When cybersquatting renders a contract unenforceable on public policy considerations

Kat friend Mervyn Cheong discusses a recent decision from Singapore that considered the interesting legal question of the relationship between cybersquatting and contract enforceability.

Can a finding of cybersquatting impact the enforceability of a contract? In a case of first impression in Singapore, the Singapore High Court has answered "yes", holding that the plaintiff would be precluded by public policy considerations from enforcing an agreement to transfer a registered domain name to the defendant.

Background

The plaintiff, 3 Corporate Services Pte Ltd (“3CS”), is a Singapore incorporated company that provides management consultancy services and the management of web portals. The defendant, Grabtaxi Holdings Pte Ltd (“Grabtaxi”), is part of a group of companies engaged in the business of providing ride-hailing and logistics services under the name GRAB.

The case was commenced by 3CS as a straightforward claim in contract. They asserted that Grabtaxi had agreed to pay them a sum of USD250, 000 to purchase the domain name “grab.co.id” (“Domain Name”) and that there was a Letter of Offer that evidenced the agreement. Grabtaxi breached the agreement when they failed to make payment.

As its primary point in defence, Grabtaxi countered that there was no binding agreement because one of the preconditions in the Letter of Offer was not satisfied. Subsequent to the circulation of the Letter of Offer, Grabtaxi found evidence that 3CS did not own the Domain Name (the Domain Name was owned by another corporate entity, which shared a common shareholder with 3CS).

In addition, Grabtaxi asserted that 3CS was engaged in cybersquatting and that such conduct is contrary to public policy; consequently, any agreement between Grabtaxi and 3CS was unenforceable. In support, Grabtaxi adduced evidence, including testimony from an expert on what constitutes cybersquatting and registrations of other domain names, such as “amyswinehouse.com.sg” and “gooogle.com.sg” by 3CS or its shareholder, which had no connection to 3CS’s business.

At trial, 3CS adduced evidence to show that they were involved in “domain investing” which is acceptable. They also asserted that cybersquatting, in any case, is not illegal in Singapore.

The court’s findings

The court found that there was no binding agreement. It accepted Grabtaxi’s evidence that 3CS was not the registered owner of the Domain Name and so one of the preconditions in the Letter of Offer was not satisfied. With its decision on this point, the court could have already dismissed 3CS’s claim and need not consider the other points raised in Grabtaxi’s defence. However, since the parties had both provided substantial submissions on the issue of cybersquatting, the court also set out its decision on this issue.

The court ruled that the plaintiff was a cybersquatter. The court noted that 3CS’s shareholder had registered 1,232 domain names indiscriminately and thus did not believe that 3CS was a domain investor. The court also observed that the misspelling of registered domain names, such as “gooogle.com.sg”, showed traits of a typosquatter.

While the court did not offer a definition of cybersquatting, it relied on three English cases that considered claims of passing off and trademark infringement concerning cybersquatting. In particular, the court cited the holding in Global Projects Management Ltd v Citigroup Inc and others as to what cybersquatting is:

Persons with no connection with a well-known business name would find some permutation containing the name and a suffix, but where that particular permutation had not been registered by the real owner of the business. The person concerned would then register that permutation himself and try to make money through being bought out by the true owner.

The court also considered the Final Report of the WIPO Internet Domain Name Process, “The Management of Internet Names and Addresses: Intellectual Property Issues”, which stated that cybersquatting is:

the term most frequently used to describe the deliberate, bad faith abusive registration of a domain name in violation of rights in trademarks and service marks.

The plaintiff argued in its closing submissions that it would not be appropriate for the court to establish cybersquatting as a new head of public policy at common law, especially when the legislature had not considered the matter.

The court rejected this argument, noting that:

… in the current world where the reach of the Internet is so wide, and the use of Internet websites is so pervasive, the abusive and/or illegal usage of domain names needs to be controlled and/or curbed. The court takes judicial notice of the fact that the world wide web was invented by Tim Berners-Lee back in 1989; he wrote the first web browser in 1990. … in 1997, the web browser was only in its infancy. The use of the internet has expanded exponentially since with its attendant abuse. Such abuse must be arrested.

Thoughts on the case

It seems that an aggrieved person in Singapore can now rely on passing off or trademark infringement to seek recourse against a cybersquatter. While no definition for "cybersquatter" was offered, the court paid close attention to whether the registrant had any legitimate interest in, or connection with, the domain name that it had registered.

Still, since the court had decided, as a primary issue, that there was no valid agreement between the parties, this is the rationale for the outcome of the case. Thus, the court’s ruling on cybersquatting, and its effect on the enforceability of the agreement, are merely obiter dicta under Singapore’s common law system, which, as such, are not strictly speaking binding as precedent. Nevertheless, the case does give some guidance as to the court’s view that cybersquatting is objectionable.