In the era of digital real estate, the rush to register valuable domain names has sparked a number of legal issues. Chief among them is cybersquatting—the act of registering, trafficking in, or using a domain name with bad-faith intent to profit from the goodwill of a trademark belonging to someone else. To combat this, Congress passed the Anticybersquatting Consumer Protection Act (ACPA) in 1999.
What is Cybersquatting?
Cybersquatting occurs when someone registers a domain name that incorporates a trademark—like cocacola.ai or louisvuitton.ai—with no legitimate interest in the name and the intent to sell it for profit or confuse consumers. While this may sound like a clever hustle, the ACPA makes this practice illegal under U.S. law.
Specifically, the Act creates a statutory cause of action for trademark owners to sue domain registrants who register names that are:
- Identical or confusingly similar to their trademark, and
- Done in bad faith with the intent to profit.
Penalties under the ACPA can include the transfer of the domain name to the trademark owner, statutory damages of up to $100,000 per domain name, and attorney’s fees.
The Legal Exception: Fair Use and Criticism
Not all uses of a brand name in a domain are illegal. The law provides an exception under the fair use doctrine, especially for sites used for criticism, commentary, or parody.
For example, registering a domain like barbiesucks.ai and using it for a website that critiques the Barbie brand or movie could be protected as fair use. However, if someone registers barbie.ai with the intent to sell Barbies or imply affiliation with the brand, that crosses into trademark infringement territory and is not protected.
Lessons for Entrepreneurs
Entrepreneurs should be cautious when registering domain names that reference well-known trademarks. Simply adding a trending suffix like .ai doesn’t shield you from legal consequences if your intent is to profit off a brand you don’t own. Before acquiring a domain that includes a famous name, ask:
- Is the name trademarked?
- Am I using the name for commercial gain?
- Is there a potential for consumer confusion?
If the answer is yes, you may be in violation of the ACPA and exposing yourself to legal risk.
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