Business

‘Cybersquatting’ law could be tested in N.H. court case

What began as a dispute over rock memorabilia sold by a New Hampshire auction house is headed to court, in a case that could test the limits of a federal law designed to protect companies against the misappropriation of their names and trademarks.

Business review sites such as Yelp are often used by consumers to register complaints or praise about products and services. But in this case, an unhappy customer allegedly registered more than a dozen Internet domains that include the name of the company, RR Auction Co., and the names of key employees, according to a complaint filed Tuesday by RR Auction in US District Court in Concord, N.H.

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From those websites, which are still live and include rrauctions.net and rrauction.biz, the defendant, Michael Johnson of Bakersfield, Calif., allegedly redirects browsers to his site rather than the company’s real site, rrauction.com. Postings on Johnson’s site assert the company has routinely sold phony memorabilia and that founder Bob Eaton threatened a former employee with knowledge of fraudulent practices before her 2008 suicide.

In an interview at RR Auction’s Boston office, Eaton denied the claims made on the website and said they have probably caused hundreds of thousands of dollars in damage to the business he started in 1976. The deceased worker killed herself soon after RR Auction filed a lawsuit accusing her of embezzling at least $111,000. The case was settled, with the worker’s estate paying RR Auction.

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Would-be buyers and consigners, always wary of fakes, have been staying away from RR Auction since the efforts linked to Johnson began late last summer, Eaton said. He said the Internet campaign amounts to a frightening new version of so-called cybersquatting that can undermine decades of reputation building in just a few mouse clicks.

“This could happen to anybody’s business,” said Eaton, whose auction house has sold such notable items as a pair of handguns owned by Bonnie and Clyde and the convertible that transported President John F. Kennedy to the airport for the flight to Dallas on the day he was assassinated.

“Trust is what I’ve built this business on. People trust me and give me their things to sell for them. That’s what’s being damaged here,” Eaton said.

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Reached by phone Wednesday, Johnson said he owns the website that accuses RR Auction of fraud, but took no responsibility for cybersquatting on Internet domains that redirect to his page. “I don’t know what’s going on with those other domains,” Johnson said. “I don’t own those websites.”

Lawyers for RR Auction acknowledged they are in uncharted territory. They plan to argue that Johnson’s alleged online activities violate the Anticybersquatting Consumer Protection Act, which is typically cited in cases where someone registers an Internet domain that a company would want — and bears a strong resemblance to a corporate trademark — and then tries to force the business to pay a premium for it.

Last year, Donald Trump won a suit against a cybersquatter who created four websites, including trumpmumbai.com and trumpindia.com, shortly after the real estate mogul unveiled plans to build hotels in India.

Facebook Inc. and Pinterest Inc. won cybersquatting suits in 2013 against people who registered domains meant to take advantage of typos, such as facegbook.com and pimterest.com. The technology giants successfully argued that Internet users who entered such misspelled versions of Facebook and Pinterest were obviously trying to access the social networks and that the cybersquatters should turn over the confusing domain names.

“That’s the kind of problem the ACPA tries to solve,” said Benjamin G. Edelman, a Harvard Business School professor who has studied cybersquatting tactics. “The problem the complainant has in this case is not what the ACPA was set up to fix.”

He cited a 2004 case in New Jersey, where a cybersquatter used Internet domains incorporating the name of Mayflower Transit to criticize the moving company. Mayflower lost, as the court ruled the cybersquatter was entitled to “a bona fide noncommercial or fair use of the mark.”

Attorneys Lawrence P. Murray and Zachary R. Gates, representing RR Auction, said they believe Johnson’s alleged efforts do not constitute fair use. They pointed to a 2005 Massachusetts case in which a federal judge ruled against a cybersquatter who used an Internet domain to criticize Microfinancial Inc. The judge ruled the cybersquatter “had a bad-faith intent to profit from his use of the mark.”

Cybersquatting can be an effective strategy for attracting Web traffic. Browsers looking for the RR Auction site may unwittingly enter the name of one allegedly owned by Johnson, and then decide to take their business elsewhere after reading his claims.

It can also boost placement in search engines. In a recent Google search for “RR Auction,” the first result was the company’s real website. The second was one linking to Johnson’s.

“We’re not trying to deprive him of his First Amendment rights,” Gates said. “But when you’re being trampled by defamatory material, material that puts you in a false light and is put before the public in a manner that’s confusing — using the company’s own trade name — that’s unacceptable.”

According to the website that Johnson said he owns, problems with the auction house began in 2011, when he claims to have discovered that $130,000 of items he purchased from the company — including a postcard signed by Paul McCartney and an album cover autographed by Eric Clapton — were fakes. The site says he demanded a refund, but was denied.

RR Auction maintains that the autographs were authentic, but cost just $9,610, and said it offered a refund, in keeping with its satisfaction guarantee. However, Johnson asked for far more than he paid for the items in question, the company said, escalating his demands to as much as $5 million.

Johnson sued RR Auction in Santa Barbara County Superior Court in 2012. In March of this year, the court rejected his request to expand the case to a class-action lawsuit. The website said in an online post that month that he would move ahead with an individual suit, seeking at least $1.3 million.

Callum Borchers can be reached at callum.borchers@globe.com. Follow him on Twitter @callumborchers.
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