Court Axes $100K Award in GoPets Cyber Warfare

(CN) - The minds behind "virtual pets" cannot tweak what it means to register a domain name on the Internet, the 9th Circuit ruled Thursday, setting aside a $100,000 victory for the South Korean company in a long-running cybersquatting case.

A federal judge had previously found that Edward Hise violated anti-cybersquatting law when, in 2006, he transferred ownership of a domain name, Gopets.com, which he had originally registered in his own name seven years earlier. The trial court said this maneuver constituted bad faith since he knew that there was a company with a similar name, GoPets Ltd.

GoPets Ltd. founder Erik Bethke had been trying since 2004 to buy Hise's Gopets.com domain name so that he could launch a "virtual pet" game and social networking site.

Hise rejected Bethke's initial offer of $750, so Bethke brought the dispute to the World Intellectual Property Organization and the Internet Corporation for Assigned Names and Numbers, an international group that arbitrates disputes over domain names.

Since Hise registered the domain name five years before Bethke created GoPets Ltd., the arbitrators said Bethke lacked the element of bad faith to prove cybersquatting.

Bethke then offered Hise $40,000 for Gopets.com, but Hise sent a letter asking for $5 million and "threatening to add metatags to the code of gopets.com, so that users who wanted to access the GoPets Ltd. game found at gopetslive.com would be directed to gopets.com instead," according to the ruling.

Two days after sending that email, Hise transferred ownership of the Gopets.com domain name to his company, Digital Overture, which he co-owns with his brother. The Hises and Digital Overture have registered more than 1,300 domain names in the last decade, grabbing onto seemingly any words that would make for a conceivable website name.

Bethke sued the Hises in Los Angles federal court, alleging cybersquatting, trademark infringement and unfair competition. As to the cybersquatting claim, Bethke attempted to get around the timeline issue by arguing that the 2006 re-registration and transfer of the name to Digital Overtur e amounted to registration for the first time. Thus, since Hise knew about GoPets Ltd. in 2006 and "registered" a domain name that was "identical or confusingly similar to registered service marks and trademarks" anyway, Bethke said he could prove bad faith and cybersquatting.

U.S. District Judge A. Howard Matz agreed and awarded Bethke $100,000 as well as the Gopets.com domain name. Matz also found that Hise had acted in bad faith when he registered 18 similar domain names (Gopet.biz, Gopet.org, Egopets.com, etc.) in the months after the arbitrator's decision, and awarded Bethke another $18,000 in damages.

A three-judge panel of 9th Circuit judges partially reversed, refusing to redefine the Anticybersquatting Consumer Protection Act's (ACBA) meaning of "registration."

"Looking at ACPA in light of traditional property law ... we conclude that Congress meant 'registration' to refer only to the initial registration," Judge William Fletcher wrote for the unanimous panel. "It is undisputed that Edward Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name. We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner. The general rule is that a property owner may sell all of the rights he holds in property. GoPets Ltd.'s proposed rule would make rights to many domain names effectively inalienable, whether the alienation is by gift, inheritance, sale, or other form of transfer. Nothing in the text or structure of the statute indicates that Congress intended that rights in domain names should be inalienable."

But the judges agreed that Hises showed bad faith in the wake of the arbitrator's ruling and that they had violated unfair competition laws in their negotiations with GoPets Ltd. On remand, Judge Matz is tasked with determining "any relief the District Court might find appropriate for that violation."

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