Cybersquatting – Entrepreneurial or Unethical Business Practice

Cybersquatting refers to registering a domain name with the intent of profiting from someone else’s trademark, and it’s one of the things domainers get hated on for doing. The practice of cybersquatting is usually carried out by buying up a domain name that uses the name of an existing business with the intent of selling the domain back to the business for a profit.

Cybersquatting doesn’t happen as much as it used to because businesses are more savvy these days, knowing that the first thing to do when developing a new company is to register the domain name before someone else does. Back in the early days of the Internet businesses were late to react and entrepreneurial domainers scooped up the domain names of big businesses, waiting for them to wake up and realize they needed to buy the domain back for a hell of a lot more than the registration fee. Panasonic, Hertz, Fry’s Electronics, and Avon were all victims of cybersquatting.

It is possible to sue a domainer for cybersquatting, but often it is far cheaper to just pay the domainer, and for this reason domainers can still profit nicely from this practice. To sue a domainer successfully for cybersquatting a business must prove the following in a court of law:

1. the domain name registrant had a bad-faith intent to profit from the trademark

2. the trademark was distinctive at the time the domain name was first registered

3. the domain name is identical or confusingly similar to the trademark, and

4. the trademark qualifies for protection under federal trademark laws — that is, the trademark is distinctive and its owner was the first to use the trademark in commerce.

Cybersquatting in the traditional sense might be a dying practice, but it is still practiced in another form. Some domainers look out for new companies, many using company formation records available for public viewing to spot opportunities. A person registers a new company and the domainer instantly registers variations of suitable domains. The company then has no choice but to buy a version f the domain back if they want their URL structure to remain relevant it is quite a clever practice, and one that can be very lucrative. But is this practice entrepreneurial or unethical? It might feel unethical if you can’t get the dot com you want, but from a domainer’s point of view this is just business, surely? It is just the practice of being opportunistic and buying up a piece of property that someone else wants. I understand that infringement of a trademark is against the law, but hey, this is cyberworld, the rules are different here, anyone can register any domain name that is available. And how can you prove the domainer wasn’t thinking of setting up a business with the same name and had the sense to register the domain before the business?!

There is nothing new about this type of business practice either, the world over people are trying to buy up rare gems and pieces of real estate in order to sell for a profit to others who desperately want ownership.

So what do you think, is cybersquatting entrepreneurial or unethical?