A non-signatory to an ICANN domain name registration agreement is bound to the agreement's forum selection clause under the doctrine of direct benefit estoppel when the non-signatory exploits the agreement by initiating proceedings against a registrant, according to a federal district court in Texas.

In Compana LLC v. Mondial Assistance SAS, Civ. A. No. 3:07CV1293-D, 2008 WL 190522 (N.D. Tex. Jan. 23, 2008), Compana registered the domain name mondial.com as an accredited registrar with the Internet Corporation for Assigned Names and Numbers (ICANN). To register, Compana executed a registration agreement that incorporates the Uniform Domain Name Dispute Resolution Policy (UDRP). The UDRP requires that parties submit to a mandatory arbitration proceeding to resolve domain name disputes.

Later, Mondial initiated UDRP proceedings against Compana by filing a complaint with the World Intellectual Property Organization (WIPO) pursuant to the UDRP. The complaint alleged likelihood of confusion and demanded the surrender of the domain name. Compana and Mondial began participation in the UDRP proceedings.

At the same time, Compana sought a declaratory judgment in Texas state court that its use of mondial.com did not violate Mondial's trademark rights. Parallel litigation is specifically permitted under the UDRP. Mondial then removed the matter to federal court based on diversity jurisdiction. Compana responded by moving to remand, alleging that Mondial was bound by the Texas state court forum selection clause within the UDRP.

The Court agreed that a non-signatory to an agreement, such as Mondial, could be bound to the agreement under the direct estoppel doctrine when it first embraced the agreement despite its non-signatory status, but then attempted to repudiate the agreement's terms during litigation.

The Court noted that the registration agreement required Compana to participate in UDRP proceedings upon the demand of a third-party, such as Mondial. Therefore, by initiating the proceedings, non-signatory Mondial had exploited the registration agreement and received a direct benefit from it.

Mondial argued that it did not sufficiently exploit the agreement because it did not initiate any litigation based on the agreement. Concurring with the Fourth Circuit decision in International Paper Co. v. Schwabedissen Maschinen & Anlagen, 206 F.3d 411 (4th Cir. 2000), the Court determined that a finding of direct benefit estoppel turned not on "whether or not the non-signatory had filed suit under the agreement," but whether "the non-signatory received direct benefits from the contract."

Therefore, even though Mondial had not sued on the registration agreement, the Court found it experienced a direct benefit from the agreement sufficient to bind it to all the agreement's terms, including the forum selection clause.