A Guide to Avoiding Pitfalls in UDRP Domain Name Arbitration: How Investors Can Mitigate Trademark Risks

A UDRP arbitration ruling hinges on the simultaneous fulfillment of three criteria:

If a domain name is confusingly similar to a trademark, the registrant lacks legitimate rights or interests, and the domain was registered and is being used in bad faith—all three conditions being met—the domain will be ordered for transfer. This is the primary reason many investors lose such cases. A common misconception among investors is that appending generic terms—such as “ai,” “net,” or “phone”—to a trademarked term can circumvent trademark risks; this is a frequent trap. In cases like “evergrandenet.com” and “realmephone.net,” the domain names contained a registered trademark in its entirety, while the added terms were merely generic descriptors. The arbitration panels determined that these still constituted “confusing similarity,” resulting in the transfer of the domain names to the trademark holders.

To elaborate: In “evergrandenet.com,” “evergrande” is a pre-existing registered trademark, while “net” is a generic internet-related term that fails to distinguish the brand. Similarly, in “realmephone.net,” “realme” is a brand trademark, and “phone” is a generic category term; neither addition alters the finding of confusing similarity.

A second common pitfall is underestimating the protection afforded to “well-known” (famous) trademarks. Even if a domain uses an obscure top-level domain (TLD) extension—such as “bayer.icu”—if it incorporates a well-known trademark in its entirety and the investor cannot prove “good faith” use, the registration will be deemed to be in bad faith, even if the domain remains unused. Well-known trademarks enjoy a broader scope of protection that transcends specific industries or TLD extensions; therefore, investors cannot rely on the choice of TLD to mitigate risk.

A third pitfall involves creating evidence of bad faith through sales-related communications. Under UDRP rules, proactively offering to sell a domain name to a trademark holder is considered clear evidence of bad faith. Many investors who list domains for sale may find themselves in a position where a brand owner inquires about the price; providing a quote in such instances can be used as evidence of “cybersquatting” for profit, significantly increasing the likelihood of an unfavorable ruling.

To manage risk effectively, investors should take three steps: conduct thorough searches of domestic and international trademark databases before registration; exercise caution when acquiring domain names that combine trademarks with generic terms; and avoid directly soliciting brand owners when listing or negotiating the sale of a domain name. Upon receiving an arbitration notice, ensure that you submit your response on time; failing to respond is equivalent to forfeiting your opportunity to present evidence, which significantly increases the likelihood of an unfavorable outcome.