Reproduced with permission from Electronic
Commerce & Law Report, 14 ECR 169 (Feb. 11, 2009).
Copyright 2009 by The Bureau of National Affairs,
Inc. (800-372-1033) http://www.bna.com

Domain Names

The new top-level domain program that the Internet Corporation for Assigned Names and Numbers says could launch as soon as this fall will impose significant financial burdens on trademark owners, and the program--along with ICANN's role in expanding the Internet space--should be evaluated by Congress, a brand owner trade association said Feb. 3.

Trademark owners have long been critics of ICANN's new domain program. Announced in June, that program would, with certain restrictions, allow registrants to apply for any word or letter combination as a top-level domain. There are currently only 21 top-level domains, including the common .com, .org, and .net.

Trademark owners worry that opening the proverbial floodgates on domain applications will dramatically increase the costs of monitoring and enforcing their marks without many resulting benefits.

Looking for Congressional Evaluation.

The Coalition Against Domain Name Abuse, a trade association of trademark and intellectual property owners, hosted a policy forum for Capitol Hill staffers and business executives Feb. 3 in Washington, D.C., to discuss the ICANN plan in light of trademark owners' concerns. The forum, titled “The $1.5 Billion Business Tax Brands Are Not Expecting,” urged Congress to evaluate ICANN's goals, motivations, and authority to expand the namespace before brand owners are harmed.

“ICANN's role needs to be called into question, and a Congressional hearing is a favorable possibility,” Josh Bourne, CADNA's president, said at a press briefing after the event, which was closed to media.

“We're getting a very good feeling from both the Senate and the House that this is an important issue, and we have been impressed with the level of understanding of the staff and the members they represent,” Bourne said.

There are no current plans for a Congressional evaluation of the new gTLD program, or of ICANN's role in facilitating it. “But it's definitely getting warmer,” Bourne said.

“We're looking forward to more concrete steps, and are pleased with the interest and concern we've seen on the Hill,” Elisabeth Escobar, senior intellectual property counsel at Marriott International, added.

Trademark owners also called for Congressional intervention during January's State of the Net Conference, which was sponsored by the advisory committee to the Congressional Internet Caucus (14 ECLR 75, 1/21/09).

Brand Owners Express Concerns.

Trademark owners' concerns with ICANN and its processes are essentially four-fold, Bourne said, and said that a Congressional review should address each in turn:

• concerns that ICANN's voting structure and policy process favors registrars and registries over rights owners;

• concerns that the structural imbalance will be exacerbated by ICANN's planned transition from Commerce oversight to independent governance in September 2009;

• concerns that the domain program is not backed by any demonstrated interest or need; and

• concerns that the program will impose substantial costs on trademark owners.

The thrust of the policy forum centered on cost, especially with respect to defensively registering domains that may not otherwise be desirable to the brand owner.

Escobar described her company's anticipated response to the coming gTLDs as requiring both (1) policing and (2) defensive registrations.

Policing will require the company to monitor the application process to guard against infringing applications, Escobar said, and then with each application that is approved, the company will have to monitor registrations at the second level.

For domains that may seem desirable--marriott.hotels, for instance, or marriott.nyc--the company will be forced to defensively register to prevent fraud or competition, Escobar said, and the company will certainly want to protect the .marriott TLD.

ICANN's draft applicant guidebook, which ICANN is in the process of revising, estimates the cost of a new domain at upwards of $185,000 (13 ECLR 1414, 11/5/08). Costs for second-level names will be at the discretion of the registrar.

“It's a real conundrum,” Escobar said; “there's no way we can defensively register everything.”

Trademark owner organizations including the International Trademark Association and MarkMonitor have expressed similar concerns over the latent costs they say the process will thrust upon owners (13 ECLR 1575, 12/24/08).

For its part, ICANN has vowed that it is “listening very carefully” to trademark owners' concerns, and CEO Paul Twomey said Feb. 5 that the program was in no way intended to hold tradematk owners “to any form of extortion in the operation of new gTLDs” (see related report this issue).

Cost Fears May Not Be Realized.

A recent report calls the trademark owners' cost concerns into question, however.

In an analysis published Feb. 2, Paul Stahura, chief strategy officer of Santa Monica, Calif.-based Demand Media, argued that opening the domain space to even an unlimited number of top-level domains should not, given trademark owners' existing practices, force defensive registrations.

“The vast majority of trademark holders are not registering their trademarks in all the current generic TLDs, let alone all the TLDs,” Stahura said. “Therefore, we do not expect them, in general, to register their trademarks in new gTLDs.”

According to Stahura, the costs projected by Escobar and others may not be realistic. Based on domain trends in the current namespace, defensive registrations are not effective at prohibiting fraud, and they are unlikely to be profitable in any event, he said.

Malware, phishing, and other cybercrimes have seen a steady increase in profitability over the years in the existing limited-TLD namespace (13 ECLR 1555, 12/17/08), (13 ECLR 1527, 12/10/08). Defensive registrations in the existing namespace are not reversing this result, Stahura said. Although the expanded namespace will bring with it an expanded canvas for foul play, defensive registrations will not likely succeed if the goal is to prevent fraud.

“Costs that exceed benefits arise when domain name registrants register their marks for the sole purpose of preventing another party from registering that mark as a domain name. If trademark holders are not registering their trademarks in existing TLDs, especially the open TLDs where registering trademarks is easy and inexpensive, then they probably would choose not to register them in new TLDs,” Stahura said.

By Christine Mumford

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Further information on CADNA's Feb. 3 briefing, as well as information on the organization's work to encourage Congressional involvement, is available at the Coalition for Domain Name Abuse Web site, http://www.cadna.org/en/newsroom/press-releases/cadna-washington-policy-forum-discussion

Paul Stahura's report, “Analysis of Domain Names Registered Across Multiple Existing TLDs and Implications for New gTLDs,” is available at the CircleID Web site, http://www.circleid.com/posts/20090202_analysis_domain_names_registered_new_gtlds/

Copyright 2009, The Bureau of National Affairs, Inc.