Domain names and trade marks: Words of caution from the UK High Court

By Jasna Bratic.

Key Points:
The use of internet domain names is itself a service offered to the public and hence could infringe a trade mark.

Thinking of registering a domain name for your business?

Before you do, make sure that the words used in the domain name do not conflict with the trade mark of another business. As indicated by the UK High Court in its recent decision, Tesco Stores Ltd v Elogicom Lts & Anor [2006] EWHC 403 (Ch), the use of internet domain names may itself be a service offered to the public. In those circumstances, the use of domain names that are similar to the trade marks of another business could constitute trade mark infringement. Such conduct could also constitute misleading and deceptive conduct (in contravention of section 52 of the Trade Practices Act) or passing off, if the Tesco case line of reasoning is applied in Australia.

These days, many businesses rely upon on-line transactions with their customers. One of the key links in this relationship is the internet address of those businesses. As a result, many businesses can be left vulnerable if domain name predators (also known as cybersquatters) register domain names which are substantially identical or deceptively similar to the trade marks of those businesses. Such conduct could lead to a potential loss of customer base, decrease the business profit margin and reap undue benefits to the infringing registrant. The Tesco case is an example of the latter.

The Tesco case

Tesco, a well known supermarket chain in the UK, sells products both through its numerous suburban stores as well as trading online. To increase traffic to its internet sites, Tesco had entered into an arrangement with an organisation called TradeDoubler under which other websites would sign up as affiliates and display an advertisement or panel on their sites as a direct link to Tesco's sites. Each click-through and subsequent sale is tracked by TradeDoubler's software and reported to Tesco. Affiliated websites get a commission for each successful click-through. This commission is paid by Tesco to TradeDoubler and is then passed on to the affiliate.

Elogicom was one such affiliate which had initially registered only two sites, Avon4me.co.uk and Avonlady.co.uk ("affiliated domains"), under the TradeDoubler program. Subsequently, however, Elogicom registered over a dozen domain names similar to those of Tesco and associated them with its two sites. Therefore, if a potential shopper guessed the internet address of Tesco, but the address was actually one of Elogicom's registered domains, the browser would link the user to Tesco's real site but the TradeDoubler software would register the user as coming via the two affiliated domains, triggering a commission payment to Elogicom.

Although this meant that potential Tesco customers were not being diverted from the Tesco sites, it did mean that Elogicom was getting paid commissions for domain names it had not registered through the Trade Doubler program. In fact, Elogicom's monthly commission jumped from an average of £70 to £26,000!

The UK High Court found that:

• the use of internet domain names is itself a service offered to the public
• Elogicom used in the course of trade a series of signs (being the domain names), each being similar to the trade marks registered by Tesco and each being used in relation to services identical with or similar to those for which the trade marks were registered; and
• the signs were used in circumstances where there existed a likelihood of confusion on the part of the public, including the likelihood of association of Elogicom's services with Tesco's registered trade marks.

Implications of the Tesco Decision

Although it is a UK case, this decision should serve as a warning to cybersquatters and others who choose to trade off the reputation of third parties by registering misleading domain names or domain names which are similar to relevant registered trade marks.

Furthermore, if Australian courts apply the Tesco case reasoning, there may also be implications for bona fide domain name registrants. It may mean that more extensive background searches will need to be carried out by the applicant to ensure that others' trade marks are not being compromised.