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Dot (your brand here), The New gTLDs: Owning and Protecting a Piece of the New Internet

IP Technology Law Journal

March 2009

The Internet landscape is shrinking fast - almost any domain name you can think of is taken. The Internet Corporation for Assigned Names and Numbers (“ICANN”) is responding by accepting new generic top-level domain (“gTLD”)[1] applications personalized to the owner (think “.(your name here)” or “.news”). For the author, “.Scotts” has a certain appeal. However, the Scott’s lawn care company may also want to grab that cyber turf. How can a brand owner prepare for this new gTLD expansion? New information has recently been released, but it is still in draft form.[2]

Top-level Domains and the Evaluation Process

The new gTLDs will be different from the existing twenty-one[3] gTLDs now approved. With the new gTLD opportunity, a brand owner, say the Jane Doe Media Company, may soon have the opportunity to own and run its own “.janedoe” gTLD and use or sell such web addresses (also known as second-level domain names) as www.music.janedoe or www.business.janedoe to increase brand awareness and build relationships with consumers, franchisees, vendors, and/or licensees on and off the Internet. The company can also implement strategies to oversee the intellectual properties within.   

The Anticipated Application Process, In Brief

There could be at least 500 applications for gTLD names (also called gTLD strings) in the first round alone. The application fee has been set at $185,000, with additional fees for various other services. The application fees will have to be paid up-front, however, ICANN is considering pro-rated refunds for dropped applications. This high cost is expected to encourage serious innovation, and discourage cybersquatters from applying. 

The first round of applications is scheduled for the second and third quarters of 2009.[4] The application process will likely be web-based and last at least thirty to forty-five calendar days. Applications will be accepted on a first-come first-serve basis and evaluated for various criteria once submitted.[5] Only established organizations, institutions and corporations in good standing may apply. Individuals and sole proprietorships will not be accepted. Those that are “financially, technically and organizationally capable,”[6] and apply early, have the best shot at the most marketable gTLD names, provided there are no competing applications for the same or similar gTLD and no third-parties assert successful objections.[7] 

Evaluating the Submitted Applications

Certain gTLD strings are likely to contain similar or identical terms. (Should .eastcoast, .westcoast and .coast be allowed to co-exist?)  Brands will have the opportunity to see resolution of confusingly similar strings through various mechanisms, including: objections, ICANN evaluations of the applications, voluntary agreements, and/or auctions (still being considered). 

It is highly advisable that the brand owner monitor third-party gTLD applications for strings containing terms similar or identical to the brand. Once similar or identical terms are discovered, the owner can either act directly via a cease and desist letter to the gTLD applicant or object through ICANN’s gTLD evaluation process. 

The evaluation phase will begin once all applications are submitted and will likely include the evaluating of applications for applicant criteria, e.g., technical and financial capability, and string criteria, e.g., string confusion (among others). During the evaluation phase, applicants and non-applicants will have the opportunity to object to potentially confusing gTLD strings.  gTLD applicants will likely be allowed to object to a confusingly similar string, and non-applicants will first have to show legal rights before objecting to a string infringing those rights. 

These objection mechanisms will allow the third-party brand owners to contest applications without being required to spend money on an application themselves as a defensive method. Dispute resolution will be used to resolve all objection issues, and the objection period will close at the end of the evaluation phase.

Also during the evaluation phase, ICANN will conduct a string similarity analysis using human and computer methods to determine what conflicts exist between two or more strings -- a “contention”. The human component will assess whether the strings should be allowed to co-exist or whether the confusion is so great that co-existence would be detrimental to the consumer -- mere possibility of confusion or association between strings would not be enough.

gTLD applicants, and non-applicants, will likely be prodded towards working out conflict issues between themselves, by either withdrawing one application, or choosing to join forces and proceed as a team. The one caveat: applicants will be prohibited from altering the string in any way to resolve the conflict. If brands cannot enter into settlement agreements, or file jointly, an auction process will likely be used to determine a winner. [8] 

An online auction is being considered as a method to resolve disputes over, presumably good faith ownership of, identical or very similar gTLD applications. Applicants would have to continue to bid until all applications with which it has a contention exit the bidding process. All bids would be legally binding. ICANN has not yet confirmed all  auction details.

Should the Brand Owner be the First on the Block with a Shiny New gTLD? 

New gTLDs are likely to create new destinations on the Internet, opening up possibilities for new marketing opportunities, more brand exposure, and alternative methods to protecting intellectual properties online. Marketing relationships with the consumer will be created when consumers seek out the brand’s gTLD for trustworthy and engaging information; more exposure may be obtained through improved search engine rankings and new keyword strategies; and, the brand owner will be able to craft use and dispute resolution policies to reduce intellectual property infringement and fraud, and prevent cybersquatters from building a haven within the new gTLD.

True, operating a gTLD means high initial fees, high technical costs of operating the registry, and additional expenses to promote the gTLD, to name a few. Some companies may feel that there is enough worldwide exposure in the brand, and a gTLD is just not a good investment, particularly during the current economic downturn period. Alternatively, the opportunity to maintain control over the brand’s online presence through operation of an online community may outweigh the high initial costs. 

For example, a large bicycle company may choose to reign in dealers by requiring that all domains be registered within the new .bikecompany. In contrast, dealers now may have domains with various registries and may be able to keep the domain name and continue to draw consumers to the site, even after they are dropped by the bicycle company. Whereas, within its own .bikecompany environment, the bicycle company could immediately remove the dealer from the site and retain the second-level domain. 

To decide whether to run a top-level domain, the brand owner should start by creating a team to look into the benefits and downsides to owning a .brandname. The team should include technology and marketing people, domain name administrators and legal counsel, among others.  They would outline the specific goals and objectives behind owning and operating a gTLD, and review the trademark and domain name portfolios for new gTLD possibilities and objections. Talking points should include: budget, policies and procedures for operating a gTLD, registration of second-level domains within the new gTLD, increasing brand awareness on the Internet, minimizing infringement, protecting the integrity of the brand and the gTLD, all while keeping in mind the rights and responsibilities of the franchisees, subsidiaries, assignees, and other business partners. 

 .guineapig or A Wait and See Approach?

In this economy, is it worth spending the money to apply in the first round? Or, is it better to wait for future rounds, or stay out of the process entirely? Holding off until the kinks are worked out may be a prudent route. Waiting until the second or successive rounds will allow the brand owner more time to see how the process works -- no one wants to be the “.guineapig”. As an added benefit, the prices may drop in later rounds, and consumer recognition of the new gTLD process may go up. 

Or, it may turn out that .com may be all the brand owner needs. Consumers may simply go numb from having too many gTLDs to choose from and may rely more heavily on the integrity and ease of the .com system. Search engine optimization and keyword research to maximize the existing .coms may be money well spent. 

The Domain Names Within The New gTLDs

Second-Level Domain Registration: Monitor, Apply, Enforce

As a defensive measure, should the brand owner try to register second-level domain names within all of the new gTLDs? In other words, Jane Doe would try to buy janedoe.cooltunes, janedoe.music, etc. If there are 500 gTLD application, that would mean 500 second-level applications. It may be, however, that some of the new gTLDs would be bought either by direct competitors, who control their own registries under certain guidelines, and would not wish to sell to Jane Doe due to potential confusion as to some implication of a connection between them (janedoe.capitalrecords) or would be so unrelated that buying the name would make no sense (janedoe.kelloggs). 

Moreover, it goes without saying, that registration of the brand or versions of the brand within all of the new gTLDs would be expensive. What if some of the more popular domain names were going to be sold for $500 each?[9] In addition, monitoring and enforcing those domain names would cause even more headaches. 

Above all, a brand owner’s domain team should stay on top of ICANN’s new guidebooks and monitor the application process for the best and worst/least and most credible of the new gTLDs.  When the time comes, apply for the new domain names as planned (either for promoting the brand or defensively), and prepare for enforcement -- infringing domainers and cybersquatters will likely seek to capitalize on the vastness created by the new gTLDs.

Efforts To Sour Domain Name Tasting and Reduce Cybersquatting: A Catalyst for Change  

Domainers and cybersquatters may benefit most from the second-level domain goldmine. ICANN has started to curb domaining practices through a new fee system for mass domain name speculation, and the courts have joined in by clamping down on infringing domainer practices through use of the Anticybersquatting Consumer Protection Act (“ACPA”).[10] 

New policies to reduce the abusive practice of mass registration and cancellation of domains have recently been put in place with initial success.[11] Under the previous generally accepted registration policies, a domain name registrant had a five-day grace period to return the domain name -- with no net cost to the registrant and no ICANN fee charged to the registrar. Domainers (mass domain name speculators -- the new cybersquatters[12]) frequently abused this practice by testing domain names by the thousands during the five-day window to see if the domains had sufficient traffic to generate more income than the annual registration fee, usually through pay-per-click advertising. This abuse of the five-day grace period is generally referred to as “domain name tasting,”[13] or in some instances, “domain name kiting,”[14]. The domain name tasting of infringing domains has caused major enforcement headaches for large and small brand owners alike. 

To tackle the problem, ICANN recently implemented a non-refundable fee on domain name registrations for mass domain name speculators. It charges a non-refundable 20 cent per-transaction ICANN fee for domain names deleted during the grace period once the level of deletions exceeds 10 percent of a registrar’s net new registrations in that month. 

The new fee based system seems to be working, at least for now. For the first month of implementation (July 2008), there appears to be an 84% drop in the number of domain names deleted after the five-day grace period. However, domaining is a profitable venture and the fee system may only curtail domain name tasting for so long. 

In other efforts, some major brands have attempted to utilize the ACPA to combat infringing domain name tasting practices. Domainers have typically relied heavily on domain name tasting procedures to skirt liability under the ACPA, often arguing that domain name tasting is harmless if mass quantities of domain names are merely “reserved” and then dropped before the end of the grace period. However, in June of 2008, in a likely case of first impression, the United States District Court for the Central District of California in Verizon California Inc., Et Al. v. Navigation Catalyst Systems, Inc.,  ruled that domain name tasting of trademarks is cybersquatting and can have the requisite bad faith intent for liability under the ACPA.[15]

What Can a Brand Owner Take from All of This?

The application period for new gTLDs will open soon. When the first sunrise period[16] for the first gTLD will be held is uncertain. Those interested in a new gTLD to build a community on the Internet, build their brand, and control potentially infringing practices should apply early. Potential names of interest are unlikely to be available in the later rounds, especially if they are well-known, or border on the descriptive or generic. What names are worth applying for? The decision requires evaluating gTLD opportunities and risks, and devising a strategy for potentially defensive applications. 

Those not interested in applying to own gTLDs for their brands, should be aware that others may. Regardless of whether you intend to seek out a new gTLD, heightened domain name portfolio management and monitoring will be a necessity. Enforcement strategies will need to evolve to keep up with the growth of the domaining and cybersquatting industry. Brand owners may wish to look to the established UDRP,[17] defensive registration methods, and the ACPA. 

The upcoming “dot (your name here)” is the next stage e-commerce opportunity and has the potential to increase consumer recognition.  Plan ahead, consult the right people, and be ready to be one of the first to grab a piece of the new Internet. 


Scott is an intellectual property associate at Carter Ledyard & Milburn LLP specializing in trademark and copyright law. The author would like to thank Rose Auslander, Esq. of Carter Ledyard & Milburn LLP for all of her contributions to this article.  


Endnotes


[1] “gTLDs are a part of the structure of the Internet’s domain-name system … Examples of gTLDs are .EDU, .JOBS, and .COM.” ICANN.org, New gTLDs — Frequently Asked Questions ¶1, http://www.icann.org/en/topics/new-gtld-strategy-faq.htm (last visited October 4, 2008).

[2] Information from this paper was obtained from ICANN draft guidebooks, among other materials. ICANN stresses that potential gTLD applicants should not rely entirely on any of the draft guidebooks as further revision and consultation is expected. ICANN plans to release the final applicant guidebooks in the first half of 2009. Draft guidebooks can be found here: http://www.icann.org/en/topics/new-gtlds/draft-rfp-24oct08-en.pdf

[3] The twenty-one are as follows: .aero, .arpa, .asia, .biz, .cat, .com, .coop, .edu, .gov, .info, .int, .jobs, .mil, .mobi, .museum, .name, .net, .org, .pro, .tel, .travel. IANA.org, Root Zone Database, http://www.iana.org/domains/root/db/# (last visited October 4, 2008).

[4] Internet Corporation for Assigned Names and Numbers, New gTLD Program: What Kind of Internet Do You Want? 17 (2008), http://par.icann.org/files/paris/BAA_Intro_NewGTLDs_Paris_23Jun08.pdf.

[5] Internet Corporation for Assigned Names and Numbers, ICANN Generic Names Supporting Organisation, Board Report, Introduction of New Generic Top-Level Domains 21 (2007), http://gnso.icann.org/issues/new-gtlds/council-report-to-board-pdp-new-gtlds-11sep07.pdf.

[6] Id.at 19.

[7] Potential grounds for objection: confusingly similar gTLD strings; infringement of IP rights; moral and public order objections; objections from community groups. Internet Corporation for Assigned Names and Numbers, supra note 5 at 15.

[8] Internet Corporation for Assigned Names and Numbers, New gTLD Program Explanatory Memorandum, Resolving String Contention, A Complete Lifecycle Including String Contention Resolution 2 (2008), http://www.icann.org/en/topics/new-gtlds/string-contention-22oct08-en.pdf.

[9] “The companies that end up operating [popular, generic term gTLDs] are expected to offer trademark owners the chance to register their trademarks early for about $500 per domain, about 10 times as much as the price to the public.” Emily Steel, New Domain Names Put Name Brands in a Bind

To Protect Their Reputations, Some Companies May Have to Buy Up Millions of Dollars of Web Sites With Suffixes Like '.bank', Wall Street Journal, November 5, 2008. Historically, on the back end, some second-level domains, such as pizza.com, have gone for much, much more.

[10] “Cyberpiracy prevention,” provides for, among other things, civil liability for registering, trafficking or using a domain name confusingly similar to a mark. 15 U.S.C. § 1125(d) (2007).

[11] Internet Corporation for Assigned Names and Numbers, ICANN Board Recommends Action on Domain Tasting 1 (2008), http://www.icann.org/en/announcements/announcement-29jan08.htm.

[12] “Cybersquatters have rebranded themselves as ‘domainers.’ ” Doug Isenberg, Perspective: ICANN Needs to Clamp Down on Domain Name Abuse, CNET News, June 21, 2006, http://news.cnet.com/2010-1030-6084970.html?tag=yt.

[13] “Domain tasting” is the practice by registrants to use the five-day grace period to test the profitability of domains. Internet Corporation for Assigned Names and Numbers, GNSO Initial Report on Domain Tasting 30 (2008), http://gnso.icann.org/issues/domain-tasting/gnso-initial-report-domain-tasting-07jan08.pdf.

[14] “Domain kiting” is slightly different from domain tasting as it involves the continual registration, deletion, and re-registration of the same names in order to avoid paying registration fees. Id. at 30.

[15] 568 F. Supp . 2d 1088 (C.D. Cal. 2008)

[16] A “sunrise period” is offered by TLD operators to trademark owners to register their trademarks as second-level domain names within the TLD, usually at the time of launch and before the general public can register. 

[17] “Under the [UDRP], most types of trademark-based domain-name disputes must be resolved by agreement, court action, or arbitration before a registrar will cancel, suspend, or transfer a domain name.” ICANN.org, Uniform Domain-Name-Dispute-Resolution Policy, http://www.icann.org/en/udrp/udrp.htm (last visited October 4, 2008).


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