Cybersquatting and Counterfeiting: Fighting Back and Enjoining Non-Parties

By: GDLD | 6.8.16 | Media

The ever-growing number of websites presents businesses that value their brands and intellectual property with the common problems of counterfeiting and cybersquatting.  Cybersquatting is the act of registering, trafficking in, or using an internet domain name with the intent to profit from the goodwill of someone else’s trademark.[1]  Sophisticated counterfeiters often register domain names and develop websites that use, or closely resemble, an established company’s name and logos to confuse consumers in an attempt to sell them fake goods.

Although trademark and copyright owners can obtain an injunction to shut down or transfer ownership of an infringing website, defendants often evade a court’s order by creating new websites to continue their counterfeiting activities.  This ability to spawn new websites as quickly as old ones are taken down has become an obstacle for companies trying to protect their intellectual property.  To combat this thorny problem, owners of intellectual property are seeking innovative injunctive remedies against third-parties who provide services that support a defendant’s infringing website, such as domain name registries, website optimization companies, and search engines.  This ability to hold third-parties accountable is a newly developing and unsettled area of law.

As a general rule, due process concerns limit a court’s ability to bind non-parties to the litigation.  Federal Rule of Civil Procedure 65(d)(2)(c) is an exception that gives a federal court the authority to issue an injunction or a temporary restraining order against “other persons who are in active concert or participation with” an infringing defendant, so long as that third-party has “actual notice” of the court order.[2]  As discussed in this article, the meaning of “in active concert or participation with” is a hotly contested issue in the quest for a robust solution to online infringement.

The seminal case analyzing “in active concert or participation” in this context is The North Face Apparel Corporation v. Fujian Sharing Import & Export LTD. Company.[3]  In that case, China-based defendants operated a wide array of websites that were set up to mimic authorized online retail stores that sold genuine “North Face” merchandise.  In actuality, however, the defendants used the web sites to sell counterfeit products falsely bearing the plaintiff’s “famous and well-regarded trademarks.”  Finding in the plaintiff’s favor, the court entered a permanent injunction against the defendants.  The court also issued orders requiring non-parties to disable the defendants’ domain names, make them inactive and transferable, and to stop providing services in connection with the offending websites.

Disregarding the court’s ruling, the defendants set up a new website and continued their counterfeiting.  Unable to effectively enforce the injunction against the defendants, the plaintiffs attempted to hold third-parties accountable.  Specifically, the plaintiffs asked the court to find Public Interest Registry, a corporation that maintains a database of all “.org” domain names, in contempt for continuing to provide services to the defendants’ websites.  Although the court initially granted the plaintiff’s request, it reversed itself only eleven days later.  Because Public Interest Registry was a non-party, the court determined that it “lacked the authority” to order it “affirmatively to act, i.e., to disable or otherwise render inactive defendants’ infringing domain names and transfer them to plaintiffs’ ownership and control.”

Nevertheless, relying on Rule 65(d)(2)(c), the court concluded that it could enjoin Public Interest Registry from “aiding and abetting, or participating, in defendants’ unlawful activities.”  The court reasoned that:

"Public Interest Registry, for example, cannot continue to make the connections that enable customers attracted to defendants’ websites to access those websites.  Physically, such a connection is made when a customer types one of defendants’ domain names ending in ‘.org,’ such as ‘,’ into an Internet browser or [c]licks on a hyperlink that corresponds to such a domain name.  Public Interest Registry’s server responds to the customer’s initiated message by supplying the link that connects the customer to the appropriate secondlevel domain name server, which, in turn, directs the customer to the specific website he or she addressed."

Thus, if Public Interest Registry continued to “connect consumers to defendant counterfeiters’ websites, and continue[d] to permit the registration and renewal of defendants’ infringing domain names, Public Interest Registry” was subject to the court’s jurisdiction.

Less than one year later, in Dish Network LLC v. Dillion, the Southern District of California entered a temporary restraining order against a number of defendants who set up a website allowing users to illegally access the plaintiff’s television programming.[4]  As in The North Face, the defendants in Dish Networkcircumvented the order by registering new domain names and establishing new websites.  In addition to being entered against the defendants, the TRO covered third-parties that aided and abetted the defendants, such as the domain name registrars and registries, “all website hosting, website optimization, and any other company or person that provided website services for the [infringing] domains, including without limitation, CloudFlare, Inc.”  The court ordered these third-parties to “cease all website services made in connection with the [infringing] domains,” but did not explain how their activities “aided and abetted” the defendants’ misconduct.

In 2015, the Southern District of New York, in Arista Records, LLC v. Tkach, found third-party, CloudFlare, “in active concert or participation with (i.e., aiding and abetting)” cybersquatting defendants.[5]  Unable to stop the defendants from repeatedly setting up new websites that improperly used its trademarks, the plaintiffs sought to enforce a TRO against CloudFlare.  CloudFlare is an internet service provider that, when someone types a domain name into a web browser, converts “the domain name into the IP address for the website associated with the domain name so that the user can connect to the website they are trying to reach.”  CloudFlare also “optimizes the delivery of customers’ websites from the customers’ origin server to the visitors’ browsers,” giving a website faster page load times and better performance, while blocking various threats to the website.

In opposition, CloudFlare contended that its services “passively” and “automatically” served the domain names at issue, and that they were not necessary for the operation of the defendants’ websites.  The court rejected this argument and reasoned that, by connecting internet users to the infringing websites, CloudFlare’s services not only benefit the defendants, but also “fundamentally assists them in violating the injunction because, without it, users would not be able to connect to Defendants’ site unless they knew the specific IP address for the site.”  Relying on The North Face and Dish Network, the court found that by connecting users and providing performance enhancements to the defendants’ websites, CloudFlare’s services went beyond the “passive hosting of content.”  Importantly, the court held that it was not determinative that CloudFlare’s services were automated, or that the defendants’ websites would to continue to exist without CloudFlare’s existence.  As a result, CloudFlare was within the court’s reach under Rule 65(d)(2)(c).

Two weeks after the court’s decision, CloudFlare filed a motion to clarify whether it or the plaintiffs had the “burden of affirmatively identifying” other websites operated by the defendants that infringed the plaintiffs’ trademarks.[6]  Noting that CloudFlare was “merely a third party” to the action, and because the plaintiffs were already monitoring their intellectual property for such sites, the court concluded that the plaintiffs were obligated to notify CloudFlare of websites that violated the injunction.  Id. at *2.  However, if CloudFlare became aware that one of its customers was infringing the plaintiffs’ trademarks, it could not sit on its hands and had to cease serving that customer without having received a request from plaintiffs.  Id.

In conclusion, because counterfeiters often rely on the freedom and anonymity provided by the internet for their operations, trademark owners seeking to protect their brand must remain vigilant and employ creative legal strategies involving non-parties that aid and abet infringement.  The developing case law in this area shows that enforcement options are available to combat cybersquatting, and that a free internet does not equate to a lack of accountability for those who facilitate trademark infringement.

[1] See 15 U.S.C. § 1125(d).

[2] Fed. R. Civ. P. 65(d)(2)(c).

[3] The North Face Apparel Corp. v. Fujian Sharing Imp. & Exp. LTD. Co., No. 10 CIV. 1630 (AKH), 2011 WL 12908845 (S.D.N.Y. June 24, 2011).

[4] Dish Network LLC v. Dillion, No. 12CV157 BTM NLS, 2012 WL 368214 (S.D. Cal. Feb. 3, 2012).

[5] Arista Records, LLC v. Tkach, 122 F. Supp. 3d 32, 37 (S.D.N.Y. 2015).

[6] Arista Records, LLC v. Tkach, Case No. 15-cv-3701 (AJN), 2015 WL 4742597, at *1 (S.D.N.Y. July 9, 2015).