Hand over that domain!

As the e-commerce space becomes ever more crowded, disputes over confusingly similar domain names are becoming ever more common. One issue that has been particularly vexing is whether a court can order the registrant of a domain name who uses it to infringe someone’s trademark to deliver up that domain to the rightful trademark owner.

 With the recent Federal Court of Appeal decision in Michaels v Michaels Stores Procurement Company Inc., 2016 FCA 88 ("Michaels"), the fog around this issue has now lifted. To the benefit of those who conduct business online, it is now quite clear that the Federal Court has jurisdiction to transfer and order delivery up of domain names as a remedy in trademark infringement cases.

Michaels is an appeal from an April 2015 decision of the Federal Court granting Michaels Stores Procurement Company default judgment against Mr. David Michaels and Michaels Inc. for trademark infringement, passing off, depreciation of goodwill and breach of the Competition Act. Mr. Michaels and Michael’s Inc. never defended. In granting default judgment, the Court held that the use of the plaintiffs’ trademark MICHAELS in the defendants’ domain name, <Michaels.ca> constituted trademark infringement and the defendants were ordered to deliver up the domain names to the plaintiffs.

The defendants appealed, arguing that the judge erred in finding that the allegations in the statement of claim had been made out, that the judge committed an error in the exercise of her discretion to hear the motion and, that the order to deliver up the domain name was overly broad.

The Federal Court of Appeal disagreed on all counts. In particular, the Court found that the allegations of trademark infringement had been sufficiently made out and no error had been made in exercising the judge’s discretion to hear the motion.

The most important holding for the e-commerce world was made in respect of the order that the domain name be delivered up to the plaintiffs. The Court of Appeal held that the domain name was the mechanism by which the plaintiff’s trademark was infringed and was the instrument that caused confusion in the market place.  Delivery up of that “instrument” falls squarely within the Courts discretion to order any appropriate remedy.  While the decision does not make a blanket statement that any such use of a trademark would constitute infringement, it affirms that this form of confusing use is adequate for a finding of infringement and sufficient for an order of delivery up.

Importantly, the Court also confirmed that the order did not restrict the defendant, Mr. David Michaels, from using his own name on the internet or in trade, as he alleged. The order simply prevented him from using the word MICHAELS and similar marks in a confusing way.

This decision reaffirms what is now commonly accepted - domain names are intangible property that can be treated by a court just like any other property. It also acts as both a useful warning and a potentially powerful weapon to the world of e-commerce.

For those registering a domain name: be forewarned and proceed with caution to ensure that you do not register a domain name that may lead a consumer to believe that you are the source of another business’ goods and services.

On the flip side, this precedent is likely to be wielded as a sword both in court and as a new negotiation tactic where use of a domain name could be seen to constitute infringement. The availability of delivery up of a domain name as a remedy will also now likely become an important tactical component of trademark enforcement strategies.

If you are aware of an online business using your trademark in an infringing way in their domain name, now is a better time than ever to contact an intellectual property lawyer to discuss your options.