According to Google, its Adsense program for domains "allows domain name registrars and large domain name holders to unlock the value in their parked page inventory."

After a ruling by the Northern District of Illinois a few weeks ago, Adsense may also allow plaintiffs' attorneys to unlock Google's value. Or, if that is ungenerous, the ruling may allow trademark holders to lock up the value of their registered trademarks. It really depends on your perspective and how you feel about trademarks and domaining.

Vulcan Golf v. Google et al. is an important case because it's the first time (as far as I know) that trademark owners have tried to hold Google liable for domain-related conduct. Plaintiffs are taking what they learned in the keyword advertising context and applying it to domaining. Further, because the case is potentially a class action, there are mega bucks on the line. Think about it: anyone who's ever had her trademark infringed by a domainer using a parking company and Google Adsense could theoretically sign up to be a plaintiff.

The recent ruling paves the way for trademark holders to sue companies who provide advertising services, but neither own or register the offending domain name, to be held liable for trademark infringement and cybersquatting.

It was generally assumed that Google's highly talented and knowledgeable legal team would have gotten the case dismissed with aplomb. Surprisingly, however, the Judge recently ruled that the lawsuit can proceed.

Let's take a closer look, shall we?

1. Who Is Suing Who?

Like many cyber-squatting and anti-domaining lawsuits, the plaintiffs in the case are well-funded, well-branded entities. In this case, Vulcan Golf, Bo Jackson, Sanfilippo & Son, and Blitz Realty Group filed the lawsuit, along with as yet to be identified innumerable similarly-situated plaintiffs. (In class action lawsuits, you start out with a few named plaintiffs, and then try to add more plaintiffs later on.)

The defendants are the most interesting part of the case. In a typical anti-domaining case, the defendants are the guys who own the offending domains. In this case, the plaintiffs are following the money and suing the domain parking agencies and Google. It's like taking down the crack dealer instead of the addict. The named domain parking companies are Sedo, Oversee.net, Dotster, Revenue Direct, and IREIT. And of course, you're all familiar with Google's Adsense program for Domains.

2. What are the basic facts?

Everyone likely to read this post understands how domain parking in combination with Adsense functions to line the pockets of the defendants. The only thing to be underscored is that this lawsuit only involves those websites that have zero content and ads.

3. What are the Legal Theories and Claims?

4. What Didn't the Court Decide?

Now, before I tell you what the Court decided, I should explain what it did not decide. The Court did not decide who is liable and not liable. Why? Because the lawsuit isn't at the fact-finding stage yet. Trials come towards the end of the process; that's when the Court resolves disputes of fact and weighs the evidence.

Before you ever get to the trial stage, the defendant can try and get the case dismissed on more technical arguments. For example, if the defendant thinks that the charges are bogus because "there is no such law" or "the law doesn't apply to me," the defendant doesn't have to go through all of the expense of the trial. He can ask the judge to dismiss the case earlier in the process. 

That's what has happened in this case. The Defendants asked the judge to dismiss the case, arguing the laws enumerated in plaintiff's Complaint couldn't be applied to them for one reason or another. In sum, even if everything the plaintiff said about us was true, the case should be dismissed because that's not against the law.

I think everyone expected a Google win here. Google's got brains, money, and a fairly common sense argument at its disposal. But it was not to be.

5. What Did the Court Decide?

The Court agreed to dismiss the RICO Act claims (notoriously difficult to bring to trial), the unjust enrichment claim, the conspiracy claim, and the state claims, including Consumer Fraud. These were all pretty low hanging fruit for the judge to pick off.

However, it was a surprise when the judge decided to allow most of the Trademark and the Anti-Cybersquatting claims to proceed.

A. The Defendants May Be Liable for Cybersquatting Even If They Didn't Own, Register, or Use the Offending Domain Names.

Both Google and the domain parking companies argued that they can't be found liable under ACPA because they didn't own, register, or use the offending domain names. They characterized their participation as minimal, automated, and well-intentioned. This argument has a certain common sense appeal. How could they be guilty of cybersquatting if they weren't the ones squatting? Shouldn't only the owner of the offending domain be liable?

The Court doesn't buy it and summarizes Google's alleged activities like this:  "Google pays registrants for its use of the purportedly deceptive domain names, provides domain performance reporting, participates in the tasting of domain names, uses semantics technology to analyze the meaning of domain names and select revenue maximizing advertisements and controls and maintains that advertising."

Accordingly, the Court ruled that

It is plausible that the [plaintiffs'] allegations fall under the ACPA prohibition of "trafficking in," which is defined by the ACPA as engaging in 'transactions that include, but are not limited to, sales, purchases, loans, pledges, licenses, exchanges of currency, and any other transfer for consideration or receipt in exchange for consideration." 15 USC(d)(1)(E).

Thus, the Court uses a broad definition of "trafficking" to bring domain parking companies and Google into the purview of the anti-cybersquatting statute.

The bottom line: You don't have to own or register the domain to have potential liability for cybersquatting under ACPA. As far as I know, this is the first case to make such a ruling. In every other ACPA case that I know of, the defendant owned or registered the domain, usually in addition to trafficking in it.

B. The Defendants May Be Liable for Trademark Infringement Because They Use Domain Names With Offending Marks "In Commerce."

In the past, courts have refused to hold domain registrars liable for trademark infringement because the registrar was "not using the trademark in commerce." Basically, past courts ruled that the registrars are just administratively registering domains. Because the registrars don't choose the domains or necessarily do anything with them, they cannot be said to be using the mark in commerce. The domain parking defendants in this case argued that they should be treated like prior domain registrars.

Again, the Court didn't buy it. The Court ruled that because the Plaintiffs allege more than mere ministerial registration of an offending domain, it is entirely plausible that the trademarks were used in commerce. By advertising and coordinating advertising programs, the domain parkers cannot claim the lack of involvement that mere registrars enjoy.

Bottom Line: The Court seemed willing to treat domain parkers and ad servers similar to the way courts have treated keyword triggered advertising: it's a use in commerce and a possible trademark infringement. In this case, the offending domain is acting as a keyword. We're used to seeing these arguments applied in cases about meta-tags and PPC campaigns. But this is the first time, that I know of, where the arguments have been applied in the domaining context against parties who do not own or register the domains.

6. What Does This Mean?

Domain parking companies and ad-serving platforms, such as Adsense, are at legal risk after this ruling. If the plaintiffs can certify a large class and prove all of their allegations, then this could have a negative impact on the domain industry.

Theoretically, such a ruling would only make it more difficult to make money off infringing domains and not the many generic or descriptive domains being parked and used to serve relevant ads. However, in practice, if parking companies and ad-serving companies are worried about being sued for trademark infringement over every domain they're involved with, the result would be a chilling effect on the whole industry.

One thing is certain, a Plaintiff's victory on the merits, combined with I-CANNs recent decision to eliminate the five-day grace period that was facilitating domain tasting, would cause industrial cybersquatting to become much less profitable and perhaps extinct. That's something to cheer for, but what about the potential repercussions for the perfectly legit domainers?

But that is a worst case scenario and we're not there yet. The Plaintiffs still have a long way to go. They need to provide proof that the defendants had actual knowledge of the infringement and that the defendants operated in bad faith. It's interesting to note that according to papers filed this month, the Plaintiffs claim that not only did Google know that it was infringing before, it continues to infringe (and profit therefrom) to this day.

Additionally, the plaintiffs will also have a difficult time certifying their class of plaintiffs. Trademark cases are extremely fact-sensitive (each trademark holder must prove he has a valid mark and that the offending domain was similar enough to cause confusion) and thus an awkward fit for class-action suits.

Thus, the plaintiffs still have an uphill battle, but there are definitely some interesting and potentially expansive rulings to come out of the case so far. Certainly other potential plaintiffs will be watching this case as a model. I'll keep you updated as well.