The Fourth Circuit is probably the most conservative of the twelve circuit courts of general jurisdiction in the US (each one covers several states), and it ruled for PETA on every point. Commentators will probably make much of the meme that the court rejected Doughney's claim that he had a First Amendment right to parody PETA by setting up a web site for "people eating tasty animals". And it did, albeit finding commercial use along the way, which slightly blunts the impact of the case.
But, the Court really did something much worse: it essentially adopted the "initial interest confusion test" for domain names. Taken to its logical conclusion, under this theory no one other than a trademark holder can have a web page in a domain where the court thinks people would expect to find the trademark holder's web site. Indeed, even not having a web page, just blocking a trademark holder's use of it, might be a problem.
The court did not hold that parody is not a defense to a claim of trademark infringement. Indeed it couldn't have held that -- US law clearly permits that defense. What the court instead held is that Doughney's parody defense was irrelevant on these facts because the 'infringement' (and the violation of the Anti-Cybersquatting Consumer Protection Act (ACPA)) happened not on the web page, but at the time that users typed www.peta.org into their browsers, i.e. before anyone could be aware of the parody.
This expansive view of the preclusive effect of a trademark is known as "initial interest confusion" theory; its application to domain names is very controversial, and until now had not received the imprimatur of a court of appeals. Until overturned by the Supreme Court, or contradicted by another circuit court, this ruling becomes the leading US authority on the application of that doctrine to domain names. This has important implications for the UDRP: as the UDRP is intended to replicate the decisions that national courts would make, UDRP arbitrators applying US law will be able to apply the PETA precedent. True, it's just one circuit, and hence not the law of the land and, yes, there are a handful of cases refusing to apply the "initial interest confusion" theory to domain names, but they are trial, not appeal, court decisions and thus carry less weight.
Although that's the likely outcome until the arrival of countervailing judicial authority, it may be a mistake. Not only is the failure to craft a parody exception at odds with the general thrust of US First Amendment law, but the logical outgrowth of this case is that trademark owners should be able to win against any commercial user -- except another trademark holder. Since the potential ‘initial interest confusion' is equal whether the non-infringing use is that of a parodist, a non-commercial user, or a trademark holder in a different jurisdiction or who sells a different class of goods, it seems very odd to give such an overwhelming edge to mark-holders.
That said, there are two obvious and likely narrowing constructions to this decision. First, it's not obvious that it applies to all TLDs. The decision rests at least in part on the idea that a user would expect to find PETA's web site in the .org domain (and, by analogy, to find a company's domain in .com). It doesn't follow that the ‘initial interest confusion' theory would work for a company in .org, or a non-profit in .com. Not a great result for free speech, but less bad than it might be if read more broadly.
Plus, even on its own terms, the decision shouldn't apply in a special class of cases. The PETA decision rests in part on the Court's finding that Doughney used the web site to link to "more than 30 commercial operations offering goods and services. By providing links to these commercial operations, Doughney's use of PETA's Mark is 'in connection with' the sale of goods or services." Thus -- arguably -- the decision might not apply to an utterly non-commercial use of the domain name. Maybe. More clearly the decision doesn't apply to "sucks" or "anti" domain names because there is no initial confusion there.
The legal theory on which this decision rests is novel as applied to the web, and somewhat controversial even in other contexts. I would not be surprised to see the issue land in the Supreme Court some day -- but perhaps not this time, since most commonly the Supreme Court waits for a disagreement among circuit courts before taking an issue. Only the First Amendment aspects of the case give it a chance of bucking that trend, and on the odds it's only a small chance at that. In recent years, however, when the Supreme Court has taken a trademark case, it has shown a tendency to read trademark rights much less expansively than the lower courts. What the Supreme Court would make of this issue when it gets around to it thus remains very much an open question.