Fifth Circuit Finds Cybersquatter Liable under Anti-Cybersquatting Act and Texas Anti-Dilution Law

Profession:Reed Smith Hall Dickler

In an April 3, 2002 decision, the U.S. Court of Appeals for the Fifth Circuit issued its ruling in E. & J. Gallo Winery v. Spider Webs Ltd. and affirmed summary judgment in favor of Ernest & Julio Gallo Winery on its claims against defendant Texas-based Spider Webs Ltd. that it violated the federal Anticybersquatting Consumer Protection Act (ACPA) and Texas anti-dilution law. The court upheld the constitutionality of APCA and confirmed that so-called domain name "warehousers" and "traffickers" can be liable without a showing that they ever offered to sell the domain name to the trademark owner.

Spider Webs Ltd began registering domain names in June 1999, registering nearly 2000 domains including some related to companies and products such as "" and "" Although it did not contact the E. & J. Gallo Winery to solicit a payment in exchange for turning over the domain name, it was contacted by attorneys for the winery who demanded that Spider Webs either abandon the domain name or transfer it to the winery. Spider Webs refused and instead began posting materials to the domain under the heading "Whiney Winery," including materials disparaging of the winery.

The Fifth Circuit affirmed that Spider Webs had a "bad faith intent to profit" and therefore was liable under the ACPA. The court also found that Spider Webs' use of "ernestandjuliogallo. com" violated Texas' anti-dilution statute, which provides for an injunction if the defendant's actions are likely to injure a business reputation or to dilute a trademark, without a showing...

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