Transferee's Right (Or Not) To a Disputed Domain Name

 
This Comment revisits a case from last year on the issue of domain name transfers that deserves to be highlighted for the acuity of the Panel’s analysis and the forcefulness of its conclusions, HSBC Finance Corporation v. Clear Blue Sky Inc. and Domain Manager, D2007‑0062 (WIPO June 4, 2007).   
 
In order to prevail in a UDRP proceeding, the complainant must plead and prove that the respondent registered and is using the domain name in bad faith. It was noted in an earlier Comment that there are Country Code ADRs that require proof of either one or the other, which is also true of the Anticybersquatting Consumer Protection Act. Under the Statute, a registrant may be in violation if it "registers, traffics in, or uses a domain name" protected as a mark (15 U.S.C. § 1125(d) (1)(A)(ii)). Under the UDRP, however, the fundamental principle is that if “a registration of a domain name ... at inception did not reach [Paragraph] 4(a)(iii)] but is found later to be used in bad faith [the respondent] does not fall foul of [Paragraph] 4(a)(iii),” Weatherall Green & Smith v. Everymedia.com, D2000-1528 (WIPO February 19, 2001), citing Teradyne, Inc. Teradyne, Inc. v. 4Tel Technology, D2000-0026 (WIPO May 9, 2000).
 
This principle, though, is not of great comfort to transferees. The consensus view of WIPO Panelists is that, while a renewal of a domain name does not amount to registration for purposes of determining bad faith, the transfer of a domain name to a third party does amount to a new registration, requiring the issue of bad faith registration to be determined at the time the current registrant took possession of the domain name. See WIPO Overview of WIPO Panel Views on Selected UDRP Questions, § 3.7, and cases cited therein.
 
The issue of good faith registration and bad faith use by a transferor was squarely in issue in HSBC Finance Corporation. The Panel found that the Respondent “fundamentally misperceives the Policy and its objectives in asserting that a previous registrant’s good faith registration of a domain name immunizes one who subsequently acquires the domain name from further scrutiny.” According to the three-member Panel
 
while a renewal of a domain name does not amount to registration for purposes of determining bad faith, the transfer of a domain name to a third party does amount to a new registration, requiring the issue of bad faith registration to be determined at the time the current registrant took possession of the domain name.
 
The Panel was unpersuaded that the Respondent “had acquired the disputed domain name for the not insubstantial sum of $48,000 (USD).” It noted that although the transferor
 
has not been shown to have registered in bad faith, a fair inference can be drawn from the record that [the transferor] had begun, prior to the 2004 transfer to the Respondent, to use the domain in bad faith to intentionally attract internet users based on confusion with Complainant’s trademark in violation of paragraph 4(b)(iv) of the Policy.
 
This led to an inescapable conclusion. If the transferee acquires "a domain name that is being used in bad faith, the Panel may infer that that acquisition was motivated by an intent to continue the bad faith use. This is evidence of bad faith registration."
 
The Panel's cautionary advice is simple. A transferee is entitled to the disputed domain name if it does not contravene the rules of legitimacy. The further inference to be drawn from this case is that in acquiring a previously owned domain name it would be both wise and prudent for the purchaser to do some due diligence.