A Comparison of Arbitration vs. Litigation
ARBITRATION
What are some the advantages to arbitration over litigation?
For now, the advantages of arbitration outweigh the disadvantages, as the great majority of domain name disputes can be resolved without the need for litigation.
Advantages
Speed and cost. Arbitrations are faster and more cost effective than court actions. Under the UDRP arbitration decisions must be rendered within 90 days of filing a complaint, but often arrive much sooner. In fact, recent statistics reveal an average of only 52 days from the time a complaint is filed until a decision is rendered. This is to be compared with court actions, which can take up to two years or more to rule on a domain name issue. Perhaps most importantly, the costs of arbitrations are significantly lower than law suits. This is in part because proceedings are more informal and less preparation is required. These cost advantages are particularly attractive where one of the parties reside outside the jurisdiction of a particular court, as requiring local counsel can make even the simplest of legal matters prohibitively expensive.
Specialization. The panelists who decide domain names cases are experienced trademark professionals. Panels are generally comprised of retired or active lawyers who often have a minimum of 15 years of trademark experience. This expertise can be invaluable because while domain name disputes have not existed for 15 years, trademark law serves as the supporting law for these cases in almost all decisions. Therefore, a panelist’s familiarity with the subtle nuances of trademark law already exists from their years of practice, and therefore, unlike judges in a court, panelists are truly experts in this area of the law.
Flexibility.Complainants have the opportunity to select a single member panel or a multiple member panel depending on the circumstances. This is always an important tactical decision. For example, if a complainant’s case is particularly strong and the likelihood of a domain name being contested by the respondent is unlikely, a complainant may be well advised to select a single arbitrator. This saves on the costs of additional arbitrators, but also statistically increases the chances for a complainant’s success. (One arbitral institution—albeit informally—has confirmed that where a single arbitrator presides over a case and there is no response—termed a “default”—complainants succeed in the recovery of a disputed domain name more than 95 per cent of the time). On the other hand, if the complainant’s case is weaker, or there is a greater likelihood that the respondent will defend the claim, a multi-member panel may be more appropriate. This reduces the opportunity for bias and improves the odds that a majority of the panel will be sympathetic to the claim.
No limitations on jurisdiction. Unlike courts, which may be constrained by geographic limitations in determining certain issues, these limits do not exist with domain name arbitrations. Because ICANN was developed with global consensus, the UDRP has been created to have world-wide application. This means that domain name arbitration tribunals have the authority to a make a finding against any person or entity wherever in the world a party may be located.
No limitations on evidence. Unlike courts, there are no evidentiary limits on what may be submitted in support of a claim. Anything that a party believes will help their case is admissible.
Non-participation still produces results. Even if a respondent fails to challenge the claim at the time it is made or chooses not to appeal the decision to a court, the domain name(s) in dispute can still be transferred or cancelled by the appropriate domain name registry.
Are there any disadvantages to arbitration?
Admittedly, arbitration is not perfect and has some drawbacks. A few disadvantages include:
Limitation of Remedies. Domain name arbitrations are limited to awarding transfers and cancellations of the domain name. Unlike some courts around the world, where the winner is entitled to recover his attorney’s fees, arbitrations follow what is referred to as the “American rule,” whereby even if you win, you are responsible for your costs. In addition, arbitrators have no authority to award compensation for damages, no matter how appropriate damages may be under the circumstances.
Panel decisions are discretionary. . Because arbitrations are not bound by the decisions of previous cases, inconsistencies develop among Panelists. However, this can somewhat be alleviated by selecting a proper venue. For example, the majority of complainants elect to file their disputes with the World Intellectual Property Organization (WIPO) or the National Arbitration Forum (NAF) since statistically their decisions result in more favorable decisions for complainants.
Lack of Appeal.There is no UDRP appeal procedure to challenge the findings of domain name arbitrations. For some, this feature is attractive because a single decision can be binding, and serves to reduce the cost of conventional litigation by affording parties only one opportunity to be heard. While for others a system which lacks a “second-look” can be frightening. The only “appeal” that effectively exists from a domain name arbitration is the initiation of a formal court action, which, in addition to being a totally separate action, can be costly and time consuming.
Always a chance of litigation.Unlike other kinds of arbitration, the UDRP allows for either party to a domain name dispute to commence a lawsuit in court at anytime. This means that even if a party succeeds with an arbitration, the opposing party has the right to go to court and litigate the entire issue again, as if the arbitration never occurred. Of course, the prevailing party in the arbitration will undoubtedly call to the court’s attention the UDRP ruling; however, it then becomes a judge’s discretion as to whether or not they will consider the arbitrator’s finding in their ruling. In addition, unsuccessful respondents in an arbitration have used the initiation of a court action to delay the transfer of a domain name.
Well, how do I know if arbitration is for me?
While no one solution will ever fit every scenario, ask yourself the following questions:
- What is my budget for acquiring or defending a domain name(s)?
- What is the likelihood that the other party will put up a fight?
To help you answer the latter question, ask yourself:
- Is the holder of the disputed domain name(s) currently doing business under the domain name(s)?
- Do I know the volume of business that is generated from the use of the disputed domain name(s)?
- What is the domain name(s) being used for if not for business purposes?
Additionally, determine where in the world the holder of your domain name is located. That is, do you and this person or entity live or do business in the same country?
Some final thoughts on arbitrating a domain name dispute
If you’re a small or medium sized business and the answers to these questions are readily known, chances are that arbitration is the better option for you. To learn more about arbitrating a domain name dispute, click here.
LITIGATION
As noted above, there exists a right to dispute a domain name in court. Like arbitration, a party may request an order from a court to transfer or cancel a domain name. Unlike arbitration, the court has more remedies at its disposal and a party may wish to sue not only the domain name holder but also the domain name registry as well, since this latter course is not available under the terms of domain name arbitration. However, while a greater number of remedies exist with the courts, litigation is often used only by a select few, and then only as a last resort, since litigation is very time consuming and costly. Nevertheless, in a small number of instances it may be the preferred method.
Advantages
A wider range of available remedies. While in arbitration actions a party cannot make a request for costs, or compensation for damages, courts on the other hand have the power to grant these remedies.
To succeed in domain name arbitrations all three elements must be established for a finding for cancellation or transfer. Again, these elements are:
- the accusing party must establish that it’s domain name is identical or confusingly similar to someone else’s domain name or trademark;
- that the infringer has no legitimate rights in the domain name, and finally;
- the domain name is used and/or is registered in “bad faith.”
In arbitrations, if you fail to establish even one of the elements, you loose the arbitration. Comparatively, in court actions, a party is free to bring a host of other claims which require that different elements to be proven. For example, an aggrieved party may make a claim for trademark infringement, passing off (a common law remedy), or invoke particular statutory remedies, such as the Anticybersquatting Consumer Protection Act (in the U.S.). Court actions are often more favorable to the claimant with a strong case, but who is unable to prove all there elements required in an arbitration.
Disadvantages
Cost. Court actions are expensive. This is particularly true where a party resides outside the jurisdiction of the court and it becomes necessary to hire local counsel to proceed against a foreign defendant.
Time consuming. From the time a suit is filed to the time a decision is rendered can take years. Unforeseen delays or appeals can result in even longer periods. Businesses can be crippled or lost if they are unable to conduct business because of delays.
Procedural difficulties. Lawsuits, at least in North America and most of Europe, require that a defendant be given adequate notice of any claim brought against them. In the U.S., courts have determined that this right to notice is embodied within the U.S. Constitution. However, the nature of domain name disputes often make it difficult to satisfy this requirement. Many domain name holders, particularly those that don’t wish to be contacted—i.e., cybersquatters—often provide false contact details. This is compounded by registrars who do not verify the correctness of the personal or business information provided by these individuals.
Some final thoughts on litigating a domain name dispute
Litigation certainly has a place in resolving business disputes. However, in the context of domain names, the unnecessary expense and wait, coupled with the lack of judicial expertise in trademark law, makes courts an undesirable forum for resolving these matters.To learn more about how your domain name issue may be more appropriately resolved, click here.
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