The Internet has radically transformed IP strategies in the past 20 years and it is showing no signs of slowing down. In an extract from CPA’s latest white paper, Dominic Speller sets out expert advice on how to manage and monitor rapidly-developing digital content.

This may seem obvious, but in the early twenty-first century, the way in which businesses market their brands and manage their presence on the Internet is continuing to evolve. According to figures released by the Internet Advertising Bureau (IAB) in May 2007, there are now 30.9 million people online in the UK alone (66% of the population). The percentage is even higher in the US, with 69.5% of the population (210.5 million) registered as regular Internet users, according to Internet World Stats (IWS). In this environment, a company trading without an impressive online presence is analogous to a writer without a word processor.

Building an online brand
At the end of the first quarter of 2007, at least 128 million domain names had been registered worldwide, a 31% increase over the previous year, according to VeriSign Inc, which runs some of the core domain name directories for the Internet. Some believe that this is only the beginning, predicting that the industry’s market value could reach US$4bn by 2010, as people continue to purchase approximately 90,000 names a day and the number of domain registrars swell.

Unsurprisingly, the growth in the presence and value of domain names has transformed IP – and marketing strategies – beyond recognition. In the Web 2.0 generation, many of today’s biggest names rely almost entirely on the Internet for exposure. YouTube and MySpace are examples of sites that have capitalised on the reach of the Internet, while companies such as Amazon.com, lastminute.com and Google are all successful, revenue-generating businesses that trade solely online.

Where a company’s entire brand survival is indelibly linked to the Internet, it’s important that this be well constructed – and properly protected. Arguably, nowhere else in the commercial world are cutting-edge legal solutions more relevant.

To be successful online, brands need to be ‘memorable and distinctive, relevant to their customers, useful and useable, efficient, and consistent with their implied service promise’, says US Internet media company iXL. But in order to maintain success online, brands need to be protected from both a technical and legal perspective. Without the combination of these, any business reliant on the Internet could easily be subjected to difficulties.

Certainly, once the creative and technical teams have designed an online brand commensurate with iXL’s criteria, legal advice is essential to ensure that a business manages its online presence to best effect.

Once a brand has been created, it’s advisable to implement watching strategies to deal with attacks on a rights holder. As Geoff Steward, IP partner with law firm Macfarlanes, explains: ‘Making sure that a member of staff does a Google search on the company name and key brand names every Monday morning could throw up examples of cybersquatting or IP infringements.’ However, this process is often very time consuming and you may not catch everything, so the alternative would be to deploy the skills of a specialist trademark-watching company or agent.

The threat of piracy
The danger of brand damage is something to be very aware of, with competitors, bored teenage hackers and gripe sites all able to damage a growing brand in a variety of ways. Their activities may sit uneasily on the borderline of the right to freedom of expression – enshrined in law in many Western jurisdictions – but rights holders need not abandon hope. There are ways in which they can protect their online brands.

Even at the outset, when a domain name is being chosen, the question of enforcement needs to be considered. It is vital that rights holders can adequately protect their brands, whether from cybersquatters, cybersmearing, piracy or phishing, all of which are increasingly embedded in the lawyers’ lexicon. As Steward explains: ‘A rights owner may not feel that the gTLD dispute resolution procedures are adequate, and may consider that litigation in a chosen ccTLD jurisdiction will be more effective.’ However, litigation is not the only solution in cases of piracy, and companies need to become increasingly clever in the way in which they select and retain their chosen domain names.

Part of this is driven by the fast-moving nature of the Internet. Only a few years ago, ‘cybersquatter’ was a relatively new term to the law. Now the courts are fully aware of the dubious methodology of the cybersquatter – the cynical and opportunistic registrant of a domain name whose sole intention is to extort money from its rightful owner for its transfer. In its early form, the cybersquatter will offer to sell the name at an inflated price, or will threaten to divert users to a damaging ‘alternative’ site, either one that is offensive, such as a pornographic site, or to sites that compete with the legitimate rights holder. These days, cybersquatting has become a far more complicated and challenging threat to domain names; the rise of domain tasting provides a pertinent example. Exploiting a loophole in the process of registering a domain name, cybersquatters are able to ‘sit’ on a domain name for three days to test traffic to a site before they register it, or release it.

New threats have also emerged, bringing with them new challenges. The practice of domaining, once considered to be a form of cyber piracy, is now being recognised as a legitimate business model. Indeed, ICANN, the not-for-profit organisation which manages the Internet’s Top-level Domain Name (TLDN) system, estimates that the domain name market, which has an estimated annual worth of US$500m, is quickly being overshadowed by the domaining after-market, now believed to be valued between US$1-2bn.

Domainers generate revenue via domain parking, through the resale of these names and by developing domain names into fully functioning websites. These domains are generally populated with links to Google advertisements, generating rental revenue for the owner and web traffic for tenants who may choose to ‘park’ on the site. Once the site builds up enough steady traffic, it can then be sold on to the highest bidder. Recently, for example, www.recycle.co.uk changed hands for £150,000, the highest fee ever paid for a .uk domain name. But this is small fry compared to the wider web, where .com domain names have changed hands for as much as US$7.5m (www.business.com).

The question for brand owners is therefore: if a domainer has registered a generic name in your field and is receiving enough hits ICANN estimates that the domain name market is quickly being overshadowed by the domaining after-market, now believed to be valued between US$1-2bn. to justify its upkeep or sale, why haven’t you registered that name todirect traffic to your own website? By understanding the approach of domainers, brand owners should be able to assess their own domain name registration and SEO strategies.

In cases where a cybersquatter or domainer has infringed your trademark rights by registering a domain name in bad faith (or, simply, without being aware that the domain name infringes an existing trademark), domestic courts provide the opportunity for claims to be heard. However, well-informed brand owners can avoid the expense necessary in cases of litigation.

Prevention better than cure
Ultimately, the best way to resolve a dispute is to avoid it in the first place. Those with a proactive approach to registering domains benefit from the best chance of protecting their valuable brands from infringement. However, to do this successfully, brand owners need to be aware of restrictions on domain name registrations and to keep on top of rule changes in the countries where they register their brands.

ICANN estimates that the domain name market is quickly being overshadowed by the domaining after-market, now believed to be valued between US$1-2bn.

Many domain name experts recommend that companies should buy all the titles available that legitimately suit their name and brand(s), at the same time as checking to see if other businesses have got there first. However, blanket defensive registration policies are fast becoming outmoded as a method of protecting all but the core brands of any company. This is partially due to improvements in the availability, technology and service behind domain and digital content monitoring offerings, coupled with a greater understanding and acceptance of domain names as legal IP Rights.

Nevertheless, it is still wise to protect key brands through defensive registrations in key territories for your current or future business operations. However, in those territories deemed less important for overall brand strategy, it makes more sense to monitor domain name registrations for potential infringement. Ultimately, most brand owners will agree that whatever the cost of their brand protection strategy, the overall value of the brand and its reputation is vastly greater.

Is it such a big deal?
Many consumers have an indulgent attitude to rogue traders, as if they somehow encapsulate a lost spirit of entrepreneurialism. But according to Anthony Riem, partner with City law firm, PCB, which specialises in commercial fraud and asset recovery, it is about time we woke up to the real cost of such fraud.

‘The demand for fake goods is incredible,’ says Riem, citing the seizure of goods worth £1.5m at the Wembley street market in the UK in 2006, ‘but people seem blind to the implications of allowing counterfeit trade to continue. Based just upon the value of fake goods seized at Wembley market, the VAT payable on fake goods sold at the 1,200 permanent markets in the UK would have been enough to build a school or hospital.’ The problem is compounded by the Internet, says Riem, not only because of its global reach but because the law tends to treat online auction sites as conduits of information, rather as a publisher which would, in most cases, be legally liable for content. Beyond that, says Riem, ‘we should remember that organised and dangerous criminal syndicates are behind online counterfeiting. They use revenue to finance other, more obviously unacceptable activities, such as drug running and terrorism’.

Riem is convinced that the most effective deterrent is taking away the proceeds of crime. ‘We are fortunate in that domestic law has wide-ranging powers that enable action without notice to the criminal. We can obtain third-party disclosure orders, using civil procedure rules and the Norwich Pharmacal principle, to compel Internet Services Providers (ISPs) to disclose who is posting material online, which are in turn accompanied by so-called ‘gagging orders’ to prohibit the ISP notifying anyone. Similar applications can be made to banks to freeze assets. The overriding point to be made is that the English courts cannot abide the idea of London being used as a centre of international financial crime, and so are very open to attempts to stop the fraudsters. Our courts are on the cutting edge of finding ways to combat online counterfeiting.’

Similarly, in the US, a growing number of legal tools are available to firms and their clients to help combat counterfeiting and Internet crime. Temporary restraining orders (TROs), permanent and temporary injunctions, and orders of seizure and asset seizures can all help brand owners to enforce their rights.

A number of other mechanisms exist to deal with the problem. eBay has implemented the Verified Rights Owner (VeRO) Programme to allow brand owners to report listings that infringe their IP Rights. Yahoo! also provides an Auction Abuse form that enables users to report any listing that abuses its guidelines and Terms of Service. Brand owners without their own in-house manpower can also use automated services.

But as Olswang’s IP consultant, Jeremy Phillips, points out, legal remedies in the virtual setting of the Internet are not always that simple. ‘Even if you do find your target, where can you sue them? The Internet is the proverbial global village, but courts only exist in real locations – countries,’ he explains. ‘Old-fashioned terrestrial law has its own web of rules that decide which country’s courts you can sue in, with separate rules governing arbitration of domain name disputes by WIPO, Nominet and other national registrars. And, even if you know who your e-quarry is and you’ve found somewhere to sue, you need to assess the likely results  of your enforcement action. If your infringer has no assets to speak of, you can forget about winning damages and getting back costs.’

Ultimately, it’s all about retaining control of your brand in the virtual world, and that necessitates a step change in the way in which users view the Internet. Educating the public of the cost of online fraud is, according to most experts, essential. So, too, as Jeremy puts it, ‘intelligence and effective deterrents’. In a world which has changed immeasurably thanks to the advent of the Internet, and which is set for yet more accelerated evolution, ‘education, intelligence and effective deterrents’ would seem a sensible formula for brand owners looking to manage and protect their digital content. So, too, an ability to think laterally – and a readiness to utilise legal remedies when necessary.


Front running: the new threat for online brands?
ICANN’s Security and Stability Advisory Committee (SSAC) has recently highlighted a new threat for IP Rights owners: ‘front running’. In ‘front running’, unscrupulous operators are thought to be monitoring legitimate checks for the availability of a domain name and the information used to register desired addresses. They are then jumping ahead of the legitimate businesses to register the domain names in order to sell them back to the user at a profit.

Companies who want to buy a domain name usually check for availability first on websites such as whois.net or through Registrar companies. It is at this point that unscrupulous operators may be registering names in order to profit from the demand. While there is no evidence of how or even if the practice is widespread, ICANN has received sufficient complaints to suggest that the practice might be taking place.

According to ICANN, potential, but unproven, sources for front runners to gain information could include free online Whois search services, malicious software infection, such as worms and Trojan executables, brand information leaks and unscrupulous registrars.

Protect your rights
In the absence of any formal ruling from ICANN on front running – and, indeed, clear proof that the practice is taking place – it is prudent to follow a few easy steps internally to mitigate against the risk of this threat:

1 Only use the availability check service provided by your trusted domain service provider, such as the CPA domains extranet. Do not use free un-vetted Internet services to conduct availability searches.

2 ensure the PC you use to search availability is free of viruses and unauthorised executables.

3 Maintain complete confidentiality around brand launches and ensure that staff involved in brand launches are briefed on the dangers of information security on the Internet.

4 Attempt to search the availability for desirable domain names as little as possible, and as close to the required date of registration as possible. The CPA domains extranet can carry available names directly into an automated order system, where they can be registered almost immediately.

5 Automatically register those domain names which are likely to be key trading sites for you as early as possible. CPA provides a domain valuation service which examines multiple factors of the domain, such as TLD, length, traffic, search engine popularity, comparable sales, current use of the domain and the amount of revenue the seller is likely to lose by releasing the domain. To find out more on domain name valuation, visit www.cpaglobal.com/domains.

Find out more
The field of domain names is an exciting and fast-moving industry. But, as businesses extend their Internet offerings to maximise their brand presence or better communicate with consumers, new threats are emerging that can undo all of this hard work. For more information on how to protect your domain names and IP Rights online, download CPA’s white paper ‘Going Digital’ at www.cpaglobal.com.


This article first appeared in IP Review, issue 21

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