Yellow not so Mellow
Domain Names Lawyer, Alex McDonald says that a recent High Court decision, Yellow Holdings Ltd v Eurobelt Ltd, illustrates the power of ‘first to register’ domain name status and the difficult stand-offs that can result where adomain name is simply ‘parked’ for years.
In May 1998 the defendant (Eurobelt) registered the domain name www.yellow.net.nz. However Eurobelt has never used the domain name.
The plaintiff (Yellow) owns the well-known Yellow Pages directory. At the time that Eurobelt registered its domain name Yellow’s predecessor, Telecom, while using YELLOW PAGES extensively, did not use the word YELLOW as a brand in isolation. Telecom had used yellow.co.nz from September 1997. However this was limited to redirecting a user to the yellowpages.co.nz website. This continued to be the case until 2007 when Yellow began operating under the unqualified YELLOW brand.
Yellow had failed in an attempt to register www.yellow.nz as the Domain Name Commission (DNC) considered it to be too close to the Eurobelt’s www.yellow.net.nz. Subsequently Yellow offered to purchase the domain name. However settlement negotiations were unsuccessful.
Yellow then attempted to have the domain name transferred to it through the DNC’s dispute resolution procedure but the DNC Expert dismissed the complaint. Yellow unsuccessfully appealed the decision to a DNC tribunal of three experts. Finally, Yellow brought the High Court proceeding the subject of the decision.
Yellow sought interim injunctions against Eurobelt. Yellow alleged that the domain name in the hands of Eurobelt or any other person other than itself, was an instrument of fraud, “in that it was registered to enable passing off and/or is adapted to be used for passing off and/or if used is likely to be fraudulently used”.
Yellow sought two different interim injunctions namely:
- a quia timet injunction restraining the Eurobelt from using the domain name yellow.net.nz;
- a mandatory injunction requiring Eurobelt to assign the domain name to it.
The Court’s Decision
A serious question to be tried?
Yellow relied on British Telecommunications PLC v One in a Million Ltd, which held that a mere registration could be sufficient to constitute the tort of passing off. The Court distinguished that case on the facts. In the present case, unlike in One in a Million, Eurobelt could not fairly be described as a dealer in domain names.
Justice Brewer determined that in order to establish that the mere registration of the domain name amounted to passing off, Yellow had to prove that it had sufficient goodwill or reputation in YELLOW at the start date of the alleged objectionable conduct. That is, when the domain name was registered in May 1998.
Justice Brewer referred to the earlier DNC decisions on the matter, where counsel for Yellow argued that the DNC Expert and tribunal were “hamstrung by the fact they had to consider the situation at the time of registration”. Justice Brewer commented that the Court was in the same position.
Justice Brewer observed that while in 1998 Yellow’s predecessor, Telecom, had successfully obtained an injunction against Eurobelt for operating a website called “Yellow Web Pages” which used the domain name www.yellowhomepages.co.nz and later, www.yellowweb.co.nz, the position was different in the current case because the domain name was inactive.
The Court found that Yellow’s case that Eurobelt’s registration of yellow.net.nz in 1998 amounted to passing off was weak. However, when it came to the threatened use of the website Justice Brewer considered that because Yellow had been operating under the unqualified YELLOW for quite some time it was seriously arguable that Yellow did have sufficient goodwill and reputation in the trade name YELLOW to support its contention that any future use would amount to passing off.
As Eurobelt’s principal, Ms Klos, had indicated an intention to wind up the business, which would include the sale of the domain name, the Court found it was seriously arguable that such a sale would amount to passing off.
Balance of Convenience
Because Eurobelt was not using the domain name, the Court determined that the only way that Eurobelt would be inconvenienced by a restraining injunction would be a restriction on selling or using the domain name. However, if Eurobelt sold the domain name, Yellow would then have to consider commencing proceedings against a third party which it argued would erode its goodwill. Taking these factors into account, Justice Brewer considered that the balance of convenience favoured Yellow in granting an injunction restraining Eurobelt from using the domain name. Damages would be an adequate remedy in addressing any loss of opportunity that Eurobelt may suffer.
However the Court’s position was different in relation to Yellow’s application for a mandatory injunction. If the mandatory injunction was granted and the domain name was transferred to Yellow, Eurobelt argued that it would be stripped of its bargaining power in obtaining the best price for the sale of its domain name. An integral part of the value in the domain name is that no one can register yellow.nz without the consent of the owner of yellow.net.nz. On the other hand, Yellow argued that it was important for it to register yellow.nz in order to portray to its customers that it remained on the forefront of online innovation. Justice Brewer was not convinced of Yellow’s submission and determined that Eurobelt’s loss of value outweighed any perceived risk of injustice to Yellow.
Both parties were found to have legitimate interests that were subject to what the law permitted them to do; Yellow having an interest in being free to adequately commercially exploit its intellectual property and Eurobelt in maintaining the value of its domain name so as to sell it for the best price.
Justice Brewer considered that the strength of Yellow’s case lay with possible future conduct or use and the restraining injunction would prevent this from occurring prior to the substantive decision. However, due to the inherent weakness in Yellow’s case that the mere registration of the domain name amounted to passing off, the overall justice pointed against granting a mandatory injunction.
The stand-off continues. The continuing registration of a domain name by someone who is not a domain name dealer doesn’t amount to passing off when a business subsequently establishes a reputation and goodwill in a trade name that is the subject of the prior domain name registration.
The lesson here for businesses is, ‘get the lot’! Trading companies should consider early on in the establishment of the business securing as many variants of the trade name of the company as domain names as they can in order to provide broad, future freedoms to operate.
  NZHC 1448, Justice Brewer.
 British Telecommunications PLC v One in a Million Ltd  1 WLR 903 (CA), at 924.
Alex McDonald, Trade Mark and Domain Name Dispute Lawyer, Auckland