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Virtual Works, Inc. v. Volkswagen of America, Inc., 238 F.3d 264 (2001)

Cybersquatting is a type of trademark violation that was made illegal by the 1999 Anticybersquatting Consumer Protection Act. It refers to the practice of registering a famous brand name as an internet domain name with the bad-faith intention to force the rightful owner of the trademarked name to pay a hefty sum to the cybersquatter. In the 2001 case of Virtual Works, Incorporated versus Volkswagen of America, Incorporated, we examine one of the first applications of this act.

In 1996, Virtual Works registered the domain name VW(dot)net for its company. At the time, its leadership discussed the famous Volkswagen brand and decided that if a lucrative deal were to be had, Virtual Works would later sell the domain name to the car giant.

Virtual proceeded to use the web address for about two years until a handful of Volkswagen dealerships contacted Virtual to purchase rights to the domain name. One of Virtual’s principals, in turn, contacted Volkswagen’s trademark department and left a voicemail offering to sell Volkswagen rights in the web address, claiming others would be eager to purchase it because web users would instinctively associate the domain name with the car maker. The message further stated that if Volkswagen didn’t purchase it, then Virtual would sell it to the highest bidder and gave the car company 2 hours to respond.

Invoking the domain name registrar’s dispute-resolution process, Volkswagen notified Virtual that Virtual needed to file a motion for declaratory judgment against the car company, which it did in district court.

Volkswagen counterclaimed with various allegations, including cybersquatting, under the act. The court granted Volkswagen’s motion for summary judgment on the cybersquatting claim and ordered Virtual to turn over rights in the domain name to Volkswagen. Virtual appealed to the Fourth Circuit.

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