202005.11

China: acquisition of domain name, limitation period and admissibility of the complaint under the China dispute resolution procedure

Extrajudicial procedures for the settlement of disputes relating to Chinese domain names are governed by the China National Domain Name Dispute Resolution Policy (CNNIC Policy) and Rules (CNNIC Rules). Compared to the Uniform Domain Name Dispute Resolution Policy (UDRP), this legal corpus contains special features that, in particular circumstances, can make the case relatively complicated. The HKIAC decision DCN-1900893, 章节 公司(CHAPTER 4 CORP. V.  (hkiac.org) sheds light on how to decide on one of the main challenges the parties may encounter: the time-bar issue in the presence of a domain name acquired on the secondary market.

In the case mentioned above, Chapter 4 Corp., owner of numerous “SUPREME” trademarks, filed a complaint with the Hong Kong International Arbitration Center (HKIAC) on April 9, 2019, to obtain the transfer of the domain name <supreme.com.cn>. The latter was created in 2006. However, the respondent acquired this domain name between July and September 2017. The 2014 edition of the Policy provided for a two-year time bar (article 2), while the 2019 edition extended the limitation period to three years (article 2). To declare whether the domain name should be transferred or not, the panel had to start by answering a preliminary question: whether the complaint was eligible for consideration? This seemingly simple question involves a few other issues to address. First, who has the jurisdiction to rule on the admissibility of the complaint? Second, should the acquisition of a domain name be regarded as a new registration?

1. Who has the power to rule on the admissibility of the complaint?

In the present case, the China Internet Network Information Center (CNNIC, the registry of the Chinese top-level domains) made a recommendation as to the admissibility of the complaint (1.1.). This interference invites to question the place of the competence-competence principle in DRP-type procedures (1.2.).

1.1. The CNNIC’s position 

The decision reveals that the HKIAC had inquired the CNNIC on whether the complaint was eligible and whether the HKIAC should accept it. In an email reply to the HKIAC, the CNNIC recommended not accepting the complaint if the domain name had been created more than three years before, regardless of whether the domain name had been the subject of an acquisition or not. 

Article 13 of the Policy (CNNIC Policy) clearly state that the CNNIC does “not participate in the dispute resolution process in any way or by any means“. However, under article 51 of the Rules (CNNIC Rules), the CNNIC can provide an interpretation of the said rules. In the present case, the CNNIC used the wording “recommend,” which, by definition, is not binding. In any case, the majority of the panel made a further argument that deserves attention:

From the perspective of predictability, there are currently more than 13 million .CN domain names, with possibly thousands of resale/purchase of domain names per day. If the CNNIC intends to make an interpretation on the cnDRP Rules, which would overturn the principles established in prior decisions, such an interpretation should be made public” (HKIAC decision DCN-1900893, 章节 公司(CHAPTER 4 CORP. V. ).

On that basis, the majority of the panel decided that the “recommendation” from CNNIC in an email reply did not constitute an interpretation of the Article 2 of the Policy. These two reasons led the majority of the panel to decide that the CNNIC’s opinion was not binding on the parties and the panel.

1.2. The competence-competence principle

When objections are raised as to the admissibility of a complaint, the competence-competence principle may be applicable by analogy. For various reasons, the domain name dispute resolution proceedings (“DRP”) cannot be qualified as arbitration proceedings. However, the cnDRP — like most of the other out-of-court modes of dispute resolution relating to domain names — belongs to the family of adjudicatory methods of dispute resolution for one main reason: the third-party decision-maker is endowed with the power to render a binding decision likely to lead to a transfer of ownership of a disputed property. When the situation requires, it seems reasonable to borrow from arbitration principles and mechanisms that could improve the efficiency of the out-of-court domain name dispute resolution mechanisms. The principle of competence-competence is a principle of arbitration that is widely recognized and applied. It lays down the rule according to which it is up to the arbitral tribunal to rule in priority on the validity or the invalidity of its own jurisdiction. Within the framework of a DRP, it seems appropriate to provide the panel with the power to decide in priority on the admissibility of the complaint and, more broadly, on the validity or the invalidity of its own jurisdiction.

2. Was the complaint admissible?

First, the panel needed to decide which edition of the Policy and Rules were applicable to the dispute (2.1.). Second, the panel had to make a decision as to whether the acquisition of a domain name shall be regarded as a new registration (2.2.).

2.1. Which edition of the Rules was applicable to the dispute?

The 2014 edition of the Policy (two-year time bar) or the 2019 edition (three-year time bar)? The panel ruled that the 2014 edition (cnnic.cn) applies because the complaint was filed on April 9, 2019, in accordance with the 2014 edition, when the 2019 edition had not yet come into force. Accordingly, the time bar was two years.

Now, when did the limitation period start to run?

2.2. Should the acquisition of a domain name be regarded as a new registration?

Answering this question first involved determining whether or not the acquisition of a domain name constitutes a new registration. In the event of a negative response, the starting point for the limitation period was in 2006 and, consequently, the complaint was out of time and, therefore, inadmissible. If so, the starting point for the limitation period was in 2017 and, therefore, the complaint was still admissible.

The first possibility was the creation date of the domain name, as argued by the respondent, and as implicitly recommended by the CNNIC. The second option was the date of acquisition of the domain name, as argued by the complainant.

In fact, only the first option can be legally justified: the acquisition of a domain name does have a decisive effect on the limitation period, which is strictly related to the implementation of the dispute settlement clause contained in the second registration contract.

The dispute settlement clause of the contract no. 1 (between the assignor and the registrar of his choice) cannot remain in the contract no. 2 (between the assignee and the registrar of his choice). Indeed, since the subject matter of the contract no. 1 (the domain name) has disappeared, the contract no. 1 cannot remain in force. The domain name has become the subject matter of another registration contract. This new registration is materialized by the transcription of the new owner into the WhoIs record, and this update is brought to the attention of third parties. For the latter (in particular trademark owners), the transcription of the assignee’s name in the WhoIs record constitutes a new fact which starts the limitation period again.

In other words, the transfer of a domain name is not to be confused with the transfer of the domain name registration contract: in the first case, the transferor only transfers the domain name, not the contract.

It follows that the applicable dispute settlement clause is the one that is incorporated into the contract no. 2. This clause, like all such clauses, constitutes an erga omnes offer to resolve disputes that may arise from the registration or use of the domain name. When a third party files a complaint, this third party accepts the offer, and thus gives an objective manifestation of its intent to form the contract. Consequently, the contract to resolve the dispute is formed at the moment the third party files the complaint. This moment also coincides with the interruption of the limitation period.

Additionally, the new holder of the domain name exercises exclusive control over the domain name, and it seems both rational and reasonable to provide third parties with a competent forum to hear their complaints in the event of an infringement of their intellectual property rights.

It is in this sense that the panel decided in favor of the first option. The acquisition of a domain name constitutes a new registration, which opens a new limitation period.

Furthermore, the panel has also relied on many domain name legal resources, which confirm that the acquisition of a domain name is equivalent to a new registration.

Also, necessary reference must be made to prior cases. Decisions made by panelists are not binding on other panelists. Nevertheless, referring to previous cases contributes to the objectives of consistency and quality, which reinforce the parties’ confidence in these extrajudicial mechanisms. 

In the paragraph entitled “6.1 Renewal, Re-registration and Transfer”, the Guide to HKIAC Domain Name Dispute Resolution supports the position that the acquisition of a domain name constitutes a new registration:

“transfer of the domain name to subsequent holders, which usually involves direct sales or auction of a domain name on the secondary market, has been considered a new registration. In Beijing Suning Shangpin Appliance Co. Ltd. v. Eryue (ADNDRC Case No. HK-1500764, September 17, 2015), the panel stated that even if the predecessor has previously used the domain name in good faith, this good faith can not be carried over to cover acts of the subsequent domain name purchaser” (hkiac.org).

Finally, the WIPO Jurisprudential Overview also holds this opinion:

“the transfer of a domain name registration from a third party to the respondent is not a renewal and the date on which the current registrant acquired the domain name is the date a panel will consider in assessing bad faith. This holds true for single domain name acquisitions as well as for portfolio acquisitions.” (WIPO Jurisprudential Overview, para. 3.9).

The domain name had been acquired between July and October of 2017. The 2014 edition of the Policy was incorporated by reference in the registration contract. Thus, the limitation period applicable to the case was two years, starting from the date of acquisition. The complaint was filed on April 9, 2019, that is to say, before the end of the limitation period. The complaint was, therefore, admissible.

3. Conclusion

This decision emphasizes two essential points: the competence of the panel and the limitation period. In general, it would be reasonable to provide the panelists with extensive powers, but that would lead us to leave the lex lata’s sphere to discuss the issue de lege feranda. In any event, it can at least be said that contract law and the principles of access to justice require that the jurisdictional competence of panelists be affirmed and respected. To that effect, the application of the competence-competence principle to extra-judicial domain name disputes should be approved and applied. As for the question of the limitation period in the event of acquisition of the disputed domain name, it is more frequent. Despite the legal differences between the policies and regulations governing disputes relating to domain names registered under country code top-level domains, it seems essential to defend the idea that a certain degree of predictability and harmony should be maintained. Again, the application of contract law and specific aspects of the law of civil liability can provide a universally accepted explanation.

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