Legal Insights

Bad faith: Squatting on domain names

By Sonia Sharma

• 01 June 2015 • 2 min read

Companies wishing to register domain names need to do so for the purpose of using them for their own business activities, not as bargaining tools

Registering domain names to use as bargaining tools, or to sell to other parties, can be a sign of bad faith in a trade mark opposition proceeding. When clients reserve domain names before acquiring business assets (e.g. intellectual property), they need to do so in good faith.

What is bad faith?

Briefly put, “bad faith” is conduct falling short of the standards of acceptable commercial behaviour and involves dishonesty.

The recent decision (Decision 2014 ATMO 84, 12 September 2014) is an interesting recent example of the Australian Trade Marks Office finding that a trade mark application was made in bad faith on the basis of domain name squatting. The trade mark applicant, John Mells, was a former employee of Save My Bacon. Relations between John Mells and SMB broke down. John Mells filed an application to register a trade mark SAVE MY BACON on behalf of his company, Marking Intelligence Limited. Shortly after, SMB filed applications to register two trade marks, SAVE MY BACON and SAVE YOUR BACON, which the ATMO refused because they resembled MIL’s trade mark too closely and were for similar services. SMB then opposed MIL’s trade mark application on the basis that MIL made it in bad faith.

The ATMO saw the following actions by John Mells and MIL as evidence of bad faith:

  • the general practice of registering trade marks and domain names to sell
  • the registration of an Australian domain name (www.savemybacon.com.au) before SMB’s incorporation
  • failure to disclose the existence of the Australian domain name to SMB during John Mells’ employment, although John Mells knew that SMB intended to expand its business internationally, including in Australia, and to register a trade mark in Australia.

Consequently, ATMO refused MIL’s trade mark application on the basis that it had been made in bad faith under the Trade Marks Act 1995 (Cth). In particular, the ATMO decided that MIL had applied for the registration of the trade mark as a negotiations tactic against SMB for payments allegedly owed to John Mells or as a way to undermine SMB’s business activities in Australia.

Lessons learnt

Companies wishing to register domain names need to do so for the purpose of using them for their own business activities, not as bargaining tools or to undermine a competitor’s business.

By Sonia Sharma

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