Domain names and passing-off

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06 Jan 2016

In South Africa, disputes regarding domain names are generally settled out of court, with parties using the Alternative Dispute Resolution procedure that was established in terms of the Electronic Communications and Transmissions Act. In terms of this procedure, a party can challenge a domain name registration on the basis that it is “abusive” or “offensive”.  An abusive registration is one that  was registered or used in a way that takes “unfair advantage of” or is “unfairly prejudicial to” the complainant’s rights, whereas an offensive registration is one that is contrary to good morals or offends any group of people. The point of this procedure is to avoid expensive and lengthy court proceedings.

That’s not to say that court proceedings are not an option for domain name disputes. They certainly are, as the recent decision in the case of Fairhaven Country Estate (Pty) Ltd v Shaun Harris and G Studio Branding Agency (Western Cape High Court, Judge Henney, 8 July 2015) shows. The facts were quite complex, but I’ll summarise them as best I can.

There was a residential housing development called Fairhaven that belonged to a bank. An estate agent thought that it would be a good idea to register various domain names incorporating the name Fairhaven – such as – with his thinking apparently being that this would help him to get the selling rights for the properties in the development. Sometime later, a newly-formed  property company acquired the development and changed its name to Fairhaven Country Estate (Pty) Ltd. This property company then did in fact grant selling rights to the estate agent. The property company also started marketing the development and, in the process, it created a website using one of the domain names registered by the estate agent – apparently the property company never knew that the estate agent was the owner of the domain name. When the relationship between the property company and the estate agent ended, the estate agent let it be known that he would transfer his domain names to a third party. The property company went to court for an order requiring the estate agent to transfer all the domain names to itself.  It based its case on passing-off.

The property company succeeded. The judge was persuaded that the company had established a reputation in the domain name that it had used as its web address, pointing to the fact that there had been significant marketing spend, that this spend had included the creation of a website, and that the web address had appeared on billboards advertising the development. The judge said that the web address was very much part of the company’s “get-up and promotional material”, and even part of its “DNA”. It was therefore very likely that there would be confusion if anyone else were to use it.  Although there had not been a misrepresentation as yet, there was clearly an intention to pass-off, which meant that the company was entitled to an order requiring a transfer of all the domain names that had been registered.

On the issue of exactly what right a domain name owner has, the judge had this to say: “I do not agree with the … [estate agent’s] claims that as the owner of the domain name he has the exclusive rights of use thereto and that the … [property company’s] rights in and to its goodwill and intellectual property cannot trump his proprietary rights in this domain name…the mere registration of the domain name that was linked to the property which belonged to someone else, cannot result in him having exclusive rights to the use of that domain name.”

It does also seem that the judge was swayed by other, more general, considerations. Although the estate agent had registered the domain names before the property company had even been formed, the judge clearly felt that it was relevant that he hadn’t registered the names as a way of marketing his own business, but rather as a way of selling someone else’s properties – the judge said that the domain names were “not inextricably linked’ to the estate agent’s business, ‘but to the property belonging to another party.” The judge went on to say that, at the time when the estate agent registered the domain names, he “could not attach any value to the domain name”, and that it was only after the property company granted him a mandate to sell the properties that “value became attached to the domain name.” The judge also said this: “As far as the outside world is concerned, such domain names are linked to the applicant.”

The judge also seemed to be unimpressed by the fact that the estate agent had not seen fit to mention his ownership of the domain names to the property company, whilst allowing it to use one of the names and spend money on creating a website. The judge accepted the property company’s claim that, had it known of the estate agent’s ownership of the domain names, it would have demanded a transfer, or even renamed the estate, if necessary.

Having domain name issues resolved by way of High Court proceedings has become unusual. As this case shows, however, it remains an option.

See also: Domain name disputes – Amendments update

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)

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