18 December 2010

Domain Names: Lifestyle Management Ltd. v Frater

An interesting little domain name case that is curious in several respects: first, that it was brought in the courts at all rather than before an administrative panel appointed by one of the UDRP (Uniform Domain Name Dispute Resolution Policy) dispute resolution service providers; secondly, that it was brought in England when none of the parties appears to have anything to do with England, thirdly, that it was brought in the Technology and Construction Court which is part of the Queen’s Bench Division rather than the Chancery Division or even the Patents County Court; and fourthly, the claimant’s cause of action.

The Facts


In Lifestyle Management Ltd. v Frater [2010] EWHC 3258 (TCC) (10 Dec 2010) the claimants were companies registered in Kenya and the British Virgin Islands while the defendant was in Scotland. The claimants have a website at www.offshorelsm.com which indicates that they provide services “for the international investor and the professional expatriate”. Their trading name appears to be “The LSM Group”. According to Mr. Justice Edwards-Stuart there had been a contract between the LSM Group and the defendant under which the defendant claimed commission from the claimants. A claim, incidentally, that the Group disputes. The judge referred to that contract only to mention that it contained no jurisdiction clause.


Instead of suing the LSM Group, the defendant set up a grudge site bearing a very close resemblance to the home page of the claimants' site setting out confidential extracts of their presentation (or method of presentation) to clients and a photograph of the members of 'LSM’s staff under the domain names offshorelsm.net", "offshorelsm.org" and "offshorelsm.co.uk". The judge found that those websites contained material that was arguably defamatory and was certainly calculated to damage the claimants’ business. The judge said that the defendant had made it quite clear in his emails that he intended to use those websites until he receives the money he claims.


LSM retaliated by bringing a without notice application in the Technology and Construction Court. Despite having concerns about Schedule 4 to the Civil Jurisdiction and Judgements Act 1982 which provides that persons domiciled in a part of the United Kingdom shall be sued in the courts of that part unless the case comes within rules 3 to13 of the Schedule, the judge made an order

“(1) Requiring the Respondent to direct all enquiries to three named websites to a blank page so that a person going onto any of the sites will not see the material presently on it).

(2) Requiring the Respondent to deliver up to the Claimants any confidential client database in his possession.

(3) Restraining the Respondent from making use of any other confidential information of the Claimants.”

LSM had asked for an order requiring the Respondent to relinquish his interest in the disputed domain names or to transfer them to the Claimants but the judge refused to do that without giving the defendant an opportunity to be heard. He therefore adjourned that part of the application to the return date.


Domain Name Dispute Resolution


This is a case that LSM could have brought under the Uniform Domain Name Dispute Resolution Policy (“UDRP”) and the Nominet Dispute Resolution Service (“DRS”). Whenever a person applies to register a top level domain name he or she warrants and represents to the registrar that:


(a) the statements that he makes in his agreement with the registrar are complete and accurate;

(b) to his knowledge, the registration of the domain name will not infringe upon or otherwise violate the rights of any third party;

(c) he is not registering the domain name for an unlawful purpose; and

(d) he would not knowingly use the domain name in violation of any applicable laws or regulations.

The registration agreement makes clear that It is the applicant’s responsibility to determine whether the domain name registration infringes or violates someone else's rights.


The agreement also requires the applicant to submit to a “mandatory administrative proceeding” if a third party complains that the domain name is identical or confusingly similar to a trade mark in which the third party has rights. “A mandatory administrative proceeding” is essentially a documents only arbitration before a tribunal appointed by the World Intellectual Property Organization or other service provider. There are similar provisions in the agreement to register “.co.uk”, “.org.uk” and other country code top level domains in the “.uk” domain space.


Both services are very quick. There is usually a decision within the time the time that would normally be taken from the issue of a claim to the close of pleadings. They are also very cheap: WIPO charges US$1,500 to resolve a generic top level domain name dispute and Nominet £750 to resolve a “.uk” dispute. Also, they are very effective. Nearly all domain name disputes are resolved through the UDRP, DRS or similar dispute procedures. Only a handful have ever been resolved by the civil courts. Further information on domain name dispute resolution can be obtained from our domain name dispute resolution website at www.nipc-domains.co.uk.


Cause of Action


Although the injunction seems designed to restrain a breach of confidence the case appears to have been put as a “tort of using unlawful means to injure another” or as “a form of reverse passing off” (see paragraph [8] of the judgment) and passing off is the basis upon which the judge seems to have decided the case:

“In my judgment the conduct of the Respondent as disclosed in the evidence before me establishes the threefold requirement of (1) a reputation (or goodwill) required by the Claimants in their domain name"offshorelsm.com", (2) a misrepresentation by the Respondent's use of domain names calculated to lead potential clients of the Claimants into thinking that his three websites are websites of the Claimants and (3) damage to the Claimants (see Clerk and Lindsell on Torts, 20th edition, paragraph 26-03).”

He referred in his decision to British Telecommunications plc v One in a Million Ltd [1999] 1 WLR 903, 4 All ER 476, [1998] EWCA Civ 1272 conceding that the facts of this case before him were not the same as those in One in a Million. However, he concluded:

"it seems to me that the essential ingredients of a deceptive use of a company name with an acquired goodwill in order to damage the owner of that name are present here.”

And of course there is the judge’s observation at paragraph [5] that the content was “arguably defamatory”.

Jurisdiction

Having decided that he had a breach of confidence and passing off case in front of him it is curious that his lordship did not direct the claimants to his brother Birss with whom he shares a court building or at least the Intellectual Property list of the Chancery Division. CPR 63.13 provides that intellectual property claims must be started in the Chancery Division, the patents county court or a county court where there is also a Chancery District Registry. The Technology and Construction Court is intended for claims that involves issues or questions which are technically complex or where a trial by a TCC judge is desirable (CPR 60.1 (3)). Examples of such cases are set out in paragraph 2.1 of the practice direction for Part 60:

“(a) building or other construction disputes, including claims for the enforcement of the decisions of adjudicators under the Housing Grants, Construction and Regeneration Act 1996;
(b) engineering disputes;
(c) claims by and against engineers, architects, surveyors, accountants and other specialised advisers relating to the services they provide;
(d) claims by and against local authorities relating to their statutory duties concerning the development of land or the construction of buildings;
(e) claims relating to the design, supply and installation of computers, computer software and related network systems;
(f) claims relating to the quality of goods sold or hired, and work done, materials supplied or services rendered;
(g) claims between landlord and tenant for breach of a repairing covenant;
(h) claims between neighbours, owners and occupiers of land in trespass, nuisance etc;
(i) claims relating to the environment (for example, pollution cases);
(j) claims arising out of fires;
(k) claims involving taking of accounts where these are complicated; and
(l) challenges to decisions of arbitrators in construction and engineering disputes including applications for permission to appeal and appeals.”

Moreover the Technology and Construction Court is part of the Queen’s Bench Division and intellectual property cases are assigned to the Chancery Division by s.61 and paragraph 1 (i) of Schedule 1 of the Senior Courts Act 1981.


What’s this case got to do with England?


The problem that does seem to have troubled the judge was whether he had jurisdiction to injunct a tortfeasor in Scotland. As he observed at paragraph [12]:

"As I have mentioned, the Respondent lives in Scotland. Schedule 4 to the Civil Jurisdiction and Judgements Act 1982 provides that persons domiciled in a part of the United Kingdom shall be sued in the courts of that part unless the case comes within rules 3 to 13 of the Schedule.”

Counsel won him over with an argument based on rule 3 (c):

“13. Mr Richardson relies on rule 3(c). This provides that a person domiciled in part of the United Kingdom may, in another part of the United Kingdom, be sued . . . in matters relating to tort "in the courts for the place where the harmful event occurred or may occur".

14. Mr Richardson submits, and I accept, that in the circumstances that I have already described potential clients of the Claimants, or companies or organisations who employ such clients and with whom I am told the Claimants enjoy a relationship, may go on to one of the Respondent's websites in the mistaken belief that it is the website of the Claimants - thereby being deceived - and will then be put off by what they find there. This, he submits, is a harmful event within the meaning of rule 3(c) of Schedule 4 of the 1982 Act with the result that the claimants can sue the Respondent in the courts of England and Wales.

15. I have been persuaded on the evidence before me that this submission is a good one. The evidence indicates also that the Respondent is in possession of the Claimants' confidential database of their clients.

16. Accordingly, I am satisfied that this Court has jurisdiction to entertain the application and that interim relief should be granted, against the usual undertakings, in the form that I have set out above.”

Since the claimants are incorporated in the Kenya and the BVI and they offer their services to expats who are by definition “out of” (ex) “the fatherland” (patria) this does not add up to a connection with England.


Comment


I do hope the defendant turns up with counsel on the return day because there is so much meat in this case. First of all there is the procedural point as to whether the case should have been brought in the TCC or even England. Next, there is the question of the cause of action and whether or not the judgment is effectively a restriction on freedom of speech. Bestobell Paints Ltd. v Bigg [1975] FSR 421 springs to mind on that point. Then it can perhaps be argued that Scott v Avery 5 HL 811 should be extended to include domain name disputes. And there is bound to be argument on the extent of the ex parte disclosure.


If anyone wants to discuss this case, or indeed domain name disputes or transactions generally, they should call 0800 862 0055 or contact me through this form.


Further Reading

See also Jane Lambert "How to handle a generic top level domain name dispute". NIPC Blog 19 Dec 2010

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