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E-Commerce News
Former Employee's Web Site Shenanigans Violate Anti-Cybersquatting Act; U-Haul Subsidiary Can't Enforce Online Arbitration Agreement
May 27, 2008
Former Employee's Web Site Shenanigans Violate Anti-Cybersquatting ActAn employee who owns his company's Web site may be liable for violating the anti-cybersquatting provisions of the Lanham Act when he changes the site's contents and links after terminating his employment. That's the recent ruling from a federal court sitting in Indiana.
According to the court, the ex-employee added links and applications that led nowhere. The ex-employee offered to sell the site back for a hefty sum. These actions demonstrated that the ex-employee had used the domain name in bad faith in violation of the Anti-Cybersquatting Consumer Protection Act.
Brian Bradford, the ex-employee, had been employed by mortgage lender Ace Mortgage Funding LLP. For reasons that were not made clear in the court's opinion, Bradford owned the domain name, and employed Web developers on staff to keep the site up to date.
Bradford was the only person with the "keys" to the site. When he was terminated, he re-titled the site "Ace Mortgage: Making Dreams & Building Families, One Loan at a Time." Although the Web site promised that it was "a great place to start looking for a mortgage," Bradford admitted that the links for applications and more information on the site were made up. And Bradford said that he never followed up on inquiries and e-mails the site received.
Ace Mortgage Funding sued Bradford for, among other things, unfair competition stemming from Bradford's control of the Web site. Ace then moved the court for summary judgment on its unfair competition claim, and the court granted it.
Ace based its unfair competition claim on the federal Anti-Cybersquatting Consumer Protection Act. That Act imposes civil liability for individuals who: (1) use a trademark in a domain name with a bad faith intent to profit from the mark; and (2) register, traffic in, or use a domain name that is identical or confusingly similar to a mark that is distinctive at the time of registration.
Although Bradford owned the domain name, Ace Mortgage Funding itself owned the valid trademark "Ace Mortgage Funding." The critical question for the court was whether Bradford acted in bad faith. Unfortunately for him, the court found that he did.
The court based its finding of bad faith on three main factors: Bradford did no business over the site; Bradford did not notify the public that the services on the site had changed; and Bradford offered to sell the site back to Ace Mortgage Funding for nearly $200,000.
According to the court, "It is undisputed that Bradford attempted to sell the domain name to Ace Mortgage at a price that would afford him a substantial financial gain. It is also undisputed that Bradford failed to use the domain name in the bona fide offering of goods or services. This factor is the clearest indicator of Bradford's bad faith intent to profit." Based on this finding, and its conclusion that "[n]o reasonable juror could find otherwise," the court granted summary judgment to Ace.
As we all know, the Internet is a powerful tool. The Anti-Cybersquatting Act is a powerful deterrent to misuse of it.
U-Haul Subsidiary Can't Enforce Online Arbitration Agreement
An employee who declines to accept an arbitration agreement with his employer is not bound by the terms of that agreement, even if he continues working there. That's the decision from a federal trial court sitting in Florida.
The employee, a man named Turner, was employed by U-Haul Co. of Florida ("Florida U-Haul"). In 2006, Florida U-Haul implemented an arbitration policy, pursuant to which all employees would be required to arbitrate any disputes with Florida U-Haul or any of its subsidiaries. Florida U-Haul set up a section on its Web site called "Sign up for the New U-Haul Employment Dispute Resolution Benefit." In 2007, Turner and other employees received an e-mail instructing them to sign on to the Florida U-Haul Web site and accept the agreement. Turner did not accept the agreement and informed his manager that he declined to do so on the advice of his attorney.
Some time later, Turner was shot during an armed robbery at the site of a Florida U-Haul subsidiary. When Turner filed suit, the subsidiary filed a motion to compel arbitration. The subsidiary argued that Turner's signature was unnecessary because he was aware of the arbitration provisions and continued working for Florida U-Haul. According to the subsidiary, this constituted implied acceptance of the mandatory arbitration clause.
In considering the subsidiary's argument, the federal court looked to Florida law. Under that law, courts consider three elements when ruling on a motion to compel arbitration: whether a valid written arbitration agreement exists, whether an arbitrable issue exists, and whether the right to arbitration was waived.
Here, the court found that no written arbitration existed. The arbitration provision posted on the Web site did not require employees to agree to the provisions to remain employed. Turner's assent to the agreement could not be inferred from Turner's continued employment. The court found, as a matter of law, that Turner was not bound to its terms.
It's important not to overstate the court's ruling here. It didn't rule that an employer can't condition continued employment on the employee's agreement to an online arbitration agreement. It just held that if that's what the employer wants to do, it needs to say so!
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.