Internet domain names: Don't get caught in a rival's web

Whether you've only just set up as a registered company and haven't got round to creating your website yet, or whether you're just thinking about developing one, all SMEs should know that a good web presence and site is crucial to enticing customers and bringing in business. But getting your web design up to scratch and your site featuring in the results of top search engines is not all there is to think about. With stiff competition around, you need to be on your toes to make sure that you do not get embroiled in an unscrupulous practice known as "passing off".

Passing off occurs when one party supplies goods or services and presents them as another's. For example, using a similar brand name or labelling so that they are trading on the innocent party's goodwill.

One consequence may be that a number of customers are diverted away from the company with limited loss of business, says John Barker, associate solicitor at Bradford-based law firm Last Cawthra Feather. But he adds: "More serious is that the reputation of the company is damaged through the supply of counterfeit or substandard products, and in severe consequences the goodwill and reputation built up in a company could be destroyed, leading to closure of the company."

The development of the internet has made the issue potentially more serious for growing businesses, as Barker explains. "Traditionally, a smaller company's geographical scope for goodwill and reputation associated with its products and services would have been fairly limited. With the internet, a very small company may now have a national customer base and reputation. As a result, the opportunities for passing off are so much greater. SMEs need to be more aware of the dangers of passing off than before."

Simon Halberstam, an author on the subject of domain names and head of internet and e-commerce law at Sprecher Grier Halberstam, clarifies why web-based passing off has become easier. "It is not practicable to register every single variant of your business domain name," he says. "Most businesses will settle for the .com and the national top level domain such as .co.uk. This leaves plenty of leeway for unscrupulous competitors to register identical or similar names. For example, if the URL (website address) of a UK flower supplier were daffolily.com, what is to stop a competitor registering a name like daffo-lily.com or daffolily.biz?"

Potentially, if a competitor has a website with an URL very similar to yours, a customer searching for your company might be led to them instead. If they are offering similar goods and services as you, and/or their registered trading name is different to the domain name, you could have a case against them - if you can show that you have established goodwill among customers. If the name is a generic one, however, it might be more difficult to prove.

Another common scenario is that the domain name variant, once owned, diverts traffic to the competitor's website which has a different URL. So, the competitor buys www.daffolily.biz and then when a customer types in that URL, they mystifyingly find themselves at www.cacti-in-a-hurry.com.

Halberstam says an additional widespread practice is where a competitor pays a search engine to bring up its website when someone making a search enters a rival's company name or a well-known product or brand name.

However, SMEs do have a variety of options if they have fallen victim to passing off. "A remedy is generally available either through the courts or via the dispute resolution mechanisms provided by the different registries such as Nominet in the UK," says Halberstam.

For further information on the subject, read Tolley's Domain Names: A Practical Guide by Simon Halberstam, Joanne Brook and Jonathan DC Turner.