Brand Owners Urge Caution On New Top-Level Internet Domain Names

By Dugie Standeford for Intellectual Property Watch
Trademark owners are not likely to benefit from the approval by the Internet Corporation for Assigned Names and Numbers (ICANN) of a predicted 500 new generic top-level domain names (gTLDs), industry speakers said at a 25 November Web seminar on protecting and promoting brands online. Potential risks include the need for defensive domain-name registrations in many TLDs and the lack of an effective procedure for resolving disputes, they said.

The “Webinar” was presented by the International Trademark Association and the World Intellectual Property Review.

No gTLD has been able to compete effectively with .com, and ICANN has not proved its case for introducing new domains, said J. Scott Evans, Yahoo! senior legal director for global brand and trademark. Newer gTLDs such as .biz and .info have millions of names available but no one is taking advantage of them because they are not comparable to .com, he said.

New gTLDs will increase brand owners’ domain name registration and recovery costs, Evans said. In the last two years, nearly 75 percent of the domains Yahoo has added to its portfolio are names it had to grab back from people using them for pornography and other activities, he said.

ICANN is “selling swamp-land in cyberspace,” said Verizon Communications Vice President and Associate General Counsel Sarah Deutsch. Verizon supports a slow, controlled rollout of new domain spaces, but ICANN is “opening a fire hydrant,” she said.

The picture is not all bad, said attorney Paul McGrady, Jr. of Greenberg Traurig’s intellectual property and technology practice. One underlying assumption of the current system is that it is reasonably stable and that domain name registrants can easily transfer their names to another registrar if their registrar fails, he said.

But many legal questions remain, McGrady said. Is a domain name personal property? Can a bankruptcy court resell a name held by a failed registrar? The new process will offer brands more security because corporations will serve as their own registries, ending the need for registrars, he said. And there are other benefits as well, he said, among them increased direct- navigation Web traffic to brand owners’ sites, more options for reducing spam and phishing, and the chance for cutting-edge brand promotion.

Businesses could lose their marks permanently if a third party wins a gTLD close to their names in the first round because the rules prohibit award of “similar strings” of domain names, McGrady said. If a cybersquatter obtains the gTLD, phishers and fraudsters could take advantage of the company’s good name. And if the new gTLDs boost brand equity, companies could find themselves relegated to the “low rent” .com district if they do not join in, he said.

Large organisations may derive some benefit from protecting their trademarks but the only way new gTLDs will be valuable to many will be if they offer something truly new and unique, said Justin Hayward, communications director for Telnic, the .tel registry.

The rollout process is “full of risk” and uncertainty, said Com Laude Managing Director Nick Wood. Seven months before the application process is due to start, no one knows exactly how it will work, he said. Wood also worried that trademark owners are not engaged enough in the ICANN deliberation process on gTLDs. He urged them to submit comments on the applicant guidelines under discussion and to show up at the 1-6 March 2009 ICANN meeting in Mexico City.

Public Benefit?

Some proposals, including city TLDs such as .berlin, could serve a legitimate public purpose if they are more than simply “me-toos,” Hayward said. There are some clear advantages to expanding the domain space for affinity groups and closed communities, McGrady said. Deutsch, however, said the new gTLDs will mostly benefit ICANN, which stands to make $90 million, consultants, registries and registrars but not businesses and consumers. Open TLDs that merely redirect users to .com sites will only cause confusion, Evans said.

“Not Now”

No one knows how the process will play out, speakers said, and they recommended that brand owners approach it with caution.

Businesses should wait to see how the first round goes, said Wood. They should be prepared to step in if their brand name is taken or they are asked to join a consortium applying for a gTLD, he said, but for most large trademark holders, the time to act is “not now,” he said.

Each company must perform its own cost-benefit analysis on whether to pay for defensive domain names, Deutsch said. Brands are the symbol of a business so each organisation must judge for itself whether having a new gTLD is worth it, Evans said. But so many unanswered questions remain that being a pioneer in a global recession may not be possible, he said.

Only domain-name speculators have the cash to buy new gTLDs, and they will use them to exploit the system, Evans said. For most other industries waiting is a good idea until the “path around the minefields” becomes clearer, he said.

Dugie Standeford may be reached at info@ip-watch.ch.