Appeals Court Rules Domain Goes to Volkswagen

A federal appeals court in Virginia Monday affirmed a lower court’s ruling
that online service provider Virtual Works Inc. violated the 1999
Anticybersquatting Consumer Protection Act when it registered the domain with the intent to sell it to Volkswagen of America.

The 4th U.S. Circuit Court of Appeals in Richmond found evidence of bad
faith by Virtual Works, citing the famousness of the VW trademark, the
similarity of to the VW mark, the admission that Virtual Works never
did business or identified itself as VW, and the availability of domains
like and which satisfied Virtual Works’ stated criterion of
registering a domain name using only two or three letters.

In the court’s opinion, written by Chief Judge J. Harvie Wilkinson III, the
court said it did not rely on those circumstantial factors in forming its
opinion. However, Wilkinson wrote that statements of intent made by Virtual
Works’ principals, Christopher Grimes and James Anderson, at the time of
registration established bad faith.

“Grimes’ deposition reveals that when registering, he and Anderson
specifically acknowledged that might be confused with Volkswagen by
some Internet users,” Wilkinson wrote. “They nevertheless decided to
register the address for their own use, but left open the possibility of one
day selling the site to Volkswagen ‘for a lot of money’.”

Virtual Works registered with Network Solutions Inc. in April 1996
upon becoming an ISP. The company used the domain for two years as part of
its ISP business. In 1998, various Volkswagen dealerships indicated an
interest in the domain. Virtual Works turned around and contacted
Volkswagen — which had registered on March 5, 1994 — offering to
sell it According to the court’s opinion, Anderson left a voice mail
message for Linda Scipione in Volkswagen’s trademark department.

“In the message, Anderson stated that he owned the rights to,”
Wilkinson wrote. “He also said that unless Volkswagen bought the rights to, Virtual Works would sell the domain name to the highest bidder.
Anderson gave Volkswagen 24 hours to respond.”

Perceiving a threat to its trademark, Volkswagen invoked NSI’s dispute
resolution procedure, prompting NSI to tell Virtual Works that it would lose unless it filed a declaratory judgment action against Volkswagen.
Virtual Works filed the action and Volkswagen counterclaimed. The district
court in charge of the case found in Volkswagen’s favor and dismissed
Virtual Works’ cross-motions. Virtual Works then appealed the case to the
U.S. Circuit Court of Appeals.

Anderson, however, disputes that Virtual Works approached Volkswagen in bad
faith. His new Web site is dedicated to the case.

“We used the domain name for three years — four years,” Anderson told
InternetNews Radio Tuesday morning. “And then we contacted Volkswagen
because we were receiving phone calls from dealerships indicating they were
interested in buying the domain name. So we contacted Volkswagen out of good
faith and offered them right of first refusal, one might call it. And we
told them that we may very well entertain some of these offers that we were
getting. But of course, corporate attorneys have a way of twisting things
around and made it sound like we called in a threatening manner — made it
sound like we were going to sell the domain name within 24 hours if we
didn’t hear from them, I think was their quote.”

Anderson added, “There was no dollar value specified. All I wanted was a
phone call from them to find out if there was anything they wanted to work
out before we moved forward; basically trying to get a good footing so we
could move forward without any problems, so we could make sure everybody was


ual Works has since gone out of business, and Anderson is now working as
an Internet consultant for Sprint. However, he said he will continue to
fight the court’s decision.

“It’s not an issue of money with me,” he said. “People think that I did this
for the money, but it’s not and I’m going to show people that. I’m going to
take my hard earned dollars — I’m on an hourly wage now — and I’m going to
take those hourly dollars and I’m going to put it together and I’m going to
try to appeal this to the next level.”

InternetNews Radio Host Brian McWilliams contributed to this story

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