Judge sides with Volkswagen in Net name lawsuit

A little-known Net access company using the address VW.net lost its legal battle Wednesday against the giant German carmaker Volkswagen, a sign that judges are again picking Goliath over David in Net name disputes.

Volkswagen attorneys successfully argued in federal court that VirtualWorks, a one-man operation in Reston, Va., engaged in cyberpiracy and trademark theft and should therefore immediately stop using the "VW" initials.

It was a decision that reversed a sweet but short-lived triumph for Virtual Works founder James Anderson, who in a late November court hearing dodged Volkswagen's attempt to shut his site down.

"I think it's completely unfair," said the 30-year-old Anderson, who vowed to appeal yesterday's actions. He changed his domain name this morning to Surebuy.com. "I've been using the VW domain since 1996. I don't see how anybody could get confused between my business and theirs."

Volkswagen lawyers called the case a quintessential example of cyberpiracy because they claim Anderson approached the company in 1998 with an offer to sell the domain, giving them 24-hour notice before putting the address up for bid.

"He took one of the most famous trademark names in the world and tried to extort money out of the trademark holder for the use of its own mark," said Gregory Phillips of the Salt Lake City law firm Howard Phillips & Andersen.

In hotly disputed domain name cases, small firms had been enjoying court victories as one judge after another refused to give companies with well-known trademarks automatic rights on the Net. But that all ended during the past several months, partly because of new legislation making it unlawful to buy Web addresses using a famous mark in bad faith.

Trademark holders also have fared well under a new mediation system set forth by the Internet Corp. for Assigned Names and Numbers (ICANN), the body that oversees Net names, leading some to question whether small companies are getting a fair shake.

"As long as domain names are valuable--and they always will be--the little guy will keep losing out," said Jonathan Zittrain, executive director of Harvard's Berkman Center for Internet and Society.

Andrew McLaughlin, ICANN's senior policy adviser, denied that recent decisions in favor of large corporations are an indication of bias, adding that the mediation system seems to have produced sensible results so far.

For Anderson, the fight has been costly and nearly ruined his operation.

He started Virtual Works nearly four years ago, hiring one employee at a time as business grew. At one point in 1998, Anderson offered to sell the "VW.net" name to Volkswagen. Shortly thereafter he heard from their attorneys, who demanded that he give up the domain.

A year later, Anderson sued Volkswagen in the U.S. District Court of Alexandria, Va., seeking US$12 million in damages, claiming that there was no legal justification to challenge the VW.net name.

Volkswagen pursued its trademark case and prevailed. A judge issued his findings last month and yesterday denied Virtual Works' plea to put off releasing the domain pending appeal.

"The court finds that Virtual Works infringed the trademark of Volkswagen," Judge Claude Hilton wrote in his opinion. "The fact that Volkswagen and Virtual Works offer different products is irrelevant since both parties use the Internet as a facility to provide goods and services."

Harvard's Zittrain argued that perhaps ICANN should come up with a place where trademark holders can clearly identify themselves and be found easily. That way, those using similar marks but with different domain endings can still exist on the Net.

"I'm all in favor of giving trademark owners their due, but there is no reason to give them more than that," Zittrain said.