Frequently Asked Questions About Arbitrations

What is an Arbitration?

While different kinds of courts have existed for centuries, more user friendly dispute resolution measures such as arbitrations are far more recent. Arbitration belongs to a family of other procedures known as Alternative Dispute Resolution, (ADR for short). Other methods of conflict resolution that fall under the ADR umbrella include mediation and negotiation. While all three of these methods differ in their approach, they all share the common goal of making conflict resolution simpler.

How Arbitration arose?

Arbitrations have been used in the commercial world for years. Enthusiasm for this new approach grew after the Second World War, when it became obvious to many within the legal community—as well as their clients—that conventional litigation was failing. Participants in litigation were increasingly unsatisfied. Outrageous legal fees, endless waiting and delays, as well as the elevated stress levels associated with litigation were becoming unattractive to all participants. In the commercial world, businesses were becoming increasingly frustrated by the failures of litigation. Companies that had long established connections to other companies had no real way to dispute individual issues, without having the entire relationship threatened by the onset of litigation. Businesses were finding—and quite rightly so—that litigation produced distrust amongst partners. Because the stakes in litigation can be so high, the stress and distrust was ruining the very connections businesses relied upon.

Recognizing the need to resolve disputes as they occurred, but not jeopardize the long-term interests of either party, commercial arbitrations were born. Interestingly, this procedure owes its beginnings to sophisticated business people and not lawyers. Business people told their lawyers that the goal was simple: “allow us a method to cheaply and efficiently resolve our misunderstandings.” “Equally important, provide us with specialists who are intelligent about our business and who understand that what is customary in our industry, may not be the same in another.”

The Role of Arbitration today

From these humble beginnings arbitrations have grown to be the primary method of dispute resolution that businesses turn to around the world. The practice is common in resolving labor disputes, as well as a host of other commercial practices, such as contract enforcement and trade issues. No longer are businesses willing to take a gamble with local courts and the potential for bias toward a local party. Instead, companies mutually agree to send their dispute to arbitration, determining in advance where the arbitration will occur and what the limitations of the arbitration will be. The terms of the arbitration are set forth in a contract, or may be contained in another document, which itself is referred to in a contract.

How Arbitration applies to Domain Name Disputes

It is through the development of contractual relations that domain name arbitrations were created. The Internet Corporation for Assigned Names and Numbers (ICANN), the international organization that regulates the Internet and gives domain name providers the authority to sell domain names, has contracted with all domain name providers around the world and requires them to adopt arbitration as the preferred method of dispute resolution. In fact, ICANN has made the process of arbitration a contractual condition in order to allow domain name registries the authority to conduct business.

Created by international consensus in 1998, ICANN is a not for profit organization committed to promoting the “stability and integrity of the Internet.”

Chief among ICANN’s accomplishments in recent years is its establishment of the Uniform Domain Name Dispute Resolution Policy (UDRP). ICANN adopted the UDRP with the explicit intent of making the process of domain name dispute resolution efficient and cost effective. A copy of the ICANN’s UDRP Policy can be found here. This policy serves as the basis for domain name arbitrated disputes and since its inception over 10,000 disputes have been heard since the fall of 1999.

Arbitrations involving domain name disputes currently involve two kinds: local and international. There are slight differences between each approach, but both serve the same goal of making the resolution of domain disputes easier.

Local Arbitrations

Each country has been issued a two letter country code top-level domain (often called a “ccTLD”), which generally corresponds to an English abbreviation of that country. For example, the United States is “.us” and Canada is “ca.,” although there are exceptions, such as Chad, a central African country which uses “.td.” As a general rule, each country domain name registry allows people to file an arbitration action locally, contracting the dispute resolution service to domestic arbitration institutions. For example, domain disputes involving “.us” endings must be arbitrated at either the American Arbitration Association (AAA) or the National Arbitration Forum (NAF). These are the only institutions mandated to review cases involving the “.us” domain. Similarly in Canada, the Canadian Internet Registry Authority (CIRA), which administers “.ca” domains has created rules for arbitrating “.ca” cases. Note that procedures and criteria for initiating arbitrations before local tribunals vary greatly from country to country. These differences in cost or procedures can have a profound effect on the choice of strategy for recovery of a domain name for a particular client.

International Arbitrations

The Internet Corporation for Assigned Names and Numbers (ICANN) is the official governing body over the Internet. Created by international consensus in 1998, ICANN is a not for profit organization committed to promoting the “ stability and integrity of the Internet.”

Chief among ICANN’s accomplishments in recent years is its establishment of the Uniform Domain Name Dispute Resolution Policy (UDRP). ICANN has contracted with all the major domain name registries in the world, and requires that they all adopt the UDRP in the event that a dispute arises involving one of their registered domain names. A copy of the Policy may be found here. This policy serves as the basis for domain name arbitrated disputes which now stands at over 10,000 since the policy came into existence in the fall of 1999. ICANN adopted the UDRP with the explicit intent of making the process of domain name resolution efficient and cost effective.

1. The Geneva-based World Intellectually Property Organization (WIPO);
2. the National Arbitration Forum (NAF) based in Minneapolis, Minnesota;
3. the CPR Institute for Dispute Resolution in New York; or
4. Asian Domain Name Dispute Resolution Center (ADNDRC), which operates in Beijing and Hong Kong.

What is involved in filing an arbitration?

ICANN’s policy provides that a complainant (the person, or entity who wishes to have a domain name transferred or cancelled) must set out the basis for their claim. More than one domain name may be the subject of any single dispute, so long as the same respondent (the person or entity who is being asked to give up the domain name ) is responsible for the disputed registrations.

How much will it cost?

ICANN requires that all fees charged by an arbitration tribunal in connection with any domain name dispute under the UDRP shall be paid by the complainant. Presumably, this is designed to deter people from filing unfounded claims. The exception to this rule that complainants must bear the entire cost of a filing is where the respondent requests multiple panelists rather than one, in which case the administrative fees will be split evenly between the two parties. Such a request is largely tactical on the part of respondents, and recent statistics released in the fall of 2005 demonstrate a positive correlation between an increase in the number of presiding panelists and more favorable findings for respondents. Again, while each of the above mentioned institutions charge different fees for their services, a complainant should expect to pay a fee of about $1,500 US for a single domain name, adjudicated by a single panelist. The number of domain names in dispute increases the fee a tribunal will charge for its services. While prices at each arbitration center vary, each additional domain name is a roughly a few hundred dollars. As a result, it makes practical sense for clients to consolidate their claims where possible so as to avoid paying multiple initial registration fees.

These above mentioned fees generally cover all the administrative charges associated with a case, including: the arbitrator’s fee, the institution’s fee and the time devoted to writing an opinion on your case (opinions vary in length, but typically run 5 to 10 pages). Be aware that this fee, generally referred to as “costs,” does not include your attorney’s fee for preparing your case.

Okay, I want my domain name back, but what can I expect?

It is important to understand that the power vested in arbitration tribunals is much more limited than that held by courts. Unlike courts, who have the authority to award attorneys’ fees, compensation for losses and if necessary even sanctions (civil and criminal), the tribunals created for domain name disputes are much more restricted in what remedies they can grant. In fact, only two remedies exist under the UDRP. The first is termed a “transfer,” whereby the domain name(s) in dispute are “transferred” to the complaintant upon demonstrating a showing of substantial entitlement to the domain name. The second available remedy is simply termed a “cancellation,” where the domain name registrar is ordered to cancel the offending domain name. This remedy is most often used where the trademark holder does not want the domain name because its use may be offensive or disadvantageous.

What factors will guide the Panelists’ decisions?

To be awarded a transfer or cancellation, all three of the following criteria must be substantially proven:

1. the accusing party must establish that it’s domain name is identical or confusingly similar to someone else’s domain name or trademark;
2. that the infringer has no legitimate rights in the domain name, and finally;
3. the domain name is used and/or is registered in “bad faith.”

As a practical matter, the most difficult element for a complainant to establish is element three—showing bad faith by a respondent. What makes this issue even more thorny is that arbitration panels, unlike courts, are not bound by precedent. A panel may rule on an issue one day, only to have the same issue produce an entirely opposite result the following day. While this kind of uncertainty hardly seems encouraging to a prospective complainant, in practice panelists often exhibit a greater degree of uniformity in their decisions.

The Hood case is a good example of a large, well-known U.S. registered trademark holder failing to prove all three requirements for a transfer. This shows that a large corporation hiring expensive lawyers does not always produce a favorable result. Click here to read the Hood case. Read the last pages entitled “Dissent” as well, as it also nicely demonstrates the differing attitudes of arbitration panelists when they are confronted with the same set of facts. In the end, it seems that Hood got its domain name after all. The unfavorable arbitration finding seems to have prompted Hood to offer a cash settlement to the domain name owner, because today “hood.com” leads to the large diary operator, which lost this case.

What kind of evidence will the panel consider?

When it comes to the evidence needed to support a case, arbitration tribunals once again operate differently than courts. Courts operate under various rules of evidence and may disallow the a party’s presentation of certain kinds of evidence; however, arbitration tribunals under the UDRP are not similarly constrained. This means that any evidence in support of the required three elements may be submitted. For example, a complainant may wish to offer the following pieces of evidence:

• any correspondence between the parties
• in particular, any cease and desist letters forwarded to the respondent
• any evidence showing that the respondent offered to sell the disputed domain name for a price above reasonable domain name registration fees

In regards to the last point, some panels have found that an offer to sell the disputed domain name by itself meets the bad faith requirement of the test, as well as aptly demonstrates a lack of a legitimate interest in the domain name. Click here for an example of an offer to sell being construed as bad faith. (The relevant part is toward the end, and is entitled “Registration and Use in Bad Faith” in the case).