148 F.Supp.2d 256 (S.D.N.Y. 2001), 00 Civ. 8448, Virtual Countries, Inc. v. Republic of South Africa

Docket Nº:00 Civ. 8448(AGS).
Citation:148 F.Supp.2d 256
Party Name:59 U.S.P.Q.2d 1754 VIRTUAL COUNTRIES, INC., Plaintiff, v. REPUBLIC OF SOUTH AFRICA, a Foreign State and South African Tourism Board, an Agency or Instrumentality of a Foreign State, Defendants.
Case Date:June 18, 2001
Court:United States District Courts, 2nd Circuit, Southern District of New York

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148 F.Supp.2d 256 (S.D.N.Y. 2001)

59 U.S.P.Q.2d 1754



REPUBLIC OF SOUTH AFRICA, a Foreign State and South African Tourism Board, an Agency or Instrumentality of a Foreign State, Defendants.

No. 00 Civ. 8448(AGS).

United States District Court, S.D. New York.

June 18, 2001

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[Copyrighted Material Omitted]

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Maxim H. Waldbaum, Salans, Hertzfeld, Heilbronn, Christy & Viener, New York City, for plaintiff.

David B. Goldstein, Rabinowitz, Baoudin, Standard, Krinsky & Lieberman, P.C., New York City, Terry Gross, Gross & Belsky LLP, San Francisco, CA, for defendants.


SCHWARTZ, District Judge.

In this action, plaintiff seeks a declaration, pursuant to 28 U.S.C.§ 2201, that it has the right to the Internet domain name southafrica.com, and an injunction preventing defendants from seeking a declaration of their rights in the name in arbitral or court proceedings worldwide. Currently before the Court is defendants' motion to stay or dismiss the action in its entirety. Because the Court finds that it lacks subject matter jurisdiction to hear the action under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-10, the action is dismissed.

I. Factual Background

Plaintiff Virtual Countries, Inc. ("Virtual"), a corporation organized and existing under the laws of the State of Washington with its principal place of business in Seattle, Washington, manages country-specific dot-com Internet domain names. 1

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(Amended Complaint ("Amend.Compl.") ¶ 6.) One of the domain names that Virtual has registered is southafrica.com, which it has "owned and maintained" since May 13, 1995 and has used in commerce since October 1996. 2 ( Id. ¶¶ 12, 17, 18.) Defendant Republic of South Africa ("Republic") is a foreign state, and defendant South African Tourism Board ("SATOUR") is an agency or instrumentality of Republic with its principal place of business in New York, New York. ( Id. ¶ ¶ 7-8.)

The two primary international organizations that set policy concerning domain name registration principles and procedures are the Internet Corporation for Assigned Names and Numbers ("ICANN") and the World Intellectual Property Organization ("WIPO"). (Defendants' Memorandum of Law in Support of Defendants' Motion for a Stay or to Dismiss ("Def.Mem.") at 3.) ICANN was formed in 1998 by a broad coalition of Internet stakeholders, and is responsible for setting policy for and administering the assignment of domain names, including the so-called generic top-level domains ("gTLDs") .com, .net. and .org. (The Internet Corporation for Assigned Names and Numbers, http://www.icann.org, (Declaration of David B. Goldstein dated Apr. 30, 2001 ("Goldstein Decl."), Ex. 1.) It is also responsible for resolution of Internet domain name conflicts. ICANN makes decisions through its Board of Directors, who are elected from several supporting organizations, and who are advised by several committees. (Def. Mem. at 4; About ICANN, http://www.icann.org/general/abouticann.htm; ICANN: A Structural Overview, Declaration of Lora A. Moffatt, Esq. in Opposition to Defendants' Motion to Stay or Dismiss and in Support of Plaintiff's Motion for Summary Judgment ("Moffatt Decl."), Ex. C.) One such committee is the Governmental Advisory Committee ("ICANN-GAC"), the membership of which is limited to national governments, multinational government organizations and treaty organizations, and certain "distinct economies" recognized in international forums. ( Id.; ICANN Government Advisory Committee (GAC) Home Page, http://www.noie.gov.au/projects/international/DNS/ gac/index.htm, Ex. 2 to Goldstein Decl.). Republic is a member of ICANN-GAC. (Def. Mem. at 4.) WIPO is a specialized agency of the United Nations which, inter alia, administers 21 international treaties concerning intellectual property protection. Its membership, like that of the United Nations, is limited to national governments, and the organization currently has 177 members, including Republic. (Def. Mem. at 4 n. 2; "The Recognition of Rights and the Use of Names in the Internet Domain Name " Interim Report of the Second WIPO Internet Domain Name Process ("Interim Report"), Ex. 7 to Goldstein Decl.) WIPO also plays a significant role in the development of Internet domain name policy, in particular by preparing reports and recommendations based upon submissions of its members and commentary by private sector members of the Internet community. (Def. Mem. at 4); Marcelo Halpern & Ajay K. Mehrotra, From International

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Treaties To Internet Norms: The Evolution of International Trademark Disputes in the Internet Age, 21 U. Pa. J. Int'l Econ. L. 523, 550-52 (2000) (describing WIPO's role in the development of ICANN's domain name policy.)

The current international procedure for domain name dispute resolution occurs through ICANN's Uniform Domain Name Dispute Resolution Policy ("UDRP"), which entered into operation on December 1, 1999. 3 (Interim Report at 1; UDRP, Ex. 3 to Goldstein Decl.) This procedure, which was developed by WIPO through the "First WIPO Internet Domain Name Process" ("WIPO-1"), is limited to the abusive registration of domain names in violation of trademark rights, which most commonly encompasses what many courts have referred to as "cybersquatting." (Interim Report at (v)); Sporty's Farm L.L.C. v. Sportsman's Market, Inc., 202 F.3d 489, 493 (2d Cir.2000) (discussing the practice of "cybersquatting"). However, WIPO left room for amendments. In the WIPO-1 Final Report, for example, WIPO discussed the issue of "geographical indications," which it stated comprise "a class of intellectual property identifiers other than trade or service marks [that are] also frequently the target of abusive cybersquatting practices," and including geographical terms such as country names. (Interim Report ¶ ¶ 187-91.) WIPO recommended that such issue be considered in future discussions. ( Id. ¶ 188.)

Discussions are now underway in WIPO, as part of a second WIPO investigatory process, the WIPO-2 process, concerning possible amendments to the UDRP. In response to a demand by WIPO Member States that the organization address the issue of geographical names, WIPO-2 "requested comments on whether and by which means geographical indications (in the broad sense) should be protected against their bad faith, abusive, misleading or unfair registration or use as domain names." ( Id. ¶ 189, Executive Summary ¶ 3.) Republic submitted a formal Comment in March 2001, in which it stated that WIPO should recommend, inter alia, a per se exclusion on the registration of country names in the second-level domain, and (ii) the adoption of a policy subjecting entities that register country names in the second-level domain to binding arbitration. (Submission by Republic of South Africa in Response to WIPO-2 RFC-2, Declaration of Andile Abner Ngcaba dated Apr. 26, 2001 ("Ngcaba Decl."), Ex. 1, at 5.) Republic has tabled similar proposals in submissions to ICANN-GAC, the Ministerial Oversight Committee of the African Telecommunications Union, and a task force of the G-8 nations addressing issues related to the so-called "digital divide" between developed and developing nations. ( Id. ¶ 5, Exs. 2-3.)

WIPO published the WIPO-2 Interim Report in April 2001. ( See Interim Report.) In a section entitled "Geographic Designations Beyond Intellectual Property," WIPO discusses certain issues raised by a country's attempt to claim ownership of domain names that employ the country's name. 4 ( Id. ¶¶ 236-86.) The Report

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states that WIPO "favor[s] the view that a system of per se exclusions would not be a desirable means of protecting names of countries...." ( Id. ¶ 279.) (emphasis added). WIPO's principal concern is that "such strong form of protection might be perceived to lack international legitimacy, in light of the absence of a universally accepted right of countries to the exclusive use of the terms in question in the context of the [Domain Name System]." ( Id.) As an alternative, WIPO suggests two other options for further consideration and comment: (i) maintenance of the status quo, with no protective measures for registration of country names through the UDRP; and (ii) permitting countries, through arbitration, to seek to obtain the transfer or cancellation of the name of a country, region, or municipality which is found to be abusive. The Report does not indicate whether the arbitration proposed in the second option would be binding. 5 ( Id. ¶¶ 281, 282.) Like WIPO-1, the WIPO-2 process will culminate with the release of a Final Report, expected in August 2001, which will constitute WIPO's recommendations to ICANN concerning domain name registration policy. (Timetable, Ex. 6 to Golstein Decl.) WIPO's conclusions are merely recommendations: ICANN and individual WIPO member states will be free to adopt or disregard the conclusions reached in the Final Report and will not be bound by its recommendations. (Plaintiff's Memorandum of Law in Opposition to Defendants' Motion to Stay or Dismiss ("Pl.Mem.") at 5.) Although defendants state that ICANN will consider the recommendations in the Final Report "by the end of [2001] or early next year," the record does not reflect that ICANN has set a timetable for taking action. (Def. Mem. at 7; Pl. Mem. at 5.)

This action arises out of a press release issued by Republic's Department of Communications on October 30, 2000 (the "Press Release"). In the Release, Republic stated its position, also reflected in its submissions to WIPO and ICANN-GAC, that "countries ha[ve] the first right to own their domain names." (Press Release, South African Department of Communications, South Africa Seeks to Secure www.southafrica.com (Oct. 30, 2000), Ex. 4 to Ngcaba Decl.)...

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