Electronics Boutique Statutory Damages Award Shocks Alleged 'Notorious Cybersquatter'
© 2001 Oblon, Spivak, McClelland, Maier & Neudstadt, P.C.
All Rights Reserved
In Electronics Boutique Holdings Corp. v. Zuccarini, the United States District Court for the Eastern District of Pennsylvania found that an alleged "notorious cybersquatter" had registered in bad faith five domain names similar to the plaintiff's trademarks in violation of the Anticybersquatting Consumer Protection Act ("ACPA"). The court ordered transfer of the domain names to the plaintiff, permanently enjoined adoption of other domain names similar to the plaintiff's marks, awarded statutory damages in the amount of $500,000 -- the maximum allowed by law, $100,000 per domain name -- and ordered payment of Electronics Boutiques' attorney's fees and costs in an amount exceeding $30,500.
The ACPA bears its teeth in Electronics Boutique. The Act's statutory damages provisions can repudiate and rectify cybersquatting and preclude the bad faith use of domain names to divert traffic from the trademark owner's web site to sites operated by the domain name registrant. Though the magnitude of the statutory damage award is attributable to the persistent pattern of willful cybersquatting allegedly committed by the defendant, other cybersquatters whose conduct reflects a similar pattern of bad faith must give serious consideration to the prospect of significant statutory damages. The cybersquatting conduct addressed in Electronics Boutique was particularly egregious.
The plaintiff, Electronics Boutique, is a retailer of video games and PC software. It operates more than 600 retail stores. It owned the registered service marks EB and ELECTRONICS BOUTIQUE, and had pending applications to register several other marks including EBWORLD.COM. Its Internet web site could be accessed at the URL's www.ebworld.com and www.electronicsboutique.com . In the eight months preceding the court's decision, online purchases through its web site had yielded more than 1.1 million in sales per month and 2.6 million online visitors.
The domain name registrant, John Zuccarini, registered five domain names, which were close misspellings of Electronics Boutique's name, marks, and domain names: www.electronicboutique.com, www.eletronicsboutique.com, www.electronicbotique.com, www.ebwold.com, and www.ebworl.com. He then "mousetrapped" Internet users happening upon his misspelled domains in a barrage of advertising windows, featuring a variety of products, including credit cards, internet answering machines, games and music. The Internet user cannot exit these frames and gain access to Electronics Boutique's web site without first clicking on as many as 15 advertisement windows. Advertisers paid Zuccarini 10 to 25 cents for every click on an advertisement.
In considering Electronics Boutique's request for a permanent injunction, the court first considered the likelihood of success on the merits. It found that Electronics Boutique's marks are distinctive and famous. The company had used and traded under the name "Electronics Boutique" since 1977. That mark is registered (and incontestable) and therefore presumed inherently distinctive. The company also used its ELECTRONICS BOUTIQUE'S mark at its Internet sites at the URLs www.electronicsboutique.com and www.ebworld.com for four years and three years respectively. The company had spent tens of millions of dollars advertising its mark in print, on television, on the radio, and over the Internet, reaching national and international audiences. Its website was well known in the industry. Its website averaged $1.1 million in sales per month and $2.6 million on-line visitors.
The court found that the domain names were confusingly similar to EB's marks, noting that Mr. Zuccarini's business was dependent on his ability to create and register domain names that are confusingly similar to famous names. There was evidence of one customer actually confused by the domain name misspellings, who believed that EB was associated with the domain www.electronicboutique.com.
Zuccarini's alleged bad faith intent to profit from the misspelled domain names was "abundantly clear." The Court concluded that Zuccarini had registered the domain names to generate advertising revenue for himself, notwithstanding his actual knowledge of the Electronics Boutique stores and web site. He believed Internet users seeking the plaintiff's web sites would, by mistake, reach Zuccarini's confusingly similar domains, and would generate profits for him by clicking on the advertisements they were temporarily forced to view. None of the domain names consisted of names used to identify Zuccarini. Nor did Zuccarini have a bona fide business purpose for registering the domain names as he did not sell goods or services relating to the plaintiff or its products. Last, Zuccarini had no intellectual property rights in the domains. The court expressly found that "Zuccarini specifically intended to prey on the confusion and typographical and/or spelling errors of Internet users to divert Internet users from EB's website for his own commercial gain."
Considering irreparable harm, the court reasoned that "'[g]rounds for finding irreparable injury include the loss of control of reputation, loss of trade, and loss of good will.'" Likelihood of confusion is another basis. The court reasoned that it was impossible to determine the number of potential and existing customers diverted from Electronics Boutique's website by Zuccarini's misspelled domain names. Zuccarini's practice of mousetrapping Internet users in numerous advertisements once they erroneously accessed his misspelled domains could cause some consumers to abandon any intention to purchase from Electronics Boutique online, and could even discourage some persons from shopping at its retail stores. In addition, it would be impossible to calculate the loss of reputation and goodwill caused by the misspelled domain names, as they could undermine consumer trust in the plaintiff's online operations. Indeed one Internet user, who believed that Electronics Boutique was associated with one of the misspelled domains, sent an e-mail expressing concern about a "possible security problem." Irreparable harm had been shown.
The balance of hardships to the parties that would result from an injunction clearly favored Electronics Boutique, but the court's analysis was brief due to Zuccarini's failure to appear. The court viewed that failure as a "conscious choice to allow this matter to proceed in his absence." The court concluded that the hardship was visited on the plaintiff alone.
The court ruled that an injunction would serve the public interest because that interest suffers when the public's right not to be deceived is violated. In the court's view, the profitability of Zuccarini's enterprise was directly proportional to the number of Internet users he deceives through the use of misspelled domains.
Last, the court addressed the issue of statutory damages, which are intended to deter wrongful conduct and to provide adequate remedies to trademark owners. The court emphasized that Electronics Boutique's actual damages from lost customers and goodwill was incalculable. In another litigation, Zuccarini had admitted that he received between $800,000 and $1,000,000 annually from thousands of domain names he has registered. Advertisers pay him whenever an Internet user clicks on one of their ads posted on one of his websites. Many of his registered domains are misspellings of famous names or otherwise infringe other's trademarks. Zuccarini "has victimized a wide variety of people and entities." He previously had been permanently enjoined by the Court from using domain names that are "substantially similar" to the mark of another plaintiff. In addition, suits alleging similar conduct by Zuccarini had been brought by Radio Shack, Office Depot, Nintendo, Hewlett Packard, The Dave Matthews Band, The Wall Street Journal, Encyclopedia Britannica, the distributor of Guinness Beer and Spiegel catalog in various federal court and arbitration proceedings. Demands concerning similar conduct had been brought by Sports Authority, Calvin Klein, and Yahoo! The court further found that "Zuccarini's conduct even interferes with the ability of the public to access health information by preying on hospitals and prescription drugs," based on Zuccarini's admission in another case that he had registered domain names that were misspellings of the Mayo Clinic and the weight loss drug Xenical.
"Zuccarini's conduct is not easily deterred." He registered the domain names at issue after the court had preliminarily enjoined him from using misspellings of another individual's marks. Moreover, after the court had permanently enjoined Zuccarini from using other misspelled domain names, assessed statutory damages at $10,000 per domain name and awarded attorneys' fees and costs against him, Zuccarini registered hundreds of domain names which were misspellings of famous people's names, famous brands, company names, television shows and movies. The court observed that: "Mr. Zuccarini boldly thumbs his nose at the rulings of this Court and the laws of our country."  It imposed the maximum statutory damages permitted by law -- $100,000 per infringing domain name – for a total of $500,000.
Electronics Boutique reflects a scenario where the ACPA is the better regime to rectify cybersquatting than pursuing a uniform domain name dispute resolution proceeding: a persistent, if not irrepressible, cybersquatter against whom prior judgments were insufficient to prevent similar conduct against other parties; the need for statutory damages to remedy real but immeasurable damage stemming from the loss of good will and reputation attributable to diversion of Internet traffic through the use of misspelled domain names; a need for permanent injunctive relief beyond mere transfer or cancellation of the domain names at issue; and the court's contempt power to remedy any post-judgment transgressions that might occur. The case demonstrates that, in appropriate circumstances, an ACPA action in federal court provides greater leverage against the well-heeled cybersquatter who possesses a business motive and plan for profiting from the marks of others.
 56 U.S.P.Q.2d 1705 (E.D. Pa. Oct. 30, 2000).
 The term "mousetrapped" describes "the situation an Internet user encounters upon accessing one of Mr. Zuccarini's domain names . . . ." Id., n. 8 (citing Shields v. Zuccarini, 89 F.Supp.2d 634, 635, 54 U.S.P.Q.2d 1166 (E.D. Pa. 2000)).
 Id. at 1710.
 Id. at 1711.
 Id. Zuccarini offered no evidence at all, so there was no evidence or claim that his use of the domain names was fair and lawful within the meaning of 15 U.S.C. § 1125(d)(1)(B)(ii).
 Id. (quoting Opticians Ass'n of America v. Independent Opticians of America, 920 F.2d 187, 195, 17 U.S.P.Q.2d 1117 (3rd Cir. 1990).
 Id. (citing Opticians Ass'n of America, 920 F.2d at 196).
 Id. at 1712.
 Id. The opinion details plaintiff's herculean efforts to personally serve Mr. Zuccarini, to no avail.
 Id; (citing S. Rep. No. 106-140 (1999); 15 U.S.C. § 1117(d).
 56 U.S.P.Q.2d at 1712-13.
 Id. at 1713 (citing Shields, 89 F. Supp. 2d at 642-43.
 Id. at 1713.