120482791_48e0027a90_zThe legalization of marijuana has been a hot topic this election season. Some forward-thinking entrepreneurs have their fingers crossed that laws like Proposition 19 will pass, but not necessarily because they are using, selling, or growing the “ganja.” Instead, some tech-savvy individuals have been registering domain names that are connected to marijuana. For example, Kevin Faler has registered more than a thousand marijuana-related domain names, hoping that, if the drug is legalized, he can sell them to companies in the new marijuana industry at a high profit.

This get-rich-quick scheme raises red flags about cybersquatting violations. Under the Anticybersquatting Consumer Protection Act, it is illegal to register domain names with a bad faith intent to profit from the sale of that domain name. However, the Act only applies to registration of domain names that are distinctive, famous, or registered as trademarks at the time the domain name is registered. In other words, the law only prohibits cybersquatters from snatching up domain names of established trademarks to sell back to the legitimate trademark owners for a quick profit. Thus, the business scheme developed by individuals like Faler — gambling on what new trends or product will become desirable as trademarks and thus domain names — slips through the cracks of the Anticybersquatting Consumer Protection Act.

This loophole illustrates how domain name regulations lag behind trademark law and undermine its competition-promoting policies. In a world without domain names, this type of scheme would have been confined to attempts to monopolize potential new trademarks. Individuals would have tried to guess what marijuana-related phrases would become desirable for business use upon legalization, and the register those phrases with the Patent and Trademark Office. However, U.S. law requires actual use or a bona fide intent to use the mark in commerce for a trademark to receive legal protection. This requirement prevents people from gathering up all possible trademarks and creating a “trademark thicket” that would harm competition by making it difficult, if not impossible, for new competitors to find available names for their product. Therefore, any attempt to monopolize marijuana-related phrases as trademarks would fail because trademark protection could not exist if the terms were not used in connection with a good or service.

However,  registering domain names does not have a use requirement. Consequently, it is possible to register thousands of domain names related to a nascent industry in hopes that those names will become desirable for business use as trademarks and Internet addresses. As Internet presence becomes more and more important to commercial success, “domain name thickets” that make it difficult for new competitors to find suitable domain names become more problematic and run the risk of hindering competition in the same way a “trademark thicket” would. While stockpiling non-trademarked domain names to sell off at inflated prices is within the letter of the law, it is not consistent with the competition-promoting goals of the use-based American trademark system.

Rachel Purcell

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