The Anti-Cybersquatting Consumer Protection Act (ACPA) has always bothered me.  It appears to be a law that transfers property based on thought.  The statute sets forth two conditions for liability: (1) bad-faith intent to profit from a trademark; and (2) registration of, trafficking in (which is defined to encompass any exchange for consideration), or use of a domain name that is similar to a distinctive or famous mark.  See 15 U.S.C. § 1125(d).

Three points are notable about the ACPA. First, these two conditions need not apply simultaneously: if you buy a domain name with the intent to use it for your business, later change your mind so that you think about selling it to a mark holder, you’re liable.  Second, the latter condition applies in most circumstances where someone merely possesses the domain name at issue: if you’ve registered or purchased that domain name, you’ve fulfilled the latter condition.  Third, the mark holder does not have any right to the domain name at issue where the domain name does not create consumer confusion or dilution: if I register nike.com but don’t do anything with it, Nike has absolutely no claim to it under trademark law.  Essentially, then, the ACPA strips a cybersquatter of specific property—i.e., a domain name resembling a trademark—based on the fact that the cybersquatter has had bad thoughts.

So what’s wrong with this law?  Shouldn’t cybersquatting be punished?  The ACPA seems like good policy for the public benefit of an efficient Internet: without cybersquatting, domain names match famous marks; with cybersquatting, I might not be able to quickly find Nike’s website when I type in nike.com. 

I don’t buy this argument.  Besides the fact that depriving property because of one’s thought raises constitutional concerns under the Free Speech and Takings Clauses, the ACPA seems unnecessary and inefficient.  The ACPA arose to cure imperfect information in the market for domain names: techno-geeks saw the commercial potential for domain names well before mark holders did, so they capitalized on that information by holding domain names ransom.  Now, however, there’s no inequality of information: any mark holder knows that he must first register his mark as a domain name before making public the mark.  Absent imperfect information, the ACPA seems unnecessary.  Moreover, the ACPA’s punishment of cybersquatting reduces Internet efficiency.  That efficiency is realized when mark holders register as domain names both their marks and derivations of their marks: it is more likely that I can find the Nike website the more derivations of nike.com point to that website.  Without the ACPA, the market provides an incentive that encourages that behavior; mark holders would immediately register domain names reflecting their marks and derivations of their marks if faced with the possibility of losing them to cybersquatters.  The ACPA, however, removes this incentive by making illegal the practice of cybersquatting. It creates an inefficiency.

The market, then, seems the appropriate mechanism to thwart cybersquatting.  The law of anti-cybersquatting seems like a name for unnecessary eminent domain.

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