Afilias.de- No protection of earlier domain name registration

Birgit Clark, Boult Wade Tennant

This article first appeared in the April 2009 issue of Trademark World. Click here to read this article in PDF format.  

The German Federal Supreme Court (Bundesgerichtshof) recently decided that a top level .de domain name registration does not automatically give any priority rights over a third party's junior company name, commercial designation or trademark.

Legal background
Section 5(1) of the German Trade Mark Act (MarkenG) provides that company symbols shall be protected as commercial designations, with Section 5(2) MarkenG defining company symbols as signs used in the course of trade as names. Section 15(2) MarkenG prohibits third parties from using a commercial designation or a similar sign in the course of trade in a a manner capable of causing confusion with the protected designation. Section 12 German Civil Code (BGB) stipulates that 'if the interest of the person entitled to the name is injured by the unauthorised use of the same name by another person, the person entitled may require the other to remove the 'infringement'. If further infringements are to be feared, the person entitled may seek a prohibitory injunction.

Facts
The claimant in the proceedings, the Irish corporation Afilias Limited, provides registry services for the top-level domain .info and owns a Community trademark registration for the word mark afilias, which was filed in March 2001 and registered in April 2002. The defendant is the proprietor of the Grman top level domain afilias.de, which had already been registered in October 2000. The defendant also owns a German trademark registration for afilias, which was filed in 2003 and registered in 2004. The claimant sought injunctive relief agaist the defendant arguing that the defendant's earlier domain name registration infringed its junior company name rights in the sign afilias as well as its Community trademark. The defendant sought dismissal of the claim arguing that his domain name registration was the earlier right and as such should be given priority over the claimant's later established rights. The court of first instance dismissed the claim. After the Higher Regional Court of Dusseldorf overturned the first instance decision and found in favour of the claimant, the defendant appealed to the Bundesgerichtshof, the highest appellate court in civil law matters in Germany.

The decision
While the Bundesgerichtshof agreed with the Dusseldorf court that the claimant was entitled to injunctive relief under Section 12 BGB, the judges decided that the Dusseldorf court had not conducted the necessary balancing of the conflicting interests required under this provision.

As the first step, the court assessed the relationship between sections 5 and 15 MarkenG and (company) name right protection under section 12 BGB. The court stated that the claimant could, in princple, base its claim on sections 5 and 15 MarkenG as well as sction 12 BGB. However, the judges agreed with the Dusseldorf court that Afilias Limited's claim based on sections 5 and 15 MarkenG was barred by a precedence of section 12 BGB because the defendant had been unable to prove that he had used his doman name registration 'in the course of trade' as required under section 15(2) MarkenG. The defendant had claimed that he had used the website commercially but could not prove that his use was indeed business related. Referring to its precedent in the shell.de case (BGHZ 149, 191) the court confirmed that for cases where the type of use was in doubt, non-commercial ('private') use had to be assumed. Based on the factual findings of the lower court, the Bundesgerichtshof took the view that the defendant had used the internet address non-commercially and that consequently section 12 BGB should apply. The court confirmed the lower court's view that the claimant had only owned company name rights in the sign affilias after it had started using the sign as its business name in Germany in May 2001, a year after the defendant had registered the domain.

The judges stressed that a domain name registration only bestowed a contractual right to use the domain but did not confer an absolute ('property') right. As such, a top level .de domain name registration did not automatically give priority rights over a third party's absolute right in a junior company name, commercial designation or trademark. However, the fact that the defendant had kept his domain registered after the claimant had acquired company name rights in the affilias sign had turned his use of the domain into 'unauthorised use' in the sense of section 12 BGB. Referring to its precedents in the shell.de, maxim.de and grundke.de cases (BGHZ 149, 191; BGHZ 155, 27; BGHZ 171, 104) the court reiterated that the relevant trade circles would usually interpret the use of a company name within a domain name as an indication of a business name and trade origin. Given that a domain name could only be allocated once, and that the defendant owned the internet address afilias.de, the claimant was deprived of the opportunity to inform interested internet users about its company in a simple fashion. The defendant's use had also caused confusion concerning the association of the afilias sign and hence injured the claimant's legitimate interests in the name as protected by section 12 BGB. The judges stressed that the use of a domain name could, theoretically, lead to the acquisition of a right in the correspondig company name provided the relevant trade circle interpreted the domain name as an indication of trade origin or as a reference to a business. However, this did not apply here due to the defendant's non-commercial use of the afilias.de domain.

The judges emphasised that even though a domain name owner did not acquire any absolute rights in the domain name, he nonetheless acquired a contractual, relative right to use the domain name, which was comparable to a property right. The court went on to clarify that such 'unauthorised use' of a domain name, which at the time of its registration did not infringe any absolute third party rights (as it was the case here), could not per se be qualified as an infringement of the legitimate interests of the proprietor of a junior company name, comemrcial designation or trademark. In such a scenario, section 12 BGB required a careful balancing of the conflicting interests of both parties, which the lower court had failed to conduct.

Balancing of conflicting interests
Restricted to reviewing ht elower court's judgment on points of law, the Bundesgerichtshof nonetheless rpovided guidance how this conflict should be decided depending on the facts of the individual case.

The judges explained that the balance would tip in favour of the 'unauthorised' domain name owner, where a domain name registration was only the first step in adopting a new company name and where it was subsequently followed by a trademark registration. Referring to its precedent in the mho.de case (BGH GRUR 2005, 430), the court took the view that it was a 'reasonable commercial practice' to secure the corresponding domain name registration ahead of starting the use of a new company name. This view was supported by the fact, that the proprietor of an identical company name could also not prevent third parties from using an identical sign (and domain name) provided both parties were active in different areas of business. In this case, however, the lower court had not determined any facts that indicated that the defendant had any plans for using the domain name as a trade name or as a trademark, particularly since the defendant's own trademark was only filed three years after the registration of the domain name.

Another decisive factor, when balancing the conflicting rights, was that a third party could easily verify whether a respective internet domain was available before choosing a particular company name or trademark. Where the desired sign was already registered as a domain name, the court was of the view that it was just and reasonable to demand that the third party should choose a different company name or trademark. In such a scenario the balancing of conflicting interests would usually be decided in favour of the owner of the earlier domain name registration.  

Matters would, however, have to be decided differently where the domain name proprietor could not invoke his rights in the domain name due to an 'abuse of rights'. Referring to its earlier decisions in Analgin, Makalu and Class E (I ZR 95/96; I ZR 134/95 and I ZR 93/98), the court reitereated that an 'abuse of rights' was to be assumed, where the domain name owner had registered the domain name without a serious intent to use the domain and with the sole objective to sell the domain registration to the proprietor of the corresponding trade or name right. In such cases, the balancing act would usually be in favour of the owner of a junior trademark or (company) name right.

Given the lower court had neither conducted the required balancing act, nor investigated whether the defendant had only registered the domain name with a view to selling it on, as argued by the claimant, the Bundesgerichthof referred the case back to the Higher Regional Court of Dusseldorf for a final decision.

Practical implications
This decision could have a serious impact on those domain name dealers who register domain names with a view to selling them on but do not use the domains themselves. In light of the court's decision such 'domain grabbing' activities could be regarded as an 'abuse of rights'. The afilias.de decision reinforces the Bundesgerichtshof's earlier precedents (Analgin, Makalu and Class E) concerning the use of domain names. Proprietors of top level .de domains, who are planning to use their domain name commercially in trade, are well advised to start using their domain immediately after its registration and after a third party rights clearance search. Domain owners should also consider filing for a corresponding trademark registration to safeguard their interests in the sign. The decision also sends a clear message to the owners of company name and trademarks that the German Federal Supreme Court considers it to be 'a reasonable commercial practice' to secure a corresponding domain name registration before starting to use a new company name or trademark.