scope of the UDRP, i.e., that it would need to speak to possible bad faith as it is understood under the Policy and not merely trademark infringement per se. Furthermore, a close reading of some of these panel decisions clearly leads to the conclusion that regardless of whether or not the license was validly terminated, which is outside the scope of the UDRP, the fact is that the respondent may have originally registered the domain name in good faith in connection with the terms of its licence even if at a later date their good faith use converted to bad faith. Regardless of any submissions concerning subsequent breach and termination, the complainant in these cases could not demonstrate that the respondent registered the disputed domain name in bad faith and the complaint under this scenario necessarily failed for that reason.  In other words, a dispute of this type if brought under the UDRP proceedings in effect boils down to be a dispute about the terms and scope of the respondent`s rights under its licence agreement. And UDRP panels interpreting the Policy have consistently declined to rule on such claims of contract breach and “trademark infringement “and have ruled that such a proceeding under the Policy is not the appropriate forum for the determination of a dispute of this nature. 

There is also the undecided legal question whether the right to use a trademark under a licence agreement, in the absence of any contractual stipulation by the trademark owner to the contrary in the applicable licence or distribution agreement, also confers upon the licensee a right to register and use a domain name corresponding to that trademark, or whether this would constitute trademark infringement. Furthermore, whether or not registration of a domain name is use as a trademark would also appear to be a “grey area” not established by case law. Whether or not the registration of a domain name constitutes use as a trademark, it is well-established that using a trademark in a domain name, for example, in a website can constitute use as a trademark. These uncertainties in trademark law therefore do not appear to be very helpful and bedevil the issue.

Commercial Solution

The solution to this legal conundrum would appear to be a matter for commercial arrangements between a licensor and its licensee/distributor in the licence or distribution agreement itself. The licensee`s registration and use of the trademark in a domain name would not be an infringement unless the terms of the licence itself imposed restrictions against such use. Accordingly, a trademark owner who wishes to restrict a licensee from registering a domain name corresponding to the trademark is well-advised to make appropriate contractual provision against such conduct in the terms of the licensing arrangements.  If such authorization or permission is granted a licensee / distributor to register a domain name corresponding to the trademark, at the very least, the licence agreement should stipulate, as a post -term obligation, that the licensee immediately cease use of such domain name upon termination of the licence agreement, and will be obligated to notify all appropriate domain name registrars of the termination of its right to use such domain names and corresponding trademark under the licence/ distribution agreement concerned. The licensee /distributor should also be obliged to authorize said registrar to transfer such domain name to the licensor upon the occurrence of such event. The licensee /distributor should furthermore authorize the licensor and appoint it as its attorney-in-fact to direct such registrar to transfer the domain name to it if the licensee / distributor fails or refuses to do so.

It may even be advisable for a trademark owner who wishes to control use of a domain name by a foreign licensee/ distributor which includes in such domain a registered trademark belonging to the licensor to register the domain name in its own name and confer use thereof upon the foreign licensee/distributor for the duration of their contractual term. This route should be proceeded upon only with the utmost caution as many Country Code Top Level Domains (ccTLDs) are subject to stringent eligibility and allocation rules. Importantly, foreign commercial entities in such countries or territories may only be eligible for registration of a ccTLD if they have applied for or hold a local country/ jurisdictional trademark registration with an exact match to the relevant domain name, or have a bona fide commercial presence in such country/jurisdiction concerned. In such circumstances, you would be well advised to consult your trademark lawyer to ensure that you meet the applicable eligibility criteria. 

Nominal Fair Use & the Oki Data test

Panels have recognized that resellers, OEM`s, distributors, or service providers using a domain name containing the complainant’s trademark to undertake sales or repairs related to the complainant’s goods or services may be making a bona fide offering of goods and services and thus have a legitimate interest in a domain name incorporating such trademark only if the following cumulative requirements as outlined in the so called “Oki Data test” are met. These four cumulative requirements or criteria which will be applied in the specific conditions of a UDRP case are: (i) the respondent must actually be offering the goods or services at issue; (ii) the respondent must use the site to sell only the trademarked goods or services; (iii) the site must accurately and prominently disclose the registrant’s relationship with the trademark holder; and (iv) the respondent must not try to “corner the market” in domain names that reflect the trademark ( (Oki Data Americas, Inc. v. ASD, Inc., WIPO Case No. D2001-0903; WIPO Overview 3.0, section 2.8.1). Thus, in Bayerische Motoren Werke AG v. David Gibson / Pos Ability USA Inc. WIPO Case No. D2023-3940 the panel in finding that that the use of the disputed domain names cannot be considered fair use and failed to meet the second above-mentioned criteria, noted that the respondent provided a website under the disputed domain names where it used the distinctive and famous BMW logo which strengthened the likelihood of confusion with the complainant’s distinctive trademarks as to the source, sponsorship, affiliation or endorsement of its website. It also offered repair parts and maintenance services for BMW vehicles as well as third-party competing car brands (e.g. Mercedes or Volvo). By doing this, the respondent disrupted the complainant’s business and intentionally attempted to attract, for commercial gain, internet users by creating a likelihood of confusion with the complainant’s mark which constitutes bad faith use.  See also Bad Kitty’s Dad, LDA v. Omegles Sites WIPO Case No. D2023-4683  in which the Panel held that the Oki data requirements were not cumulatively fulfilled in that case. At the most basic level, the disputed domain name falsely suggested that the website is an official site of complainant or of an entity affiliated to or endorsed by complainant. In the instant case the domain name is nearly identical, with the only addition being a hyphen, and panels have found that domain names identical to a complainant’s trademark carry a high risk of implied affiliation (WIPO Overview 3.0, section 2.5.1). Respondent`s website extensively reproduced, without authorization by the complainant, complainant’s trademark, without any disclaimer of association (or lack thereof) with complainant. Furthermore, the use of a domain name which intentionally trades on the fame of another and suggests affiliation with the trademark owner cannot constitute a bona fide offering of goods or services.

Key Takeaways

In licensing situations, it is not uncommon for business relationships to unravel and for unauthorized use of a mark to continue after the license or distributor agreement has terminated.  But, as a number of cases as illustrated above have indicated, subsequent unauthorized use does not mean that the initial registration of the disputed domain name was necessarily in bad faith. The prevailing view of UDRP panels is that the Policy was not designed to prevent such situations. In Substance Abuse Management, Inc. v. Screen Actors Modesl [sic] International, Inc. (SAMI), WIPO Case No. D2001-0782, the panel stated that “If a domain name was registered in good faith, it cannot, by changed circumstances, the passage of years, or intervening events, later be deemed to have been registered in bad faith.” Panels have found that to decide these licensing cases on the subsequent bad faith action would “extend the Policy to cover cases clearly intended to be outside its scope.” 

In instances where resellers, distributors, OEM`s or service providers using a domain name containing the complainant’s trademark are concerned, the position is relatively straightforward. Panels have found it appropriate to apply the Oki Data principles to evaluate whether, under UDRP jurisprudence, a respondent has rights or legitimate interests in the disputed domain name or not. 

These licensing issues, where it is recognized that while complainant may have a credible claim of trademark infringement but it is not proven that respondent registered the disputed domain name in bad faith within the framework and meaning of the Policy, highlight a fundamental distinction between “trademark infringement” under trademark law for which redress and compensatory damages may be sought in a competent court of civil jurisdiction and the “bad faith” intent requirement to succeed in a UDRP compliant under paragraph 4(a)(iii) of the Policy. 

UDRP disputes are abbreviated proceedings, “minimalist” in character, that are not meant to resolve complex contractual issues that turn on facts that are in dispute or on general legal principles and findings concerning intricate arguments of infringement, validity of trademark registrations, implied contractual terms & breach of contract, consent, acquiescence, estoppels or other equitable defences. These are issues and questions which need to be fully ventilated under proper document discovery and viva voce examination and cross-examination of the parties concerned before a proper forum which has the power and authority to make an appropriate decision and finding on the facts and governing law, and, if necessary, award injunctive relief and compensatory damages. The UDRP procedure is not a convenient forum for resolving these borderline disputes and/or cases involving material conflicts of fact. The Policy is only designed to deal with clear cases of domain name abuse and not all disputes of every kind that relate in any way to domain names.

If any of your trademarks may be subjected to domain name abuse and you need assistance to file a domain name dispute resolution complaint to secure or enforce your digital brand, or need assistance in developing an enforcement strategy to safeguard your digital assets from all forms of infringement, violation and abuse,or where a trademark holder is challenging your domain name, please email Ivan Lipshitz at: Ivan.Lipshitz@jmbdavis.com or JMBmail@jmbdavis.com.

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