Unauthorised use of domain names

Domain names and website addresses represent valuable electronic real estate for a business’ presence and brand.  Traditionally, parties seeking to prevent unauthorised use of domain names (“cyber squatting”) by a third party could:

• lodge an action with the ICANN or through auDA (the regulatory body for .au domain names);
• negotiate a settlement with the third party;
• (c)    or obtain final orders through court proceedings.

The case of Thomas International Limited v Humantech Pty Ltd [2015] FCA 541 demonstrates another potential avenue for parties to obtain relief in relation to domain names. Where a person gives an undertaking to do certain things (such as transfer a domain name), and has breached it, an application for interlocutory orders (orders made before the full trial of a dispute) may be available to require a party to transfer a domain name to another.

Parties seeking an interlocutory order will still need to satisfy the court as to the usual criteria that an interlocutory order is appropriate, including showing that there is a probability they will succeed at trial.

Unique domain names (i.e. website addresses) are increasingly becoming a valuable and finite resource as businesses continue to embrace e-Commerce and grow their online web presence. A strong online presence may mean the difference between success and failure for a business, whether it be a small-to-medium enterprise or large corporation.

Domain names are administered and managed by various organisations, including the Internet Corporation for Assigned Names and Numbers (ICANN) or .au Domain Administration Ltd (auDA) for websites ending with “.au”. Traditionally, a persons with a dispute about who is entitled to use a particular domain name may seek to obtain relief in a number of ways including:

• Submitting a complaint or action to ICANN or auDA to resolve the dispute through their dispute resolution processes;
• Engaging in negotiations with the third party;
• Or obtaining final court orders after a trial.

A recent decision by the Federal Court of Australia as offered another option for businesses that find someone improperly using their internet domain name. Instead of having to wait until a full trial of a dispute for relief, aggrieved parties may wish to consider seeking an interlocutory order for a mandatory injunction requiring a party to transfer the domain name, such as in the case of Thomas International Limited v Humantech Pty Ltd [2015] FCA 541.

Background facts

Thomas International (TIL) is a UK company which carries out business providing psychological testing and psychometric assessments, and competency and skills-based assessments. Much of the business is carried on using the internet through a centralised online “hub” in the UK consisting of a sophisticated computer system that can be accessed online by TIL’s distributors and customers by logging into TIL’s website: www.thomasinternational.net.

In January 2007 TIL and Humantech entered into a master licence agreement where Humantech was granted the exclusive right to appoint distributors throughout the territory (including Australia), sell and distribute TIL’s products.

In 2013/2014 Humantech’s sales figures declined dramatically and TIL discovered another company called “Assessment Centre Technologies” (ACT) had begun advertising products similar products as well as TIL’s products which were being sold through another company’s, Thomas International Australia Pty Ltd (TIA), website at www.thomasinternational.com.au without TIL’s permission. The director of Humantech, Mr Schutte, was also discovered to be a director of Assessment Centre Technologies and Thomas International Australia Pty Ltd.

TIL wrote to Humantech terminating the master licence agreement, and commenced proceedings against Humantech for various matters including breach of contract.

On 17 May 2015, the parties met with their legal advisors to attempt to negotiate a settlement. TIL indicated that it would not be agreeable to discussing a new licencing arrangement until the current issues were dealt with. As a result, Mr Schutte signed an undertaking that provided (among other things):

“Each of the Schutte Group companies (including their successors and assigns) jointly and severally undertake to TIL (including its successors and assigns) in the following terms (which adopt the definitions in the notice) which, save for paragraph 6 which is effective immediately, are not effective until TIL and the Schutte Group companies acting in good faith to resolve the dispute in the proceedings have exhausted such discussions or 25 May 2015, whichever occurs first:

4. Transfer of Domain Name

4.1 each of the Schutte Group Companies will immediately take all steps and do all things necessary to transfer the domain names thomasinternational.com.au and Thomas.co.za to TIL.

…”

The following morning, the parties again met and a licence proposal was put to Mr Schutte.  He said the proposal would mean view that it “would have meant financial ruin” subsequently put his companies into administration. As a result, ACT and TIA’s websites were taken offline which meant that TIL’s Australian customers were prevented from accessing its centralised ‘hub’ in the UK and applied for an interlocutory injunction.

The Courts’ decision

In deciding to grant TIL an interlocutory injunction compelling TIA to take all such steps and do all things as are reasonably required to transfer the domain name www.thomasinternational.com.au to TIL, the Court had to be satisfied that:

• the inconvenience or injury which the TIL would be likely to suffer if an injunction were refused outweighed the injury which the TIA and any other third parties would suffer if an injunction were granted and the balance of convenience favoured the granting of the injunction;^[1]
• TIL had a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the it will be held entitled to relief (i.e. show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial);
• an award of damages would not be adequate to remedy such inconvenience and injury; and
•  if TIL was willing to provide an undertaking to pay compensation to a third party if the Court so orders or take any other appropriate action.

The Court was satisfied that the undertaking to transfer the websites was a strong prima facie case and capable of being enforced by a mandatory injunction, and that the failure to transfer the website would result in significant reputational damage as customers would be prevented from gaining access to TIL’s products through the TIA website.

His Honour Justice Nicholas granted the injunction on the basis that TIL also offered an enforceable undertaking to the Court to adhere to any court order to pay compensation to anyone adversely affected by the injunction, and re-transfer the domain names if required. The Court also required TIL to pay $225,000.00 into Court as security for the undertaking.

The case shows that in some circumstances it may be appropriate to consider applying for an interlocutory injunction to Court in disputes relating to domain names and provides another avenue for relief for businesses with an online web presence. It should be noted that to increase prospects of success parties seeking to obtain an injunction may need to produce a signed undertaking or other similar compelling evidence that would be successful such as an agreement to transfer a domain name.

[1] These are long established tests as noted in Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1 per Kitto, Taylor, Menzies and Owen JJ. See alsoSamsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156at [44]-[74]