Does that argument hold any water when the company in question did not secure the name themselves long after it was obvious they might want it? Unless this domain was secured before DE was released knowing that it would be, but even in that case you would think the first people to know there is going to be a DE are MS themselves.
NB: THIS IS NOT LEGAL ADVICE
This is interesting because it gets to a very important distinction that many people overlook in IP law. Generally, having the rights to intellectual property means that you have a *right* to defend your claim, not an *obligation*. This means that even if you do infringe on somebody else's IP, if they want, they can ignore it - and this doesn't make what you're doing legal, and it still doesn't lessen their exclusive claim to the IP. This is essentially where we are at now. MS could go after Voobly, but they are choosing not to, for whatever reason. Even if the infringement is potentially criminal (this is unlikely but honestly copyright law is such a godawful mess that you never know how many laws you're breaking at any given moment), as long as MS doesn't care, nothing will likely happen, but if they start caring, "they didn't care before" isn't a defense. They never were obliged to enforce their claim. There are weird exceptions, mind you, but that's usually the case. Don't trust people online that say "if company X doesn't enforce their IP rights, they'll lose them".
True, this is a defense, but the thing with a defense is that it's just that - a legal defense. It doesn't get you out of having to deal with infringement notices or court proceedings, you still need to *get* to the point where you're in court to make your defense. Unfortunately, getting to that stage costs a lot of money, and MS has more than you. This is why patent trolls, copyright trolls, etc. exist - they know that even if their claim is bogus, it's in your best interest to pay up a few thousand rather than pay tens or hundreds of thousands of dollars for a lawyer and legal proceedings. This is unfortunately commonplace throughout the world - it's not just a US thing. (This is also why I happen to know a little bit about it - I've been in two industries where IP infringement is a big big deal, and where unfortunately you have to deal with immoral yet legal practices).Also if that "bad faith intent to profit" is any sort of meaningful standard to prove in court I don't know how strong the case would be because Voobly is free and makes every effort to emphasise that players first need to give money to MS for access to the IP.
So usually the best defense to all IP law is to just do your absolute best to never draw attention to yourself, *even if* you think you could defend yourself in court successfully. It really, really sucks, but unfortunately that's the world we live in at the moment.
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