FOR SALE SIGNS IN CYBERSPACE: WHETHER FEDERAL RULE OF EVIDENCE 408 SHOULD BE ADAPTED TO THE UNIFORM DISPUTE RESOLUTION POLICY FOR INTERNET DOMAIN NAMES TO BAR EVIDENCE OF OFFERS TO SETTLE FROM ARBITRATION PROCEEDINGS
In 1996, Panavision International, L.P., demanded that Dennis Toeppen stop using the domain name panavision.com because it was identical to the Panavision trademarked name. Toeppen replied that he had a right to the domain name, which he had registered with Network Solutions, Incorporated. 
If your attorney has advised you otherwise, he is trying to screw you. He wants to blaze new trails in the legal frontier at your expense. Why do you want to fund your attorney’s purchase of a new boat (or whatever) when you can facilitate the acquisition of ‘PanaVision.com’ (sic) cheaply and simply instead? 
Toeppen had registered a series of well-known, trademarked names as domain names and engaged in the business of attempting to sell the registered domain names to the companies that owned the trademarked names.  Toeppen offered to “settle” with Panavision for $13,000.00, in exchange for which he would transfer the registered name and agree not to, “acquire any other Internet addresses which are alleged by Panavision to be its property.” 
The United States Court of Appeals for the Ninth Circuit, in this ground breaking case, found that Toeppen’s efforts evidenced a commercial use of the domain name and violated both state and federal trademark dilution acts.  The court considered Toeppen’s demand for payment in the principle case and in previous cases;  in fact, the demand was crucial to the court’s determination that Toeppen was engaged in the business  of being a “cyber pirate.” 
Since the Panavision decision, “cyber pirates” have become known as cybersquatters, and the term has entered the English lexicon. Cybersquatting, at least according to trademark holders and their lawyers involves individuals buying domain names identical or confusingly similar to the trademarks of other entities and demanding payment from the trademark holders for the domain names.  The highest levels of American government heard and responded to a call for action against cybersquatters by proposing a system for managing domain names;  the Internet Corporation for Assigned Names and Numbers (“ICANN”) followed therefrom. 
ICANN created a Uniform Dispute Resolution Policy (“UDRP”)  to address the “Toeppens” of the world with swift action on behalf of the trademark holders.  The UDRP functions through a group of approved arbitration organizations,  which, in turn, apply the UDRP through private arbitrators referred to as Panelists in their written opinions.  With remarkable ease UDRP Panelists found bad faith registration and use of domain names that were the same as or confusingly similar to trademarked names. Demands similar to Toeppen’s demand to Panavision were fodder for the claims of bad faith.  ICANN’s President announced the organization’s delight with the results of the system it had implemented. 
Yet, in the short time the UDRP Panelists have been creating a new common law for trademark protection on the Internet, the pendulum has begun to swing back to the side of the property speculators – formerly referred to as cybersquatters – who, all of a sudden, found a friend in the battle to protect their personal property rights. Ironically, the friend was one of the very UDRP Panelists who once transferred their domain names with such ease. Panelist Michael DeCicco’s  proposal: adopt the United States Federal Rule of Evidence (“FED. R. EV ”) 408 to bar discussions of offers of settlement, between cybersquatters and trademark holders, from consideration in UDRP arbitration proceedings.  Presently, not all Panelists in all approved UDRP arbitration groups adopt DeCicco’s position. Some arbitrators explicitly reject his proposal.  Yet, the entire tenor of the UDRP process has changed. Now, Panelists characterize requests for payment in excess of out-of-pocket expenses – which were once considered clear evidence of bad faith registration and use – as an “offer to settle;” though such offers are still weighed by most Panelists, the offers are no longer considered clear evidence of bad faith. 
The shift in characterization creates a higher burden for trademark holders and returns them to their position before the implementation of the UDRP. They are subjected to a system of requirements as strenuous as those used in the United States Federal Courts to prove they are entitled to domain names.
But, is adoption of FED. R. EV 408, or even a shift in characterization from “demands for payment” to “offers to settle” appropriate? Ought the arbitrators apply, sua sponte, an American law that may not be recognized by international parties to arbitration? Even if both parties are American domiciliaries, should the same standard of evidence as traditional litigation be applied to a system that was designed to be both quick and efficient via private arbitration? Is that standard of evidence capable of meeting the challenges of a largely anonymous Internet?
This article will address these issues. I begin with an explanation of the creation of the UDRP, its impetus and the methodology used in its drafting and adoption. I consider whether adoption of FED. R. EV 408 would be consistent with this history. Next, I turn to Panelist Michael DeCicco’s argument for the adoption of FED. R. EV 408. In the heart of this article, I attempt to evaluate the propriety of DeCicco’s proposal given the character of the Internet. Finally, I conclude with the repercussions on the UDRP if FED. R. EV 408 is adopted and a model case for dealing with offers to settle.
R. Jonas Geissler*Read More