Updated July 8, 2020:

What is domain squatting? This is the practicing of buying a domain name for the sole purpose of preventing someone else from buying it. Typically, the buyer will then resell the domain name at a higher price to a buyer who is desperate to pay for the domain. The domain squatter takes a risk in trying to find a domain that someone else will be willing to pay at an up-charge to buy the domain in the future.

Someone looking to make a profit with domain squatting might register a company's with a .ca or other country designation in a country in which he or she is looking to expand. Alternatively, they may buy the domain name on a product name that a company will soon be looking to launch. The companies that want these domain names will often find it worthwhile to pay extra for these domain names and avoid expensive legal fees in where they likely won't recover the rights to the names anyway.

How Does It Work?

A domain squatter will first perform searches on the availability of domain names, which include business names, brand names, trademark names, or anything he or she feels will be valuable to the company willing to pay for. If it's available, the individual buys the domain name, with the intent of selling it at a higher price to the owner of the business or the brand.

In today's business world, the internet is a key part in marketing and sales strategy for many businesses, and domains are considered to be valuable assets. Domain squatting is not new, but victims now have legal recourse. Many states and countries have passed laws against domain squatting, making it illegal.

There are two ways in which domain squatters earn money:

  • Placing ads on the site. Domain squatters that purchase domains with common words put ads on the sites in the hope that people searching the internet will land on the website, and the domain squatters will get paid for the page views. They may also buy common typos of misspellings of popular domain names in hopes that people will land on their site by accident.
  • Selling the domain at a premium to the buyer with the highest bid. Domain squatters that purchase highly sought-after domains, or purchase domains which their previous owners forgot to renew, do so in hopes that people who want the purchased domain name are willing to pay a large amount to have the privilege to use the specific domain they want.

Domain squatters are not the only ones who have an interest in popular domain names. A domain name provider will routinely put domains on hold if it notes particular domains have been searched for frequently for their availability, or ones that are rich in keywords. The domain name provider will then essentially do the same thing that a domain squatter does: hold the domain and try to sell it at a premium price.

Why Is Domain Squatting Illegal?

While the concept of domain squatting can be compared to buying low-cost real estate that is expected to become valuable, it is actually very different. Buying and selling real estate is considered an investment, while domain squatting is illegal. A domain squatter is blocking the rightful owner of the trademark or brand from acquiring the domain name and using it to increase his or her internet visibility.

The law looks at domain squatting as similar to holding a property (the domain name) in order to raise ransom, and it is considered a trademark infringement. If a domain squatter can't prove a legal intent in owning the domain name, it is considered to be a bad faith registration, and he or she is considered guilty of domain squatting.

There is legislation in most countries and states to now protect:

  • Company names
  • Trademarks
  • Personal names.

It can be difficult to prove the domain was registered with ill intentions. However, if this can be proven, and the domain squatter is deemed guilty, there are typically high fines involved.

To reclaim ownership of a domain name, you can file through the court of the state or country where the plaintiff resides. Once you file through the courts to take back ownership of a domain, it signals to the domain squatter that the domain name is, in fact, worth ample money to you. This may begin a long, drawn-out court process to fight for the rights to the domain.

If you need help with domain squatting, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.