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Cybersquatting is the act of registering domain names, especially those connected with celebrities or recognizable trademarks, with the intention of reselling them at an inflated price. A cybersquatter takes advantage of the domain registration companies' 'first come, first served' policy by submitting a large list of very popular words and names all at once. While the domain registration company is in the process of entering these names, the cybersquatter uses profits from individual domain resales to finance the required registration fees.
A cybersquatter can literally sit on a popular domain name for years, causing grief to the actual celebrity or company it represents. As long as a cybersquatter is recognized as the legitimate owner of BillClinton.com, for example, the real former president cannot legally use his own name as a domain. He would have to pursue a lawsuit to compel the cybersquatter to relinquish the name, or actually pay whatever price the current owner assigns. Until a federal Anti-Cybersquatting Consumer Protection Act became law in 1999, most celebrities and companies found it easier to pay the often exorbitant fees charged by the cybersquatter.
The actual act of buying an abandoned or unused domain name is not technically illegal under normal conditions. What eventually causes legal trouble for a cybersquatter is using that domain name in 'bad faith'- a purpose clearly counter to the reputation or intention of the celebrity name or trademark. If a cybersquatter chooses to create a Paris Hilton fan site at ParisHilton.com, he or she may be protected from prosecution under the language of the federal anti-cybersquatting law. If that same cybersquatter used Paris Hilton's celebrity status to draw traffic to a pornography site, then Ms. Hilton (or any other celebrity in that situation) can sue in federal court for an injunction and fines. A successful prosecution is not guaranteed, however, and legal costs may be prohibitive.
An alternative solution to the cybersquatter problem may lie in a regulatory body called the Internet Corporation for Assigned Names and Numbers (ICANN). ICANN now offers an arbitration option which can settle domain name disputes outside of the court system. Celebrities and company representatives must still prove the bad faith intentions of a cybersquatter, but a successful arbitration can be held without legal representation. The cybersquatter may be compelled to relinquish domain rights at a fair market value or be fined for improper use of a trademark. This would not apply if the cybersquatter registered a domain name before it became associated with a celebrity or trademark. If a cybersquatter registers JimJenkins.com in 1998 and a new music sensation named Jim Jenkins becomes famous in 2001, there would be far fewer grounds for a lawsuit.
The era of the cybersquatter may be coming to an end, however. Companies and celebrities now have a better understanding of the importance of domain name registration. Acquiring the rights to their own names and product lines has become a much bigger priority, considering how much potential income could be lost if their preferred internet identities are already owned by a cybersquatter.