Defensive Registrations in New Generic TLDs Could Cost Brands Owners $500,000 Each

ICANN released a document in March of 2010 on the expected number of new TLD launches, which brands can use to calculate the real financial impact that the launch would have on their company. It predicts that there will be 400 generic TLD applications accepted in the initial round of the new TLD launch process. ICANN also expects there to be 100 branded TLD applications accepted.

Many trademark owners are currently focused on determining whether to apply for their own .BRAND and have paid too little attention to the generic TLD aspect of the new TLD launch. ICANN’s own predictions tell an important story about the hefty costs trademark owners will face due to an influx of 400 generic TLDs being planned by a myriad of registrars and “new TLD entrepreneurs.” Examples include .ECO, .SPORT, .FOOD, .NYC, .HOTEL and .MUSIC.

A company such as Adidas could feel inclined to defensively register domain names like Adidas.SHOES, Adidas.SPORTS, Adidas.SHOPPING, Adidas.NYC, Adidas.ECO, Adidas.TEAM, Adidas.AFRICA, Adidas.WIKI, Adidas.GREEN, Adidas.LONDON and hundreds more. Each “sunrise period” registration will likely cost much more than what the public will pay later, will include tedious application processes, and will need to be renewed annually. Many brands will feel they have no choice but to take on this administrative and financial burden in order to protect their consumers and reputation from unauthorized registrants.

The launch that ICANN predicts could cost each brand owner about $500,000 if we conservatively estimate that the average brand owner will defensively register 3 domain names per gTLD, that the average price of domain name registrations in sunrise periods of new gTLD launches will be $500, and that brands will not necessarily participate in each gTLD launch equally. The cost of these defensive registrations to businesses worldwide may exceed $746 million.

This $500,000 per brand owner price tag does not factor in future renewals, new domain name monitoring or enforcement costs in the expanded Internet space. This estimate also excludes the costs that brand owners will incur should they opt to secure their own generic or branded TLD.

This new cost will apply to brand owners across the board. Brands in all industries, whether for profit or nonprofit, will be forced to spend significant time and money to monitor activity in each new TLD and to defensively register domain names in an attempt to mitigate the effects of malicious use of their trademarks.

CADNA’s calculations relied on conservatively estimating that roughly 1.49 million total sunrise period defensive domains or on average 3,731 trademark sunrise domains per new TLD registry will be registered. When you compare this figure to the approximately 140,000 accepted .EU sunrise registrations in 2006 and 15,000 .ASIA sunrise registrations in 2007, it seems likely that CADNA’s estimates are low and the costs realized by the trademark community could be in excess of 4 times these projections.

While brand owners can express their concerns about the rapid release of this rollout to ICANN during public comment periods, ICANN’s chronic lack of responsiveness requires further action.