Top 10 Internet Law Developments in 2001

Written by Stuart D. Levi, Rita A. Rodin & Kenneth M. Kaufman

The Internet industry went through some much-anticipated growing pains in 2001. Numerous dot-coms failed to make it through the year, and venture capital funding continued to be scarce. However, the industry also matured considerably, with an increasing number of "brick and mortar" industry leaders folding e-commerce and Web strategies into their business models. Internet law also matured as courts and legislators continued to strike a balance between regulating the Internet and allowing it to expand freely. Although there were a number of important legal developments, we have listed below the ten that we believe are most likely to shape the development of the Internet in the coming years. Like any top-10 list, what is included, and what isn't, is subject to debate. We welcome your thoughts and comments.

1. New Top Level Domains Raise Questions for Intellectual Property Owners

The Year 2001 saw the introduction of two of the seven new global Top Level Domains ("TLDs") that were approved in order to expand the crowded domain name space currently dominated by .com and, to a lesser extent, .net and .org. This marked the first time since 1983 that new global TLDs were introduced to the Internet, and is likely only the first step toward the introduction of many new TLDs in the future. The first two new TLDs to launch were .info (in September) and .biz (in October); the remaining five - .name, .pro, .aero, .museum and .coop - are likely to launch in 2002.

With the exception of .info, each of the new TLDs is subject to different limitations, imposed by the TLD operator, as to who may register domain names in the TLD and, in some cases, to what use such domain names may be put. For example, while anyone may register a .biz domain name, the name must be put to a "bona fide commercial use." Domain names in the .name TLD must correspond to the registrant's personal name or the name of a fictional character in which the registrant has trademark rights. The .pro, .museum, .aero and .coop TLDs are each limited to certain types of registrants and the organizations that service and support them (.pro is for accredited professionals, .museum is for museums, .aero is for the air transport industry, and .coop is for cooperative businesses).

The launch of these new TLDs raises two important issues that businesses must address: (i) how do these new TLDs fit into their on-line strategies, and (ii) what should trademark owners do to protect their marks from "cybersquatters" who try to register domain names corresponding to pre-existing trademarks in the hopes of reselling them to the mark owners.

In addressing the first issue, businesses must evaluate, among other factors: (a) the level of public acceptance of these new TLDs; (b) how they can use these TLDs to improve their communication with the public; and (c) how the availability of new types of domain names will affect their branding strategies.

In addressing the second issue, trademark owners may have to reevaluate their trademark protection strategies. When .com, .net and .org dominated the domain name space, some trademark owners aggressively sought to protect their marks by registering them as domain names in every TLD available. Some took this further and sought to register variations on their marks as well (such as common misspellings of their marks, or their marks plus common prefixes and suffixes).

As more TLDs launch, however, such an approach could easily become cost-prohibitive. Thus, some trademark owners have decided to be less aggressive, registering only their most important marks in the new TLDs and relying on other available remedies to protect their rights such as: (i) the United States Anticybersquatting Consumer Protection Act; (ii) local trademark and related laws; and (iii) the Uniform Domain Name Dispute Resolution Policy, which offers a relatively inexpensive and quick procedure for reclaiming domain names from cybersquatters and which will apply to all of the new TLDs.

2. International Jurisdiction Over U.S. Web Sites

U.S.-based Web sites have always been concerned that they could become subject to the laws of foreign countries because they could be accessed around the world. Two recent international cases suggest that these concerns are not unjustified, and a United States federal court decision further demonstrates that this issue remains unresolved.

The first case involved the offering of Nazi and Third Reich items on Yahoo!'s U.S. auction site. In May 2000, a French court held that since the auction site was accessible in France, Yahoo! Had violated a French law prohibiting the sale of Nazi objects. The French court ordered Yahoo! To eliminate access to the prohibited material, to post warnings that any search on Yahoo.com may yield search results containing material prohibited by French law, and to remove index headings from browser directories and hyperlinks related to Nazi propaganda.

Yahoo! requested that the French court reconsider the terms of the order, arguing that compliance was not technologically feasible. In November 2000, the court rejected Yahoo!'s request, reaffirmed its order of May 22, and stated that Yahoo! had three months to comply with the order or face a penalty of 100,000 francs for each day of non-compliance. In response to both the order and public pressure, Yahoo! decided to ban hate-related items from its auction pages.

Although the issue seemed resolved, Yahoo! decided to challenge the French court's order in U.S. federal court. Specifically, Yahoo! sought a declaratory judgment that the French court's order was neither cognizable nor enforceable under U.S. laws. The U.S. district court agreed, and held that the French court's order was unenforceable in the United States.1 The court reasoned that the First Amendment protects content generated in the United States by American companies from being regulated by countries that have more restrictive laws. Although the court's ruling will prevent enforcement of the French order in the United States, it will not prevent French authorities from enforcing the French court's order against Yahoo!'s entity and assets in France.

The issue of international jurisdiction also arose in a recent ruling by the Supreme Court of Victoria, Australia. In Joseph Gutnick v. Dow Jones,2 an Australian businessman sued Dow Jones for defamation based on the content of an article that was published on-line. Dow Jones argued that the court did not have jurisdiction because the article was published in New Jersey where its Web server is located, and that to hold contrary would result in a chilling effect for on-line publishers. On August 28, 2001, the court rejected Dow Jones' arguments and determined that publication occurs in the location where a third party comprehends the matter. The practical effect of the ruling is that U.S.-based Web sites could be subject to the defamation laws of Australia if Australians have access to the sites. On September...