Question on the inclusion of “bad faith” as constitutive requirement in domain name dispute resolution in China

By Tao Xinliang, Dean of Shanghai University Intellectual Law School,[Internet & Domain]

In China, domain name disputes are resolved in accordance with China Internet Network Information Center (CNNIC)’s Domain Name Dispute Resolution Policy (DNDRP), which was formulated in 2002 and has been implemented since March 17th, 2006 after amendment. It is based on WIPO’s 1999 research report, the Uniform Domain Name Dispute Resolution Policy derived from the WIPO’s report and issued by the Internet Corporation for Assigned Names and Numbers (ICANN), and the initial domain name dispute resolution policies set up by the CNNIC shortly after the releasing of the former two. However, the Policy has not given a clear definition to “bad faith act,” resulting in difficulties in its being implementation in practice.

I. An overview of “bad faith” in China’s current norms for domain name dispute
Article 8 of DNDRP stipulates the sufficient and necessary conditions for the disputed domain name to be transferred or cancelled. The complaint shall be supported subject to any of “the following conditions:”
(a) The disputed domain name is identical with or confusingly similar to the complainant’s name or mark in which the complainant has civil rights or interests;
(b) The disputed domain name holder has no right or legitimate interest in respect of the domain name or major part of the domain name;
(c) The disputed domain name holder has registered or has been using the domain name in bad faith.
The three conditions must be met for any complaint. In other words, there are three constitutive requirements for domain name, namely, “identical with or confusingly similar to,” “no right or legitimate interest” and “bad faith,” which must be satisfied at the same time. Therefore, “bad faith” becomes one of the indispensable conditions for a disputed domain name to be transferred or cancelled.
Pursuant to Article 9 of DNDRP, an “act” shall be established in “bad faith” where:
(a) The purpose for registering or acquiring the domain name is to sell, rent or otherwise transfer the domain name registration to the complainant who is the owner of the name or mark or to a competitor of that complainant, and to obtain unjustified benefits;
(b) The disputed domain name holder, on many occasions, registers domain names in order to prevent owners of the names or marks from reflecting the names or the marks in corresponding domain names;
(c) The disputed domain name holder has registered or acquired the domain name for the purpose of damaging the complainant’s reputation, disrupting the complainant’s normal business or creating confusion with the complainant’s name or mark so as to mislead the public;
(d) Other circumstances which may prove the bad faith.
However, there are difficulties in practice to find whether an act constitutes “bad faith” in a domain name or not. Therefore, an amendment is added in DNDRP as Article 10:
Before receiving the complaint, any of the following circumstances may be evidence of the rights to and legitimate interests in the domain name:
(a) His use of the domain name or a name corresponding to the domain name in connection with a bona fide offering o f goods or services;
(b) He has been commonly known by the domain name, even if he has acquired no trademark or service mark rights;
(c) He is making a legitimate noncommercial or fair use of the domain name, without intent of  or commercial gain to misleadingly divert consumers.

II. Difficulties in evidence and identification of “bad faith” in domain name disputes
According to Article 9 of DNDRP and domain name disputes resolution practice, any of the following shall constitute “bad faith” where he registers or acquires the domain name:
(a) For the purpose of selling, renting or otherwise transferring the domain name registration to the complainant or its competitor in order to obtain unjustified benefits;
(b) Of other’s legal names or marks on many occasions;
(c) For the purpose of damaging the complainant’s reputation;
(d) In order to disrupt the complainant's normal business;
(e) Aiming at creating confusion with the complainant’s name or mark so as to mislead the public;
(f) For “passive holding” instead of putting it into use;
(g) Though he knows it is a well-known name or mark of others;
(h) Though he ought to know it is a well-known names or mark of others.
There are other circumstances of “bad faith” in cyber piracy in addition to the above-mentioned nine kinds of cyber squatting, which may be involved in a domain name case more or less.
According to the axiom that “the proof lies upon him who claims,” the complainant shall bear the burden of proof that the respondent shall be responsible for one or more of bad faith acts mentioned above. However, it is usually difficult for the complainant to prove. First, some bad faith acts, such as “the purpose of registration or acquirement is to sell, rent or otherwise transfer the domain name registration to the complainant’s competitor,” are not easy to prove. Some verdicts even stresses that “selling” does not constitute “bad faith,” that bad faith acts cannot be proved if the complainant has only evidence that the respondent sold it to unspecified person or intended to sell, and that these can not prove the complainant’s registration constitutes “cyber piracy for the purpose of selling, renting or otherwise transferring the domain name registration to complainant’s competitor.” Therefore, it is very difficult for the complainant to prove that the respondent engages in domain squatting in order to damage the complainant’s reputation or disrupt the complainant’s normal business or create confusion with the complainant’s name or mark so as to mislead the public.
It is also very difficult for the panel to ascertain whether the respondent has “bad faith” intent or not. Firstly, the panel is required to make a decision for a domain name within dozens of days. Secondly, there is no possibility for the panel to ascertain evidence because the documents are reproductions submitted by the parties. Last but not least, there is no chance for testimonies in person, defenses and cross-examination between the parties due to the adoption of “written examination” in domain name resolution. Therefore, it is difficult for the panel to make a prudent, fair and justifiable decision during a short period that the respondent had bad faith in his registration of the domain name in dispute where there is no hearings of witnesses and no cross-examination. However, the most important reason may be that the panel may decide the case without consideration of the existence of bad faith of the respondent in a domain name resolution.

III. Bad faith should be excluded from domain name constitutive requirements
The ascertainment of bad faith of the respondent is the precondition for current domain name resolution. In fact, is not necessary to have such a precondition. The author thinks that bad faith can be safely excluded, whereas a domain name could be sufficiently ascertained and judged by the other constitutive requirements, namely, “identical with or confusingly similar to” and “no right or legitimate interest.”
As mentioned earlier, Article 8 of CNNIC DNDRP provides the necessary and sufficient conditions for the decision of the domain name to be cancelled or transferred to the complainant as follows:
(a) The disputed domain name is identical with or confusingly similar to the Complainant’s name or mark in which the complainant has civil rights or interests;
(b) The disputed domain name holder has no right or legitimate interest in respect of the domain name or major part of the domain name;
(c) The disputed domain name holder has registered or has been using the domain name in bad faith.
As far as the consequence is concerned, the Article 14 of CNNIC DNDRP stipulates that “the Panel shall make the decisions on the basis of the facts related to the dispute and the evidence submitted by the complainant and respondent. Where the Panel supports the complaint, the registered domain name shall be cancelled or transferred to the complainant; otherwise, the complaint shall be rejected.” The enforcement shall be in line with Article 16 as follows:
If the Dispute Resolution Service Provider rules in its decision to cancel the registered domain name or to transfer it to the Complainant, the domain name Registrar, before enforcing the decision, shall wait 10 calendar days calculating from the date on which the decision is published. If during such waiting period the Respondent submits valid proof attesting that a competent judicial authority or arbitration institution has accepted the relevant dispute, the registrar shall not enforce the decision of the Dispute Resolution Service Provider.
(a) If any proof attests that the parties have reached a settlement by themselves, the Registrar shall enforce such settlement;
(b) If any proof attests that the party that instituted the judicial action or applied for arbitration has withdrawn the complaint or the relevant action or complaint has been rejected, the Registrar shall enforce the Dispute Resolution Service Provider’s decision;
(c) If the judicial authority or arbitration institution has rendered a judgment or an award that has become legally effective, the Registrar shall enforce such judgment or award.
In summary, domain name dispute resolution mechanism is designed to decide which party should be the owner of the domain name in dispute. It has nothing to do with “bad faith.” Therefore, all disputes can be settled by the other two constitutive requirements, namely, “identical with or confusingly similar to” and “no right or legitimate interest.”
It is generally recognized that bad faith is an important element for the judgment of economic compensation quantity in civil and commercial cases, regardless of whether they are heard by the court or arbitrated by the panel. China is still holding up the banner of compensative principle instead of punitive damages in civil lawsuits. It can be seen from the foregoing paragraphs that dispute settlement procedure pays no attention to the civil tort liability incurred in dispute. Such liability can be settled through litigation or arbitration. Therefore, it is enough for the panel or court to make judgments in domain name cases by taking “identical with or confusingly similar to” and “no right or legitimate interest” into consideration.
It shall be deemed as “identical with or confusingly similar to” where the disputed domain name is identical with or confusingly similar to the complainant’s name or mark in which the complaint has legal civil rights or interests prior to his complaint. The respondent’s cyber piracy shall constitute civil infringement or unfair competition against the complainant’s existing legal civil rights and interests if there is no exception under such circumstances. If there is exception, it shall be established where the complainant has “no right or legitimate interest” in the disputed domain name. However, it shall not be deemed as “no right or legitimate interest” where the respondent has legitimated rights and interest in the domain name according to laws and contracts concluded between and among him and the complainant even if he has legal civil rights or interests prior to his complaint. Their rights shall be coexisted and no infringement happened.
In accordance with Article 10 of DNDRP, it shall be deemed that the respondent has legitimate rights to and interests in the domain name before receiving the complaint where any of the following circumstances may be evidenced:
(a) His use of the domain name or a name corresponding to the domain name in connection with a bona fide offering of goods or services;
(b) He has been commonly known by the domain name, even if he has acquired no trademark or service mark rights;
(c) He is making a legitimate noncommercial or fair use of the domain name, without intent of or commercial gain to misleadingly divert consumers.
However, it has potential conflict with Article 9. The author does not agree with the time limitation of “before receiving the complaint” and thinks that it should be extended to the time of registration of the disputed domain name. The Article 5 of Interpretation of The Supreme People’s Court on Application of Laws in the Trial of Civil Disputes over Domain Names of Computer Network also provides that “If the defendant produces evidence to prove that the domain names he owned have gotten certain fame before the case, and can be distinguished to the prosecutor’s registered trademarks or domain names, or other conditions prove that the defendant has no malice, the people’s court may convict the defendant not malicious.” The author also thinks that something should be improved in the time limitation set by the Interpretation.
In conclusion, the author believes that the provisions of “identical with or confusingly similar to,” “no right or legitimate interest” and “bad faith,” are not proper. “Bad faith” has no reason to be included in the constitutive requirements of cyber piracy because the dispute settlement mechanism focuses on the transfer and cancellation of the disputed domain name and has nothing to do with economic compensation. The other two constitutive requirements are enough for such settlement.

(Translated by Yuan Renhui)

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