In Rem Provisions of Anticybersquatting Pass Constitutional Muster

Kramer Levin is in the forefront of efforts to use the recently enacted Anticybersquatting Consumer Protection Act of 1999 to protect the rights of trademark owners. In April 1999, the firm commenced, on behalf of Caesars World Inc., an in rem action, entitled Caesars World, Inc. v. Caesars - Palace.com, in the United States District Court for the Eastern District of Virginia against 42 domain names that were using variations of Caesars Palace or Caesars World or Caesars. After some procedural skirmishing, Caesars World amended its complaint in December to add a claim against over 100 domain names under the Anticybersquatting Act, which provides a new federal cause of action against domain name registrants who register or use the domain name in bad faith.

The Act was aimed at such practices as registering domain names incorporating famous trademarks in order to sell the domain names to the owners of the trademarks. The Act authorizes, under certain circumstances, an in rem action against domain names in the federal court where the registrar of the domain name is located. In this case, because Network Solutions Inc., the registrar of the defendant domain names, is located in Virginia, the case was brought there.

Two owners of certain defendant domain names moved to dismiss Caesars World's complaint, arguing, inter alia, that the Act was unconstitutional on its face and that Caesars World had not followed certain procedures allegedly mandated by the Act. All of the movants’ arguments were rejected by the Court on March 3, 2000. 

The Court found sufficient minimum contacts to support in rem jurisdiction. It rejected the argument that the domain names did not constitute property located in Virginia. The Court also rejected the argument that there were certain conditions precedent, such as first demonstrating through an unsuccessful prior lawsuit that in personam jurisdiction did not exist, that had to be satisfied before an in rem action under the Act could be commenced. 

The Act, and its in rem provision, is an important new weapon for trademark owners trying to protect their trademarks against cybersquatters. The in rem proceeding is especially useful where: (1) The registrant has given the domain name registrar a false name and address and cannot be found or (2) is located outside the United States.

The Caesars World case is one of the first filed under the Act, while the March 3, 2000, decision is the first in which constitutional challenges to the Act have been considered and rejected.

Congratulations to the Kramer Levin team of John Daniel, Nicholas Coch, Peter Abruzzese, Paul Fakler, and Eric Roman on their success.