Virtual Works, Inc. v. Volkswagen Of America, Inc.

238 F.3d 264 (4th Cir. 2001)

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Nature of the Case

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Facts

On October 23, 1996, Virtual Works (P) registered the domain name vw.net with Network Solutions. At the time that D registered vw.net two of its principals were aware that some internet users might think that vw.net was affiliated with Volkswagen (D). The principals even talked about that fact and decided that they would use the name and if D complained they would sell it to D for a large amount of money. P used the name for two years. In December 1998, various VW dealers contacted P and expressed an interest in purchasing the rights to the name. P then called D and offered to sell the name to D. The message that was left was that if D did not buy the name that P would sell it to the highest bidder and D was given only 24 hours to respond. In response to these threats, D invoked the dispute resolution procedures of Network Solutions, Inc. (NSI). NSI informed P that P would lose the domain name unless P filed a declaratory judgment action against D. P filed the action and D counterclaimed alleging trademark dilution, infringement, and cybersquatting under the ACPA. The ACPA was enacted in 1999 to prevent trademark piracy on the internet. The ACPA is concerned with deliberate, bad-faith and abusive registration of domain names in violation of trademarks. Congress viewed cybersquatting as harmful to both established firms, the internet itself and to trademark integrity. The statute, 15 U.S.C. 1125(d)(1)(A) defined nine factors related to the bad faith determination needed under the statute. Courts were not limited to the nine factors in determining bad faith. The ACPA also contained a safe harbor that bad faith should not be found in any case in which the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was fair use or otherwise lawful. The district court found that a number of the nine bad faith factors were present under the facts. The court held that P had no right or interest in the VW mark and that P had never been referred to or had done business under the name VW. The court also found in relation to the fifth factor that the disparaging comments posted by P harmed the goodwill of D’s mark. The court also found that under the ninth factor the famousness of the mark favored D. The district court then granted summary judgment to D and this de novo review as undertaken. P was ordered to relinquish to D the rights to vw.net.