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Congress has enumerated nine non-exclusive factors for courts to consider in determining whether bad faith exists under the Anti-Cybersquatting Consumer Protection Act (ACPA). 15 U.S.C.S. § 1125(d)(1)(B)(i). A court need not march through the nine factors seriatim because the ACPA itself notes that use of the listed criteria is permissive. Instead, the most important grounds for finding bad faith are the unique circumstances of the case. Congress has said that in evaluating bad faith, courts may consider a person's prior cybersquatting activities. 15 U.S.C.S. § 1125(d)(1)(B)(i)(VIII) provides that courts may consider a person's registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive. Also, Congress has provided a safe harbor for ACPA defendants who believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful. 15 U.S.C.S. § 1125(d)(1)(B)(ii).
David Lahoti, who considered himself as an “Internet entrepreneur,” began registering a number of domain names with the “veri-“ prefix. In 2003, Lahoti successfully acquired the vericheck.com domain name, but he never developed a transaction verification service. Vericheck, Inc., a Georgia corporation providing electronic financial transaction processing services, gained a Georgia state registration for its service mark, which consisted of a checkmark over the word "VeriCheck" (the "Disputed Mark"). Vericheck tried to obtain federal registration of the Disputed Mark but the United States Patent and Trademark Office (“PTO”) denied the application because an Arizona company had already registered a “Vericheck” trademark. In 2004, Vericheck contacted Lahoti and offered to purchase the vericheck.com domain name. Doubtless this fit into Lahoti's business plan as an Internet entrepreneur. Lahoti first asked for $ 72,500, and then reduced his demand to $ 48,000, but negotiations soon ended. In 2006 Vericheck filed an arbitration complaint pursuant to the Uniform Domain-Name Dispute-Resolution Policy. The arbitrator ordered the transfer of the Domain Name to Vericheck, but instead of complying, Lahoti sought a declaratory judgment in the district court that he did not violate the Lanham Act's cybersquatting or trademark infringement provisions. Vericheck counterclaimed that Lahoti's actions violated the Lanham Act, the ACPA, the WCPA, and Washington state common law. Both parties moved for summary judgment. The district court granted summary judgment to Vericheck, but only on the question of whether Lahoti acted in bad faith. The district court concluded that Lahoti acted in a bad faith attempt to profit from his use of the Domain Name and that no reasonable jury could decide otherwise. After a bench trial on the remaining issues, the district court decided for Vericheck, determining that the Disputed Mark was suggestive in part because the PTO had granted federal trademark registration to the Arizona Mark, which like the Disputed Mark consisted solely of a design around the word "Vericheck."Lahoti appealed, arguing that the district court erred in its determination that the Disputed Mark was a distinctive and valid mark. Lahoti further contended that the district court clearly erred in finding that he acted in bad faith.
1) No, but since it did not use the proper legal standard, its decision on the matter could not stand.
The court noted that although the statutory presumption of distinctiveness applied only when a mark holder's own mark has been registered, courts may also defer to the Patent and Trademark Office's (PTO's) registration of highly similar marks. Thus, in this case, the court held that the district court's decision to rely on the Patent and Trademark Office's registration of the non-party's mark as evidence that the disputed mark was distinctive was legally proper. However, the district court improperly required that the mark describe all of the corporation's services, examined the mark in the abstract rather than in an industry context, and concluded that it could not analyze the mark's component parts. Because the district court did not rely exclusively on the proper legal standard, the district court's judgment could not stand as a matter of law. The record did support the district court's summary judgment determination that the entrepreneur was motivated by a bad faith intent to profit from his use of the disputed mark. Inter alia, he was a repeat cybersquatting offender and was not entitled to the safe harbor defense in 15 U.S.C.S. § 1125(d)(1)(B)(ii).