Registering a domain name, where there is already an existing trademark with that name is not an offence in itself, where an individual is legitimately using that domain name but where an individual registers a domain name in bad faith with the intention of misusing it for profit or to cause harm to another business, an offence may occur.
The vast majority of companies conduct their business with clients over the Internet, use their business website as a means of advertising and may also use it as a platform to communicate information to clients. The consequences therefore of cybersquatting to a trademark or business owner may have a significantly negative effect. As a result of this, cyber squatters use this knowledge to take advantage of the value attached to a domain name to a trademark or business name in order to make a profit.
Cyber squatters are known to register the domain name of an existing business name or trademark and then attempting to sell the domain name back to the actual trademark or business owner at a significantly high price. Cyber Squatters may also use these domain names to confuse consumers and sell products, which are similar to those of the trademark owner. Another possibility is where a cyber squatter uses the domain name as a way of defaming a business by including undesirable content in the site to put off visitors of that site.
Check out Nominet’s rules on domain name disputes http://www.nominet.org.uk/disputes