An Internet service provider acted in bad faith when it registered the vw.net domain name intending to later sell it for 'a lot of money' to Volkswagen of America Inc., a federal appeals court has ruled.
As a result, the service provider, Virtual Works Inc. of McLean, Va., violated anti-cybersquatting consumer protection legislation, the 4th U.S. Circuit Court of Appeals in Richmond has held.
Virtual Works, which has the same initials as the automaker, denied any violations and asked the court on Feb. 12 to reconsider, according to its lawyer, William Bode of Washington.
'The intent was to use the mark, and the client did use it for two years,' Bode said. 'It's an unfortunate decision, and we believe plainly wrong.'
Cybersquatting is the practice of registering well-known brand names in an effort to force the owners of those trademarks to pay 'substantial sums' to use them, the appeals court said.
Gregory Phillips, a Salt Lake City lawyer for Volkswagen, said it was the first cybersquatting case involving his client to reach an appellate court.
Phillips said VW is not seeking damages or attorney fees. 'The main goal is to get the domain name,' he said.
According to the appeals court, several Volkswagen dealers contacted Virtual Works in December 1998 seeking to buy the rights to vw.net. Instead, however, the company president contacted Volkswagen's trademark department, saying he would sell it to the highest bidder unless Volkswagen bought the rights to the domain name.
U.S. District Judge Claude Hilton in Alexandria ruled in Volkswagen's favor without trial, and vw.net then was transferred to Volkswagen, which now operates it. The appeals court upheld that decision.
'Unfortunately for Virtual Works, there is circumstantial and direct evidence establishing bad faith,' said appeals Judge J. Harvie Wilkerson III. He cited the 'famousness' of the VW trademark; the fact Virtual Works never did business under the VW initials; and a statement by one of the company owners that vw.net might be sold 'for a lot of money' to Volkswagen.
The court said Virtual Works 'foresaw the ability to profit from the natural association of vw.net with the VW mark. It is obvious even to a casual observer that the similarity is overwhelming.'