Richard Conway and Julian Nicholson had argued that their plan to set up domain names for companies such as Marks & Spencer and Virgin was not "passing off" or trade mark infringement.

The pair denied they intended to deceive

But in three Court of Appeal judges have ruled that deputy High Court Judge Jonathan Sumption QC had been right to grant injunctions against their business in November last year.

Five companies - BT, Marks & Spencer, Ladbroke, J. Sainsbury and Virgin - were granted the injunctions after the judge said: "The threat of passing off and trade mark infringement, and the likelihood of confusion arising from infringement of the mark, are made out beyond argument."

In their appeal against the injunctions Mr Conway and Mr Nicholson said the idea was to register Web site names similar to those of well-known companies and then try to sell them to those companies.

The pair denied that their scheme was intended to deceive, infringe trade marks or make money by "passing off" as the companies included in their web site names.

They argued that their actions were no different to those who stockpile old car numbers or buy plots of blocking land to sell to developers and denied doing anything unlawful.

Dismissing their appeal Lord Justice Aldous ruled: "The domain names were registered to take advantage of the distinctive character and reputation of the marks.

"That is unfair and detrimental."

BT was among the domain names registered

He ruled that "passing off and threatened passing off has been demonstrated".

Lord Justice Aldous said he believed that the names registered by the appellants were "instruments of fraud".

The registered domain names included "ladbrokes.com", "marksandspencer.com" and even "spice-girls.net" and "buckinghampalace.org".

The pair had not told the organisations concerned they were registering the names at a cost of £150 each.

The companies or individuals only knew about it when Mr Conway and Mr Nicholson wrote to them offering the name for sale or hire.

Mr Conway wrote to Burger King offering to sell them the name "burgerking.co.uk" for £25,000 plus VAT, otherwise it would be available for sale to any other interested party.