'; Weidan Fan Discusses the Fourth Circuit Decision on the Safe Harbor Provision of the Anti-Cybersquatting Consumer Protection Act (ACPA)

Weidan Fan Discusses the Fourth Circuit Decision on the Safe Harbor Provision of the Anti-Cybersquatting Consumer Protection Act (ACPA)

April 11, 2023

By Weidan Fan

The Fourth Circuit recently ruled that a Chinese exchange trading company is not entitled to benefit from the “safe harbor” provision of the Anti-Cybersquatting Consumer Protection Act (ACPA). See 15 U.S.C. 1125(d)(1)(B)(ii). The “safe harbor” provision protects innocent registrants who believed or had reasonable grounds to believe that their use of a domain name qualified as fair use or was otherwise lawful. For Chinese companies, the “safe harbor” provision can be useful if a company was unware of an American domain name without any bad faith intent.

However, the “safe harbor” provision did not protect a trading company because the Fourth Circuit held that its registration of the domain name “PRU.COM” was in bad faith. The Fourth Circuit affirmed a district court’s determination that the exchange trading company, Stone Network, must have had prior knowledge that the domain name was identical to a domain owned by Prudential Insurance Company of America (“Prudential”) even though Stone Network conducted its business exclusively in China.

Frank Zhang, the owner of Stone Network, purchased the PRU.COM domain name on behalf of Shenzhen Stone Network in 2017 while preparing to launch a website to provide forex-related services. Forex refers to foreign exchange industry. The entity using the PRU.COM mark never provided any forex-related services. Instead, visitors to the PRU.COM website were directed to a GoDaddy webpage, which displayed advertisements for Prudential’s competitors and a “Notice of Non-Affiliation” stating “ is not … in any way officially connected with [Prudential].”

The district court pointed to several facts to support its finding that the purchase of the PRU.COM mark was in bad faith, including Zhang’s multiple changes to the registrant account, which was suggestive of an intent to conceal Stone Network’s true identity. Further, the district court determined that Stone Network never actually used the PRU.COM mark in connection with any offer of goods or services.

At the Fourth Circuit, Stone Network unsuccessfully argued that an easy-to-remember domain name such as “PRU.COM” is closely associated with its proposed forex news product’s Chinese name “普鲁社” pronounced as “pu” “lu” “she.” Stone Network also argued that “PRU” is similar to “PRS,” which represents “Prussian News Organization” – an English translation of the Chinese name “普鲁社.” The court rejected these arguments, stating there is nothing special about the name “Prussian News Organization” that would lead consumers to believe they would find forex news via PRU.COM.

The Fourth Circuit stated that the “safe harbor” provision will not isolate a foreign registrant from its “bad faith” conduct, such as the conduct by this registrant. The “safe harbor” provision is designed to protect innocent domain name registrants who are unaware of another’s use of the name.

Thus, the court did not accept Stone Network’s argument that it did not have knowledge of the mark. The court determined that the “Notice of Non-Affiliation” on the website PRU.COM suggests Stone Network’s prior knowledge of the mark and its relationship to Prudential. Further, the court found Stone Network had “no reasonable grounds to believe that its registration of the PRU.COM domain name was otherwise lawful” because Prudential has held the mark “PRU” since 1974 and is well-known in over 20 countries. The court found it to be unreasonable for a company specializing in foreign exchange trading, i.e., Stone Network, to not recognize that “PRU.COM” is identical to Prudential.

Domain name registrants should be aware that the “safe harbor” provision is not always “safe” in that some limitations apply. Circumstances suggesting ignorance of US business names, which may by themselves be a basis for protection of a registrant under the “safe harbor” provision of the ACPA, will not protect the registrant when there are other circumstances suggesting bad faith usage of the mark. In determining the issue of bad faith, US courts will look for relevant facts suggesting the registrant had prior knowledge of the domain name.

Weidan Fan