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Trademark Issues in ICANN Domain Name Initiative Create Perils, Opportunities
For over a year controversy has swirled around the plans of the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit organization that sets policy for the Internet’s domain name address system, to authorize potentially hundreds of new generic top-level domains (gTLDs) starting in 2010. At present there are only 21 gTLDs, including .com, .net, .org, .info, .biz, etc. If ICANN continues full steam ahead, however, you could soon see domain names ending in .paris, .bank, .google or .pizza, among other things. ICANN’s plans have created a major headache for trademark owners, who face the possibility of a huge increase in cybersquatting, typosquatting and phishing incidents. At the same time, if the trademark issues can be navigated successfully, the new gTLDs may mean a revenue enhancement opportunity for affiliates.
Brand protection in the domain name sphere is already expensive for trademark owners. Preemptive or “defensive” registration of domain names identical to a business’ trademarks can lead to ownership of literally hundreds or thousands of registrations if the business is, for example, Disney and has a large trademark registration portfolio spanning the globe. But a defensive brand protection strategy actually requires more than this, since the trademark owner must also anticipate that domain name cybersquatters and typosquatters will register common misspellings and mistypes of its trademarks, as well as combinations of the trademarks with other terms (e.g., www.mickeymousecartoon.com).
When you throw all of the common existing gTLDs (biz, .info, and national or transnational gTLDs like .eu) into the mix, there can be thousands or tens of thousands of domain names with the potential to cause brand damage or consumer confusion in the hands of a squatter if the trademark owner doesn’t secure them. Aggregated, the registration fees alone can cost hundreds of thousands of dollars per year. In addition, under U.S. trademark law, an owner must actively police the use of its marks or risk the loss of its trademark rights. Active policing and brand protection do not require registration of every possible domain name and legal action against every single typosquatter, but there must be a coherent, reasonable and vigilant strategy to protect the business’ goodwill; in other words, if you don’t care enough about your trademarks to spend money on brand protection, don’t go whining to a court about infringers.
As expensive and imperfect as a defensive domain name registration strategy is, it is much cheaper than the alternative, i.e., letting cybersquatters and typosquatters gobble up large numbers of sensitive domain names and then siccing your lawyers on them. The problem is not an absence of legal recourse – both the federal Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. §1125(d) (ACPA), and ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP), a policy followed by all domain name registrars enabling a trademark owner to compel the cancellation or transfer of an infringing domain name by mandatory arbitration, provide relief against squatters who have no legitimate interest in a domain name and have registered it in bad faith.
However, in practice this system is cracking under the strain of cybersquatter and typosquatter proliferation and innovation. While arbitration under the UDRP is generally much cheaper than litigation under the ACPA, it still costs thousands of dollars in legal and filing fees at a minimum and frequently a lot more. Furthermore, if the culprit is using a proxy registration service or an offshore rogue domain name registrar as an accomplice, identification of the culprit and securing of the registration are much more difficult. Finally, successful acquisition of the abusive domain name registration doesn’t cut off the expense, since it must now be added to the portfolio of existing registrations to be maintained.
If all of this makes your head spin, now imagine adding several hundred more gTLDs to which squatters can hitch a trademark or a misspelling of a trademark. Some of these domain names a trademark owner will have to register or acquire, even under the most permissive brand protection strategy, if it cares at all about protecting its customers from phishing schemes and avoiding consumer confusion. Regulated financial institutions, which have a compliance mandate to educate their customers about security threats as well as to protect their reputations (and the bottom line from fraud losses), will need to be particularly vigilant. For example, letting a squatter use www.chase.bank is simply not an option. No wonder, then, that financial services companies and associations like Bank of America Corp. and the American Bankers Association have been among the most vocal objectors to ICANN’s gTLD initiative.
ICANN Responds to Trademark Owners
Faced with such objections and requests to delay implementation of the new gTLDs until a new trademark abuse prevention strategy could be devised, ICANN convened the Implementation Recommendation Team (IRT), a group of intellectual property experts, in March 2009 to examine the problem. On May 29, 2009 the IRT published its Final Report on Trademark Protection in new gTLDs (pdf) for public comment. In the report the IRT recommends coupling the implementation of the new gTLDs with several significant measures to protect trademark owners, including the creation of:
- An IP Clearinghouse to serve as a repository of data about asserted trademark rights (both registered and unregistered trademarks) throughout the world and a validator of these rights where trademark claims impact domain name registrations, and
- A Globally Protected Marks List (GPML) of select trademarks which have a large number of registrations in numerous countries and, accordingly, are targeted for the highest levels of abuse.
A “reasonable fee” would be assessed for the submission of marks to the IP Clearinghouse and GPML, but at a low enough rate so that holders of large trademark portfolios would not incur substantial costs exacerbating those of defensive domain name registration as described earlier.
The report also recommends the creation of a variety of trademark rights protection mechanisms (RPMs), some applying to the period prior to launch of the new gTLDs and others applying post-launch, which would utilize information in the IP Clearinghouse and GPML to resolve disputes and, in certain limited cases, block registration of infringing domain names. These measures would supplement, not replace, the UDRP.
The new gTLDs and the process ICANN is developing would apply worldwide. All registry operators for the gTLDs would be governed by the process, and they in turn would be required to bind all domain name registrars to certain commitments (like participation in the URS, if the IRT’s proposal is adopted). ICANN has been working with the World Intellectual Property Organization (WIPO) and other international groups on this project, and the IRT team is composed of IP experts from a number of different countries.
Rights Protection Mechanisms: an Alphabet Soup
The RPM proposals are complex and contain much administrative detail, so I do not attempt to provide a full summary here. However, a few elements of these proposals are particularly noteworthy Third-party applications for top-level domains that match or are confusingly similar to trademarks in the GPML (such as, hypothetically speaking, .apple) would initially be blocked, as would third-party applications for second-level domains that are identical to marks on the list (apple.computer, again hypothetically speaking). Applicants to be gTLD registry operators would be required as part of the application to specify both pre-launch and post-launch RPMs they intend to implement.
An example of a pre-launch RPM endorsed by the IRT report is participation in a Pre-Launch IP Claims Service, whereby, if a gTLD registry does not provide some other type of pre-launch RPM, and a third party attempts to register a second-level domain that matches a trademark contained and validated in the IP Clearinghouse (and that is not a Globally Protected Mark subject to blocking), the registry would notify both the trademark owner and the registrant. The registrant receiving the notice would not be blocked from registering the domain name, provided that it makes certain contractual representations and warranties – i.e., it has a right or legitimate interest in the domain name, will not use it in bad faith and (under penalty of cancellation of the domain name) has provided accurate contact information. (You can see what I mean about the procedures being complex.)
The IRT proposal also recommends that all gTLD registries be required to participate in a new Uniform Rapid Suspension System (URS), sort of a cheaper, fast-track, limited-purpose version of the UDRP for super-bad cybersquatters. Successful use of the URS would not result in cancellation or transfer of an infringing domain name registration, as with the UDRP; rather, the registration would be frozen for its natural life, and Internet users attempting to access that domain name would see a specific error webpage.
While the “substantive” standard for evaluating a URS complaint would be the same as the UDRP’s – bad-faith registration and use, with no legitimate interest in the domain name – the complainant’s “evidentiary” burden would be greater, so that it would have to establish its case by clear and convincing evidence, and the complaint would be denied if there was any “genuine contestable issue” about the infringement or the illegitimacy of the registration. (The URS is intended to resolve only the most clear-cut cases of trademark abuse; an unsuccessful complainant would still be able to seek relief under the UDRP or ACPA.) Complaints would be submitted to a third party selected by ICANN, which would retain a qualified legal expert to render a decision. Fees would be assessed by the third party on a cost-recovery basis. All in all, the process would be more streamlined and less formal than under the UDRP, and complaints could be submitted by e-mail.
Thick WHOIS Reporting
Finally, the IRT report recommends requiring all registry operators for the new gTLDs to provide WHOIS information under the “Thick WHOIS” model, as is currently done in the .biz and .info registries. This model contemplates the provision of detailed WHOIS information by the central registries for all domain names registered within those registries, rather than reporting by domain registrars (the “thin WHOIS model”), which tends to be less complete and reliable. Using the thick WHOIS model for the new gTLDs will make it easier and more cost-effective for trademark owners to identify and pursue squatters.
Will this Improve Inefficiencies in the Current Trademark System?
The IRT’s proposals are not going to sweep away the complications of preventing trademark abuse in the domain name sphere since the system of preventing domain name abuse in its current form is certainly overtaxed and inefficient. Brand protection is still going to be administratively complex and expensive, but the IRT’s proposals, if adopted, should compensate for some of the increased risk from the new gTLD’s. The GPML blocking proposal, in particular, should be helpful, although it will apply only to a relatively small handful of well-known marks registered throughout the world.
An Opportunity for Affiliates?
While these protections will undoubtedly aid trademark owners and represent a much needed supplement to the rather clunky and expensive UDRP, in light of the sheer number of domain name possibilities that the new gTLDs will open up, trademark owners can still expect to have their hands full (and wallets emptied) protecting their brands and fending off squatters. However, this headache and expense might create opportunities for new types of arrangements between merchants and their affiliates.
For example, rather than a merchant trademark owner trying to anticipate and register all domain names under the new gTLDs that could pose a problem if acquired by an unfriendly third party, it could license its affiliates to do so; the affiliates could either keep the domain names inert or have them resolve to approved ad copy. Affiliates could be paid a premium commission for clicks or transactions resulting from Internet traffic visiting the new domain names, to compensate the affiliate for both its initiative in opening up new real estate and the mitigation of trademark risk to the merchant from having the domain name in “friendly” hands. The affiliate contract could even contain a buyout clause giving the trademark owner the option to purchase the domain name registration from the affiliate at a designated price (the affiliate’s out-of-pocket costs plus some kind of premium).
For affiliates, such an arrangement would mean new sources of revenue. For the merchant, in addition to increased Internet traffic, the arrangement would mean lowering its trademark abuse and brand protection costs – fewer domain name registrations to acquire and maintain, fewer disputes to pursue under either the URS or UDRP. The “good guys” (affiliates) would effectively be deputized to compete with the “bad guys” in the new gTLD gold rush. However, affiliates sensing an opportunity should get on the same page with their merchants and enter into an appropriate contract before snapping up domain names; otherwise, they risk being lumped together with the squatters.
As the 2010 launch date approaches, hold on tight – it’s going to be a bumpy ride for sure.
Thanks for clear explanation about this issue.
david
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