Exploit domain names at your own risk: interlocutory relief may be available

27 September 2015 | Amanda Cowan, Herbert Smith Freehills

Introduction

Protection of domain names is of utmost importance to companies that rely heavily on their online presence to develop their brand and obtain revenue. One such company is Thomas International Limited (TIL), a global provider of psychological and competency testing operating substantially online, with a centralised hub in the UK accessible to TIL's distributors and customers.

In the recently decided case of Thomas International Ltd v Humantech Pty Ltd [2015] FCA 541, the court recognised that domain names were being exploited in a manner detrimental to TIL's reputation, and took the unusual step of awarding an interlocutory injunction to compel the transfer of domain names to TIL.

Facts of the case

In January 2007, TIL entered into a Master Licence Agreement (MLA) with Humantech Pty Ltd (Humantech), under which Humantech had exclusive rights to appoint distributors to market, sell and distribute TIL's products throughout territories including Australia and South Africa. Humantech was also permitted to incorporate a company in Australia under the name Thomas International (Australia) Pty Ltd (TIA) and to register the domain names "thomasinternational.com.au" and "thomas.co.za". Importantly, a clause in the MLA provided that Humantech would not sell, market or distribute any products in competition with the TIL products.

The dramatic decline in Humantech's sales figures in 2013 and 2014 led to TIL's discovery of Assessment Centre Technologies (ACT), an entity incorporated by Humantech that sold similar products to TIL as well as TIL's own products. It appeared that the decline was caused by some of TIA's customers being diverted to ACT, in breach of the requirement not to compete with TIL products. A former employee of TIA also provided evidence that there was a shift in TIA to promote and sell ACT products.

TIL brought a claim against Humantech, TIA, ACT and Mr Schutte, the sole director of Humantech (the defending parties). Mr Schutte subsequently signed an undertaking under which the defending parties would transfer the domain names to TIL. However, after the parties failed to agree on terms for a new licence agreement, the defending parties disabled the websites. Customers using TIL's products and services in Australia were prevented from gaining access to the TIL hub through the TIA website.

Decision

TIL successfully applied for an interlocutory injunction to enforce the transfer of the domain names in accordance with the undertaking. Nicholas J in the Federal Court of Australia accepted that preventing Australian customers from accessing the hub through the TIA website would result in irreparable reputational damage to TIL's brand, giving rise to a prima facie case.

His Honour also agreed that damages would not provide an adequate remedy, so the balance of convenience favoured granting the injunction. His Honour rejected the defending parties' argument that the undertaking was invalid because TIL did not act in good faith when negotiating the new licence arrangement, noting that TIL was not required to subordinate its own interests during negotiation. The defending parties also failed to show that transferring the domain names would disrupt the business of TIA and ACT, as the websites had already been disabled.

The decision introduces interlocutory injunctions as an alternative avenue for enforcing relief in domain name disputes. However, it is unclear whether such relief is only available where a party does not comply with an undertaking or similar arrangement, or also in broader circumstances concerning domain name disputes.

Note: Originally published Internet Law Bulletin, September 2015, Volume 18 No 6