Overstock's Use Of Obay Web Address Raises Questions
By Riva Richmond and Carol S. Remond
Of DOW JONES NEWSWIRES
15 September 2006
Dow Jones News Service
(c) 2006 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)--It's been a tough couple of years for Salt Lake City online-retailer Overstock.com (OSTK).
Lagging results have sapped about half of the company's market valuation, as chief executive Patrick Byrne did battle with hedge funds and other Wall Street institutions he accused of unfairly depressing his company's stock. The Securities and Exchange Commission has began an investigation into the company.
Now it looks like Overstock could soon add another name to its list of adversaries: auction powerhouse eBay Inc. (EBAY) of San Jose, Calif. That's because two years ago, Overstock took the unusual step of registering the Web address "obay.com," in a play on "ebay.com" and Overstock's former slogan "It's all about the 'O'."
The move, according to legal experts, could violate eBay's trademark rights and provoke a legal dispute over "cybersquatting," or use of Web addresses that include trademarks.
Ebay said it wasn't aware of Overstock's registration of obay.com before asked about it by a reporter. But eBay spokesman Hani Durzy said the use of obay smacks of trademark dilution and infringement, and that the company "will aggressively fight" assaults on its marks. He pointed to past cases where it has taken action against competitors using domain names including the term "bay."
The domain name obay.com points Internet users to the company's online-auction service, whose primary address is "auctions.overstock.com." Overstock registered obay.com in September 2004, two days after it launched the auction site.
Overstock spokesman Scott Blevins said the company's lawyers do not believe its use of obay.com is cybersquatting or a violation of eBay's trademark. He said Overstock buys "hundreds" of Web addresses, many beginning with the letter 'O'." The obay name was purchased at a time of controversy over an increase in seller fees at eBay and was meant "to poke fun at their hegemony, if you will, and ability to raise fees at will," not syphon traffic from the auction giant, he said.
Overstock does not disclose its auctions revenue, but there appears to be little growth there. The company said in its June quarter report that the value of the merchandise sold in its auctions declined nearly 7% from a year earlier.
In the auction business, Overstock is facing a formidable challenge in eBay, which is by far the largest auction site on the Internet. EBay had 77.7 million visitors in July, for a nearly 98% market share, according to comScore Media Metrix. Overstock's auction site ranked No. 3, but its traffic was tiny in comparison at 1.9 million visitors in July, down 34% from the same period a year ago. Overstock's main Web site hosted 14.3 million visitors in July, down 17% from a year earlier, according to the firm.
In July 2001, eBay settled a trademark infringement suit against BidBay.com Inc., which didn't admit liability but agreed to change its corporate and Web site names to AuctionDiner.com and paid an undisclosed sum of money to eBay. Earlier, eBay resolved a dispute with an auction site called BrickBay.com, causing its rival to change its name to BrickLink.com. Both companies said fighting eBay wasn't worth the cost or distraction. EBay remains entangled in a legal case against PerfumeBay.com.
Any litigation between eBay and Overstock would likely hinge on the significance of "bay" and whether eBay's trademark rights extend to that word, legal experts say. EBay is likely argue that "bay" is significant and that Overstock's use of the term infringes on and erodes the distinctiveness of its mark.
"EBay is a well-known trademark, and when you have a well-known trademark they will often times be allowed a broader scope of protection," says Sam Ibrahim, trademark and copyright practice group leader at Buchanan Ingersoll & Rooney PC, of Pittsburgh. Though he added that it might be difficult for eBay to argue that the use of obay is confusing to consumers because the Web page displayed is clearly that of Overstock.
Legal experts said eBay could pursue a case under the Anticybersquatting Consumer Protection Act, which allows fines of up to $100,000 per domain name in damages for anyone who, with intent to profit, "registers, traffics in or uses a domain name that is identical to, confusingly similar or dilutive of" an existing trademark. And it could avail itself of more traditional intellectual-property laws protecting trademarks and prohibiting unfair competition, which could involve higher damages, says Darren S. Cahr, an intellectual-property attorney at law firm Gardner Carton & Douglas of Chicago.
Overstock is likely to argue that it is known by the letter 'O,' which is used heavily on its site and in its TV commercials, and that "bay" is not protected, Ibrahim says.
Still, the use of the name is likely to add to Overstock's reputation as a company with an odd corporate strategy. Cybersquatting today is largely the terrain of small operations that use such sites to profit from pay-per-click advertising, and is an uncommon choice for large corporations in the post-bubble era.
Overstock's CEO Byrne raised eyebrows on Wall Street and beyond when he said in a conference call last year that Overstock is the target of a massive conspiracy to depress its share price. The conspiracy alleged by Byrne includes Rocker Partners, a hedge fund since renamed Copper River and research firm Gradient Analytics, both of which Overstock later sued in a California state court. Rocker and Gradient have denied charges that they colluded to denigrate Overstock's business. The case is ongoing. According to Byrne's 2005 presentation, a number of financial reporters and the SEC were also part of the alleged plot.
(Disclosure: Two columnists for Dow Jones & Co. (DJ), Carol Remond and Herb Greenberg, have received subpoenas from the Securities and Exchange Commission requesting information in connection with an SEC investigation. Dow Jones, publisher of this newswire, objected to the subpoenas. The subpoenas were put on hold and the SEC recently announced new guidelines for requesting information from journalists.)
-Riva Richmond, Dow Jones Newswires; 201-938-5670; riva.richmond@dowjones.com
-By Carol S. Remond; Dow Jones Newswires; 201 938 2074; carol.remond@dowjones.com [ 09-15-06 1648ET ] |
