How to Deal with Cybersquatting

Business owners can deal with cybersquatting in several ways, including learning about the laws that protect against this often-illegal practice of buying domain names to profit from the goodwill of the actual trademark owner.

Our guide helps you understand what cybersquatting is, how it might harm your business, and how to defend against this activity.

What is cybersquatting?

Cybersquatting, also known as domain squatting, is the act of registering domains that are similar to a trademark, corporate name, or personal name of an individual. Buying these similar domain names is done with the goal of profiting from them. This might be done by selling the domain name at an exorbitant price or by creating a fake website that steals business from the true company.

Cybersquatting can describe a wide range of actions involving domain names. It can refer to small problems, like purchasing and holding a domain name until someone pays a high price for it, which is extortion, all the way up to using a similar domain in order to steal business from a reputable, trademarked brand. 

Some cases of cybersquatting are illegal, by malicious actors, while others may be unintentional. Unintentional cybersquatting might happen if you choose a domain that happens to be similar to another, but you didn’t do it in bad faith in order to profit from the domain name. Also, there are cybersquatting cases that fall into legal gray areas.

Types of cybersquatting

There are a number of common forms of cybersquatting. Cybersquatting is used as an umbrella term to describe a variety of online crimes involving domain names. Many of these terms are newer and may be used interchangeably, which can cause confusion.

Typosquatting

Typosquatting is when a person or company purposefully purchases a misspelled domain name. The domain name will be close enough to a well-known or trademarked brand to cause consumer confusion. Potential customers may quickly type in a URL and misspell the domain, which unknowingly leads them to a different website.

A typosquatter might own Netflicks.com and attempt to steal customers away from the true brand, Netflix.

When done intentionally to take advantage of a trademark owner and their business, typosquatting is illegal.

Warehousing

Warehousing is when a registrar takes back an expired domain. A registrar would be a domain retailer, such as GoDaddy or Google.

If you register a domain but then decide not to re-register that domain, the registrar can reclaim and resell it. This isn’t illegal but exists in a gray area. A registrar has the right to reclaim and resell unused domains, but they can also take advantage of a potential profit, which damages the overall domain market.

Warehousing often happens when a lapsed domain is considered “premium.” This might mean it includes common or highly sought-after words. The registrar can reclaim the lapsed domain and charge a higher price to the next customer, increasing their profit.

Warehousing is not considered illegal. There has been customer backlash against domain registrars who practice warehousing.

Domain investment or domain name speculation

A common example of cybersquatting is someone registering domain names for investment or speculation. This happens when a person or business purchases domains they think will be highly desirable and then holds them. If someone does want the domain name, they will then up-charge them for it.

No one is immune to domain squatters. A well-known internet domain name squatter recently sold HarrisWalz.com to an anonymous buyer for $15,000. He originally purchased the domain in 2020. His guesswork and prescience allowed him to turn a significant profit. The domain registration originally cost $10, with a similarly priced annual renewal fee.

This type of cybersquatting is annoying but isn’t illegal. However, if the invested domain name is too closely associated with a trademarked name, it could result in a lawsuit.

Gripe sites

A gripe site is a website set up to complain about a specific topic. In general, these malicious domains use the name or trademark of a business in the URL, which increases their potential for traffic and infringes upon the trademark owner’s rights.

Gripe sites will commonly redirect users to add the word “sucks” to the end of the business name they’re complaining about. Examples of gripe sites include farmersinsurancegroupsucks.com and equifaxeatspoop.com.

These websites and domain owners often get shut down quickly because of illegal trademark infringement. Some, however, may continue because the gripe sites aren’t for commercial purposes.

Name jacking

This form of cybersquatting happens when someone registers a URL or social media handle for a celebrity's name or other personal names. This might be unintentional (they share the same name as the celebrity) or intentional. Often, cybersquatters will look at up-and-coming celebrities and purchase their domain or social handles in order to resell them at a higher price.

In the U.S., people can trademark their personal names, which makes prosecuting this type of cybersquatting easier.

Reverse domain name hijacking

In this situation, someone who owns a trademark will pressure a domain holder to transfer the domain with the threat of litigation, since they are the trademark holder. 

If the domain holder is not acting in bad faith and held the domain prior to the trademark registration, they are the rightful owner of the domain. These types of domain squatting can be confusing and depend entirely on who registered first.

These tactics are often used by large companies and are illegal. 

How to recognize cybersquatting

With some forms of cybersquatting illegal and others just a nuisance, it’s important to figure out how to recognize cybersquatting.

If you’ve been alerted to a website with a name similar to your own or are trying to purchase a new domain, it’s important to first find out if it’s already registered and active. If it is, then it’s time to investigate if it’s owned by a cybersquatter. 

You’ll want to go to the URL and assess these three things.

1. Website functionality: When you go to the website, you want to see what it looks like. If it has a “for sale” sign, then you might be dealing with a cybersquatter who is holding onto a premium domain and waiting for someone to pay a high price for it. If the domain doesn’t yet have a functioning website on it, it might also be perfectly innocent. Someone might be holding the domain while they’re building their site and business.
2. Ads: If the website has a bunch of ads for products or services that are similar to what you sell, then the website owner might be a cybersquatter trying to take advantage of your good brand or trademark. 
3. Connection to your company or trademark: If there is no connection to your company or trademark, it’s likely that there is an innocent, non-illegal coincidence. Business names must only be unique within a state. If you registered the same business name in Kentucky that someone registered in Oregon, that’s legal. And, if they registered the domain first, then there’s no illegal activity. 

Not all domain holding is illegal cybersquatting. It’s important to understand the way cybersquatting looks so you can identify it and potentially take legal action against cybersquatting. 

What to do if cybersquatting happens to you

If you’ve found a website using a similar domain to your brand or trademark and believe it’s cybersquatting, there are a few steps you can take.

1. Contact the cybersquatter

The first step is to contact the potential cybersquatter.

The cybersquatter may be willing to sell you the domain name for a reasonable price or simply be an innocent person with a similar business name.

To contact the domain owner, you can use the Whois domain lookup. The results should give you contact information for who owns the domain. After contacting the owner and discussing the sale of the domain, you may consider taking legal action if the owner seems like a cybersquatter.

If the owner seems to be legitimately using the domain and website, you may need to consider a different domain name for your business. To find a variation, you might:

• Use a different ending, such as .biz instead of .com.
• Change the domain name you want. Find a variation you like.

Sometimes, buying the domain name from the cybersquatter is the best path forward. It may be expensive, but it will be less expensive and take a lot less time than filing a lawsuit.

2. Use an international arbitration system

If you have assessed the domain holder to be a cybersquatter and want to move forward with legal action, you can use an international arbitration system. 

The Internet Corporation for Assigned Names and Numbers (ICANN) has the Uniform Domain Name Dispute Resolution Policy or UDRP. This policy can help you to arbitrate your cybersquatting situation. It is not litigation.

To win your arbitration under ICANN, your case must meet the following criteria:

• The domain name is confusingly similar to a trademark or service mark you have the rights to
• The owner of the domain name has no legal rights to the domain name
• The domain name is being used in bad faith

If you meet these requirements and win your case under UDRP, the domain name will either be transferred to you or the ownership canceled. There is no financial compensation under this arbitration.

3. File a lawsuit

You also have the option to file a lawsuit under the Anticybersquatting Consumer Protection Act or ACPA. You may also be able to create a legal claim under the Lanham Act or Trademark Dilution Revision Act, which governs the use of trademarks. 

The ACPA is a U.S. federal law that makes it illegal for one owner to purchase a domain that infringes upon a trademark owned by someone else. If the lawsuit is successful, it can get a court order transferring the domain to the trademark holder. The cybersquatter may have to pay for any damage.

FAQs

Is cybersquatting illegal?

Cybersquatting is illegal.

But not all domain holding is illegal. There are a number of instances where what appears to be cybersquatting is actually legal activity. Examples of non-illegal domain holding would be:

• A person or internet corporation which purchased a premium domain name and is now selling it for a higher price when it becomes desirable.
• A person who owns a similarly named business and operates a website selling their product or service but neither you nor they hold a trademark for the business name.

If you have assessed that your situation is cybersquatting, you can seek arbitration under ICANN or file a lawsuit under the ACPA. You can also sue for trademark infringement under the Lanham Act. 

How can I prevent cybersquatting?

The best way to prevent cybersquatting is to register your domain name early and monitor similar variations. Trademark owners also have a lot more protection against cybersquatting. You can help protect newly registered domains by also registering your trademark.

Many large companies also purchase multiple, similar domain names. For example, Netflicks.com is owned by Netflix and redirects to the correct website.

To avoid a cybersquatting situation, you might consider buying common misspellings of your domain and similar URLs with different suffixes, such as .net or .biz. You can also trademark any assigned names for an extra layer of protection.

Can cybersquatting hurt my business?

Yes, cybersquatting and abusive domain name registrations can hurt a business. Cybersquatters may try to hijack your business by registering a similar domain and taking money from confused customers who were trying to buy your products. They have bad faith intent. They can also dilute your brand or trademark, which will cause long-term harm to your business. Customers may no longer find your company trustworthy if they’ve had a bad experience.