Czech .cz domain speculators and how to fight them effectively

Recently, we have been contacted by an increasing number of clients who underestimated the need for a timely registration of a suitable domain name in the past and have now fallen victim to domain speculators. In this situation, there are several possible ways of how to proceed, which we describe in this article. We focus primarily on Czech domain names within the Czech .cz domain, but in principle, it is possible to proceed in a similar way with other domains.

Although the domain business has changed a lot in the last decade or so, there are still many domain speculators in the world. The speculators buy up large numbers of various domain names without having virtually any interest in them and basically just wait for the possibility to sell them. Persons interested in an already registered domain name may then feel that they have no other choice but to choose another name or domain, or to purchase the desired domain name from the speculator. However, in certain cases, there are other options.

Court Proceedings

The first option is to initiate standard civil court proceedings. Domain speculators often buy domain names that interfere with personal names, business names or trademarks. This effectively constitutes an unjustified interference with the rights of the specific person, company or trademark owner. 

Depending on the nature of the use of a given domain name, a domain name speculator may also be engaging in acts of unfair competition, most often in the form of free-riding or creating a likelihood of confusion. 

However, we do not consider this option to be the most efficient solution, mainly because it is very time-consuming. In court proceedings, the speculator may be required, for example, to pay unjust enrichment or damages, but such claims are not very common in practice; moreover, they are usually very difficult to quantify and prove. 

ADR proceedings

As we have already mentioned in our article regarding .eu domains and personal names, the second and, we believe, more effective option is to initiate ADR[1] proceedings, which can also be applied to .cz domains. Similar proceedings can generally be opened in connection with other domain names (both national and generic), but it always depends on the specific domain and the relevant registration rules. 

ADR, as an out-of-court dispute resolution method, is a relatively quick and inexpensive way leading to the transfer of a domain name or the cancellation of its registration. Proceedings are initiated by a petition filed using an online form and are held before the Czech Arbitration Court.[2] The entire proceeding is online and less formal than the court proceedings.

The resolution of these domain disputes is primarily subject to the Domain Name Registration Rules issued by CZ.NIC, the administrator of the Czech .cz domain. The rules contain both the basic principles, procedures and conditions of alternative domain dispute resolution and the court decision-making rules. 

The main condition for success of a domain dispute is to prove that the domain name and the protected designations of the complainant – such as trademarks, trade name, designation of origin and others – are confusingly similar. However, proving mere confusing similarity is not enough for the dispute to succeed. The rules contain two additional conditions, the fulfilment of at least one of which must be proven by the complainant. [3] 

The holder has no rights to the domain name

In this respect, the rules address situations where the holder has some rights to the domain name.[4] However, to meet this condition, the complainant must assert and ideally prove the following claims in the proceedings:

• The holder does not have rights to a protected designation that is identical to the domain name. This claim is relatively easy to prove in practice – speculators often register domain names identical to the names of commercial companies or trademarks that are unrelated to the speculator. 
• The holders have neither used the domain name for an honest purpose in connection with an offer of goods or services, nor have they made preparations for such use prior to the commencement of the dispute. Since speculators do not use domain names at all, meeting this condition in practice is also not a problem – speculators typically use a domain name for the sole purpose of placing advertising links or redirecting to other unrelated websites. However, in practice, it can be a problem as speculators may counterargue that they have taken steps towards such use although, needless to say, they would have to sufficiently prove this claim. 
• The holder is not generally known by the domain name. In practice, this does not cause a problem as speculators register domain names that are unrelated to them in any way. 
• The holder is not using the domain name for honest purposes, but rather with the intention of misleading third parties or damaging the reputation of the complainant or its protected designation. Since speculators often do not use domain names at all, this point is not usually a problem. In practice, speculators frequently use a given domain name for the sole purpose of redirecting, for example, to their online shop – by this practice, they very often free-ride on, for example, a trademark or brand name and, at the same time, mislead the visitor into believing that they are the owners of the given designations. 

Registration, acquisition and/or use in bad faith

Another option is to prove that the holder has registered, acquired or uses the domain in bad faith.[5]

The following situations in particular are considered bad faith according to the rules:[6]

• registration and/or acquisition of a domain name primarily for the purpose of sale, transfer, lease or another similar disposition;
• registration or acquisition of a domain name for the purpose of preventing the use of the protected designation of the complainant (domain name applicant), provided the holder has repeatedly acted in this way or has not duly used the domain name for at least two years from the date of registration;
• the registration and/or acquisition was made primarily with the intention of hindering the economic activity of the complainant; or
• the domain name was deliberately used to gain profit from users by creating a likelihood of confusion with the complainant’s protected designation.

It is clear from the above points that it is not difficult to fulfil this condition vis-à-vis typical domain speculators. In practice, both conditions are often fulfilled in ADR proceedings, i.e. the condition that the holder has no rights attached to the domain name and the domain name was registered, acquired or is used in bad faith.

Since domain name speculators often demand unreasonably high sums for domain name transfers, ADR proceedings can be an effective and relatively quick way to achieve a domain name transfer. We have come across several situations where our clients have chosen ADR proceedings even though the speculator asked for a sum of money for the domain name transfer that was lower than the fee for opening ADR proceedings; they did so because they were not willing to support speculators in their activities. 

Our law firm has extensive experience in domain name disputes. Our dedicated team has long assisted our clients in resolving their domain name issues, ensuring claims assessments, drafting the necessary documents, and providing other related legal services. We have successfully transferred a number of domain names, including a large number of foreign domains – we have conducted and are currently conducting several proceedings before the Czech Arbitration Court as well as before WIPO and foreign local arbitration courts.

In case you might also be addressing issues in this field, we will be happy to discuss them with you. Please do not hesitate to contact us.