UDRP: the improper and unjustified transfer of the domain name home-goods.shop
The UDRP decision FA 1893706, rendered on May 22, 2020, under the aegis of the National Arbitration Forum, deserves careful reading (NAF, FA 1893706, HomeGoods, Inc. v. Jiahongnetwork / jiahongnetwork jiahongnetwork, May 22, 2020, transfer). The dispute was between the owner of the HOMEGOODS trademark (an American company) and the owner of the domain name home-goods.shop (a natural or legal person having indicated his domicile or head office in China). Notwithstanding the indisputable descriptiveness of the trademark, its weakness, and its lack of international reputation, the transfer of the domain name was ordered. This decision raises several issues: weak trademarks in UDRP procedures (1 and 2); the proof of the lack of right or legitimate interest where the trademark is weak (3); the defendant’s bad faith and the risk of partiality of the third-party decision-maker, even if unconsciously (4); reverse domain name hijacking (5), and the protection strategy for weak trademarks (6).
1. A weak trademark
HomeGoods, Inc. is an American company that sells home goods. It owns a design trademark incorporating the words “HOMEGOODS” and two lines forming a roof so that the whole looks like a house (USPTO, 1955706, registered on February 13, 1996). This trademark designates the following products: retail store services featuring general housewares, giftware, furniture, paper
products, specialty foods, party goods, stationery, books, household chemicals, bedding and bed linens, decorative furnishings, window treatments, wallpaper, closet organization, carpeting, towels, rugs, table linens, clocks, lamps, artificial flowers, artwork, crafts, bathroom furnishings and linens, dinnerware, glassware, kitchenware and utensils, small appliances, and electronics. Considering the indisputably descriptive nature of the trademark, HomeGoods, Inc., voluntarily or at the USPTO examiner’s request, did not claim any exclusivity on the words “Home Goods”, following article 15 U.S. Code §1056 (Cornell.law.edu):
“Disclaimer: NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE” HOME GOODS “APART FROM THE MARK AS SHOWN.”
HomeGoods, Inc. is also the owner of the domain name homegoods.com:
Hence, in the present case, the claimant had a U.S. registered trademark. Insofar as the question of the validity of the mark does not enter into the panelist’s powers, the latter had no choice but to admit its existence as a registered trademark. The panelist also made a reference to Nintendo of America Inc. v. Lin amy with the purpose of justifying the existence of the trademark right (NAF, FA 1818485, Nintendo of America Inc. v. Lin amy, December 24, 2018):
“The Panel finds that Complainant has rights in the HOMEGOODS mark under Policy ¶ 4(a)(i). based upon its registration of the mark with the USPTO. See Nintendo of America Inc. v. lin amy, FA 1818485 (Forum December 24, 2018) (“Complainant’s ownership a USPTO trademark registration for the NINTENDO mark evidences Complainant’s rights in such mark for the purposes of Policy ¶ 4(a)(i)”).“
The reference to the Nintendo trademark is relatively inconvenient: the NINTENDO trademark is unparalleled and globally well-known, while HOMEGOODS is descriptive and devoid of international reputation. In addition, legal rigor and intellectual honesty require clarifying where the scope of a trademark is reduced by article 15 U.S. Code §105. The UDRP case law provides numerous examples of trademarks as weak as HOMEGOODS. As the following table shows, it is not uncommon for complaints based on such trademarks to be dismissed:
Among the decisions listed, decision D2011-1629 is exemplary:
“Initially, this seemed to this Panel to be a simple and straightforward case of abusive domain name registration, the Respondent having registered the Domain Name well after the registration of the Trademarks, redirecting it to its own website under a different domain name, where it sells competing products and not having responded to letters of summons from Complainant, nor having filed a response and apparently having another, similar domain name transferred to a third party after receiving a letter of summons from Complainant.
Upon scrutiny of the evidence submitted by Complainant, the case became less clear. First, Complainant in the Complaint did not mention that the Trademarks are design marks (…).
Second, Complainant failed to disclose in the Complaint that the U.S. registration was granted with the disclaimer “No claim is made to the exclusive right to use ‘Swiss chocolate.ch’, apart from the mark as shown”.
Both facts are extremely relevant, both for the finding whether the Domain Name and the Trademarks are confusingly similar and for the findings in relation to rights or legitimate interests and registration and use in bad faith.
In the view of this Panel, deliberately omitting essential facts from the Complaint does not help the case of a Complainant, since it raises the suspicion that the Complainant is trying to “cover up” facts which are unfavorable to its case. Such behavior may in itself be sufficient for a panel to deny the Complaint. After all, when filing a Complaint, the Complainant has to subscribe to the following clause which is part of the model Complaint: “The Complainant certifies that the information contained in this Complaint is to the best of the Complainant’s knowledge complete and accurate, that this Complaint is not being presented for any improper purpose, such as to harass, and that the assertions in this Complaint are warranted under the Rules and under applicable law, as it now exists or as it may be extended by a good-faith and reasonable argument.
Furthermore, Panelists have to do their work in a limited timeframe where, especially in a case like this one where no response is filed, they have to rely on the statements in the Complaint and the evidence provided by Complainant. If Complainant tries to mislead the Panelist as to essential facts, he cannot expect the Panel to decide in his favor.” (WIPO, D2011-1629, Sven Beichler v. chocri GmbH, November 17, 2011).
We can only agree with this reasoning. Additionally, panelists have the duty not to address the issue of validity, but to check the existence and the scope of the trademark and to report omission of relevant information such as the disclaimer arising from article 15 U.S. Code §1056. Furthermore, panelists can also decide to reject the complaint on the basis of such an omission.
In NAF FA0404000257001, Tickets.com, Inc. v. Woofer Smith and No Org Name, released June 28, 2004, it was decided that:
“The USPTO registration documents provided in the Complaint state that, ‘NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE ‘TICKETS.COM’, APART FROM THE MARK AS SHOWN.’
Complainant submitted an earlier Complaint to the Forum on September 15, 2003, raising these same issues as to the same domain name against the same Respondent. See Tickets.com, Inc. v. H.A. Woofer Smith, FA 196048 (Nat. Arb. Forum November 14, 2003) (hereinafter referred to as “Tickets.com I”). In Tickets.com I, the Panel, finding that “Complainant and Respondent and thousands of others sell TICKETS,” concluded that the mark TICKETS.COM is generic as to which no one has exclusive rights and dismissed Complainant’s Complaint.” (NAF FA0404000257001, Tickets.com, Inc. v. Woofer Smith and No Org Name, June 28, 2004).
It the home-goods.shop case, the HOMEGOODS trademark is descriptive and weak to such an extent that the attempt to prevent other traders from selling household goods should be considered an abuse of rights. However, the decision does not indicate that the trademark is limited in its scope and effects. On the contrary, the value of the HOMEGOODS trademark is elevated to that of NINTENDO! Given that the claimant would not necessarily highlight the weakness status of its trademark, it is up to the panelist to verify and address this issue in the decision, particularly in cases where defendants do not appear in the proceedings. Consequently, one can consider that the complainant had not met the first condition and that the panelist failed in his/her duty and did not fulfill his/her mission.
2. A domain name strongly similar to the verbal elements of the trademark
On December 5, 2019, the domain name home-goods.shop was registered by Jiahongnetwork of China to designate an e-commerce website offering household products. The domain name is irrefutably identical to the complainant’s trademark.
However, the demonstration of the likelihood of confusion is not sufficient to obtain the transfer of a domain name within the framework of a UDRP procedure. The complainant must also demonstrate that the defendant has no legitimate right or interest in the disputed domain name and that he/it registered it in bad faith. These conditions are easily fulfilled in cases where the complainant proves that its trademark is well-known. However, in cases where: i) the defendant is located in a foreign country, ii) the trademark is descriptive; and iii) that trademark is not internationally well-known, proving that the defendant made an act of cybersquatting is a very challenging task which requires substantiated reasoning and evidence. Despite all of this, the transfer of the domain name was ordered.
3. The problematic proof of the lack of right or legitimate interest in the presence of a weak trademark
The complainant argued that it had not authorized the defendant to use its HOMEGOODS trademark in any form whatsoever, and concluded that the defendant had no right or legitimate interest on the domain name home-goods.shop. The panelist simply adopted this reasoning:
“Complainant provides screenshots of the website at <home-goods.shop> which offers a variety of household products for sale that directly compete with Complainant’s business. The Panel finds that this use is not a bona fide offering of goods or services or a legitimate noncommercial or fair use, and thus Respondent has no rights under Policy ¶¶ 4(c)(i) or (iii)“.
Accepting this argumentation, without any other argument, would mean that no third party worldwide can use the words “Home Goods” to sell goods for the home. Without additional reasoning, the decision grossly violates the principles that govern intellectual property and free trade. Once again, the trademark is not strong enough to legally prevent third parties, even competitors, from using the words “Home Goods”. On the contrary, this trademark status prohibits its owner from excluding others from using these words.
4. The bad faith of the defendant and the risk of partiality
In order to demonstrate the defendant’s bad faith, the complainant asserted that: i) the defendant was using the domain name to designate an e-commerce website selling goods for the home, and ii) the HOMEGOODS trademark is well-known, implicitly to the point that the defendant had it in mind when he registered the domain name.
According to the panelist, these two arguments were sufficient to demonstrate the defendant’s bad faith. The argument relating to competition has already been addressed: in short, HomeGoods, Inc. is not in the position to prevent Jiahongnetwork or any other competitor from exploiting any domain name containing the words “home goods”. The similarity of the logos was not discussed. The UDRP procedure is designed in such a way that the analysis of the likelihood of confusion usually focuses on the verbal elements of the trademark. However, an analysis of the website’s content designated by the disputed domain name can be indicative of bad faith. In the present case, if the two logos were confusingly similar, this would have constituted a strong indication of bad faith.
However, this was not the case. The logo of the home-goods.shop website is red and incorporates a shopping trolley inlaid in a circular arc. The only common feature between the two signs is the combination of the words “Home Goods”, one being pink with no space, while the other is white with a dash. Additionally, the disclaimer resulting from article 15 U.S. Code §1056 fully applies, so the element “Home Goods” should not be taken into account when considering the likelihood of confusion. It follows that the analysis of the logos would not have revealed the bad faith of the defendant.
As for the issue of reputation, what evidence did the complainant provide for its HOMEGOODS trademark to be considered as well-known? The decision is utterly silent on this point and, therefore, unjustified. Besides, the dispute was between two parties having their head offices or domiciles in different countries: the United States and China. In this context, the recognition of reputation had to be brought to the international level. It is conceivable that American panelists and consumers consider that the HOMEGOODS trademark is well-known in the United States (it still has to be demonstrated), but there is reason to doubt such reputation outside the American borders. Consequently, there is no evidence that the trademark is well-known in the context of an international UDRP and that the defendant was aware of the HOMEGOODS trademark.
The issue of reputation calls that of the appointment of the panelist. In a conflict between, on the one hand, a party having its head office or domicile in country A and, on the other, a party having its head office or domicile in country B, the principle of neutrality, which incorporates that of impartiality, requires the decision-maker to emanate from a third country in order to prevent his/her discernment from being biased, whether consciously or unconsciously. In the present case, it seems that Home Goods, Inc. has a chain of hundreds of stores in the United States. In such a context, no American panelist can ignore the HOMEGOODS stores and trademark; it may even be part of his/her daily life if he/she is a neighbor or client, to such a point that his/her perception of the scope of the trademark could be bias. To avoid such complications, dispute resolution service providers maintain lists of panelists with diverse cultural backgrounds, including the National Arbitration Forum, which has 81 American panelists and 75 non-American panelists. Finally, it would have been fair to appoint a panelist among the second group.
5. Abuse of rights and abusive procedure
It is not uncommon for weak trademark owners to attempt to obtain the transfer of domain names via UDRP procedures. Abuse of trademark rights and abuse of the process is sanctioned by article 15(e) of the UDRP Rules (reverse domain name hijacking or RDNH). For example, the complaint of The Sun newspaper against the holder of the domain name thesun.com was considered abusive; the sun shines for everyone (iptwins.com, May 11, 2019). Section 4.16 in fine of the WIPO Jurisprudential Overview states that “some panels have held that a represented complainant should be held to a higher standard“, which seems very reasonable (WIPO Jurisprudential Overview, para. 4.16, in fine). However, article 15(e) of the UDRP Rules has only symbolic significance, which convinced WIPO to add the following warning:
“NB, parties may be aware that unlike in the UDRP system, certain national courts may (where invoked) impose monetary penalties (including punitive damages) where the equivalent of RDNH is found.” (WIPO Jurisprudential Overview, para. 4.16, in fine).
For example, following the decision WIPO D2017-1517 concerning the trademark “WEEDS” and the domain name weeds.com (cited in the table above), the panelists having declared the complaint abusive, the holder of the domain name sued the owner of the trademark before a judicial court to obtain not only the cancellation of the trademark but also the reimbursement of the costs unduly paid for the two procedures (Innovation H.Q., Inc. v. Weeds, Inc., 2: 17-cv-01533-MPK, U.S. District Court for the Western District of Pennsylvania) (iptwins.com, March 8, 2018).
The question remains whether panelists have the power to declare the complaint abusive, including in the absence of a response from the defendant. Neither the UDRP Principles nor the UDRP Rules preclude decision-makers from taking up the issue. Panelists can be lenient towards a reckless and unrepresented claimant (WIPO, D2018-2083, WEDIA SA v. Office Yui Asia Limited, November 8, 2018). Otherwise, they should be less tolerant:
“The Complaint was therefore completely devoid of any facts or arguments that could support a finding that the Respondent lacked rights or legitimate interests in the disputed domain name.
The Complainant and its counsel also provided no evidentiary support whatsoever to support their argument that the Respondent must have registered and used the disputed domain name in bad faith. As such, they completely ignored the requirements set out in the Policy for establishing bad faith registration and use of a domain name. The Complainant and its counsel ignored the potential legitimate reasons as to why the Respondent may have registered the disputed domain name, disregarded precedent and unfavorable facts in concluding that the webpage (which makes no connection whatsoever to the Complainant) was an attempt to misappropriate its trademark reputation, and offered no more than unsupported allegations.
As such, the Panel finds the Complainant guilty of Reverse Domain Name Hijacking.” (WIPO, D2019-2642, Nalli Chinnasami Chetty v. Anthony Nalli, FourPoints Multimedia Corp., December 18, 2019).
Ordinarily, panelists recall at least the main arguments of the parties. More than an option, this is a duty to ensure that the procedure has been conducted in accordance with the principles of a fair trial. It is, therefore, important that the decision reflects the argument of the parties with certain fidelity. However, in the present case, the complainant’s arguments are presented in three lines. In conclusion, the transfer of the domain name should not have been ordered, and the procedure should have been qualified as abusive.
6. What strategy for weak trademarks?
In a globalized and interconnected environment, it is strongly advised not to choose a trademark that, for one reason or another, could be considered generic or descriptive. Whoever does not follow this advice must accept to quietly coexist with competitors.
Using Google.com, located in the United States, a search for the expression “Home goods” brings up nearly 2 million results, including competitors such as Ikea or Macy’s, on the first page:
Would HomeGoods, Inc. consider suing Ikea or Macy’s for the unauthorized use of the keywords “home goods”? Such a lawsuit is unlikely to be successful.
Owners of weak trademarks have two options. The first is to change the brand name. It is an expensive and risky bet. However, several companies created before the advent of the Internet have successfully rebranded, such as LG (Lucky-GoldStar) or Kering (formerly Pinault-Printemps-Redoute). The second option consists of proactively securing the domain name portfolio, which implies a minimum of registrations for as many top-level domains as possible.