The Cybersquatters are Back!

We commented in our May 2005 Newsletter on a High Court case where there was found to be no confusion in the simultaneous use of the domain names Phone4U-co.uk and Phones4U.co.uk, despite there being only a minor difference between the names (see “The Cybersquatters are Coming!”).

The decision seemed to offer assurance to small businesses that they could use, without fear of legal action, domain names of commercial interest to more established businesses, provided that there was no deception as to by whom goods or services were supplied .

However, Phones4U appealed and the Court of Appeal recently overturned the original decision, in relation to the company’s ‘passing off’ action.

The background to the High Court Decision

Phones4u began trading in 1995, registering the domain name phones4u.co.uk in 1997. By 1999, Phones4u was an established (and highly successful) business, with shop premises in most major cities and towns.

In August 1999, a Mr. Heyakli (‘Mr. H’) registered the domain name phone4u-co.uk. Shortly afterwards, Mr. H began trading, using that domain name and selling mobile phones. Not surprisingly, he received letters of complaint from Phones4u, alleging that he was damaging Phones4u’s goodwill.

At trial, the judge decided that Phones4u did not own the necessary goodwill to succeed; no evidence had been produced which, in the judge’s opinion, showed that the public was deceived as to the origin of goods sold by Mr. H’s company - the public were not confusing that company with Phones4u, when purchasing mobile phones.

The Court of Appeal Decision

The Court of Appeal disagreed with the trial judge, stating that Phones4u did have the necessary goodwill (which seems reasonable enough, bearing in mind their nationwide presence). It followed that they had suffered damage.

The trial judge had limited himself to considering damage caused by trade diversion - the damage caused by the public dealing with Mr. H’s company while believing that they were dealing with Phones4u. The Court of Appeal stated that damage could be caused to goodwill by acts other than by trade diversion - the mere association with another business might cause damage in other ways, such as perception about the quality of goods or the way in which business is carried out.

The Court of Appeal also picked up on the point that the Phone4U-co.uk domain name was not actually used for trade until after Mr. H learned of the existence of the Phones4u business. Further, Mr. H had tried to sell his domain name for a large sum of money; an act not looked upon favourably by the Court.