Uncharted territory

ICANN’s plans to liberalise the domain name system by introducing an additional tier of new generic top-Level domains has left many brand owners worried about their online brand strategies. Three experts offer guidance and argue for reform, while ICANN’s Paul Levins defends the plans

ONE: THE BUSINESS TAX BRAND OWNERS ARE NOT EXPECTING
ICANN’s plans are unnecessary, disorganised and overly expensive, says Josh Bourne, president of the coalition against domain name abuse

In 1996, the then chairman of the Federal Reserve, Alan Greenspan, spoke about the dot-com boom and questioned at what point one could identify that ‘irrational exuberance’ had unduly escalated asset values. Greenspan’s words remain relevant today as we face a potential onslaught of new Top-Level Domains (TLDs). Will this change to the internet landscape be dictated by fact or hype?

First, let’s take a step back. Who develops, approves and implements policy for the internet and why do they have that authority? Transparent governance of internet policy is crucial as the web increasingly becomes the engine for commercial activity, artistic and intellectual creativity, and, regrettably, mischief too.

The Internet Corporation for Assigned Names and Numbers (ICANN), a California-based non-profit organisation, is the governing body of the internet tasked with the day-to-day responsibility for establishing policies and managing the operations of the internet’s domain name system. ICANN oversees the operation of the 13 root servers that make up the veins and arteries – and even the heart and soul – of the internet, and is tasked with fairly representing all the diverse constituencies that compose the internet community. In recent years, however, ICANN has developed policies that I believe will actually harm its constituents instead of representing their needs. The recently approved policy to vastly expand the universe of TLDs is a prime example of such a policy.

Ignoring complexity
Plans to dramatically increase the number of TLDs available for registration will make the web exponentially more complex. Given the state of the current domain name governance system, priority should be given to correcting existing issues rather than expanding the space. For example, it is still too easy for cybersquatters to register domain names in bad faith that are lawfully associated with legitimate entities. Even without these proposed TLDs, cybersquatting grew by 18% in the last quarter of 2008 (to 440,584 instances). A proliferation of untested and unproven new TLDs will expose businesses and consumers to more cybercrime.

Unfortunately, much of the onus of recovering infringed names is placed on brand owners. They are tasked with all the due diligence, financial or otherwise, to recover names. As soon as they have successfully recovered one set of names, another 10, 100, or 1,000 infringing names are registered. Brand owners, who are already struggling to manage infringements in the 1,000+ worldwide domain extensions, will be forced to contend with the added complexity of policing the use of their brands in many additional domain names if these new TLDs go ahead.

The costs of monitoring, defensively registering and enforcing the new TLDs are likely to be substantial. We estimate the cost to US businesses of defensively combatting this form of cyberpiracy at $1.5bn. This is not to mention the brand dilution, proliferation of cybercrime and damage to the integrity of the internet that may occur.

The genesis of the policy to issue new TLDs is unclear. It was fleshed out and articulated by the Generic Names Supporting Organization (GNSO), ICANN’s policy-making body. While the benefits of the policy are not evident to internet users, there are discrete businesses, namely registrars and registries, which would reap direct financial benefits from this policy.

Registrars are the for-profit businesses in charge of selling domain names to the general public. Registries are the companies that administer TLDs. New TLDs will promote the registration of millions of new domain names, substantially increasing the profits to these registrars and registries. Even ICANN could net a projected $90m in registration fees.

The practice of financing the success of new TLDs through ‘sunrise’ participation (the early registration period allocated to trademark owners) has become commonplace. If past TLD expansions are any indication, sunrise periods tend to be driven by registry operators and registrars which hope to create enough momentum to garner instant profitability for their new extension.

From what we see in the industry, businesses are either dismissive of the new TLD rollout, or are taking a ‘wait and see’ approach. If new TLDs become incorporated into consumer behaviour and it becomes standard to participate in registrations for a brand TLD, they will follow suit. However, there is a fear that this pragmatic approach will give way to emotional decisions in the final days before the first application period. In other words, businesses should be wary of the irrational exuberance surrounding the launch and follow through with the best approach for their company and brands. Otherwise, resolving brand infringement later on will cost them exponentially.


TWO: THERE’S STILL TIME TO BUILD EFFECTIVE RIGHTS PROTECTION
ICANN needs to put some real workable solutions in place to prevent brand abuse, says J Scott Evans, senior legal director of global brand and trademark, Yahoo! Inc

The possibility of an unlimited and ever-increasing number of TLDs has caused a furore within the international trademark community. Trademark owners are already faced with serious trademark infringement and other abuses such as phishing. Added to this is the new concern that expansion of the domain name system without proper mechanisms for brand enforcement will be a disaster for consumers who rely on trademarks to identify legitimate goods and services on the internet.

A competitive landscape
ICANN was established in 1988 as part of a policy created by the National Telecommunications and Information Administration (NTIA), under the direction of the US Department of Commerce. In its initial research and final Statement of Policy, NTIA stated that the management of the domain name system needed to be changed because of several overarching issues caused by the evolution of the internet from a US-based research tool to an international medium for commerce, education and communication.

There were two main drivers of change: dissatisfaction with the lack of competition in domain name registration, and the need for cost-effective mechanisms that would protect trademarks. At the time it was published, the domain name system was populated by a little over 200 country-code Top- Level Domains (ccTLDs) and seven generic Top-Level Domains (gTLDs). There are now 21 gTLDs, more than 240 ccTLDs and two quasi-geographic TLDs (.asia and .eu). The price of a domain name registration has also dropped from around $50 per domain to as little as $1.99 per registration.

Clearly, ICANN has succeeded in bringing competition to the domain name system. Unfortunately, however, it has failed to establish sufficient mechanisms to thwart brand abuse in the new open TLDs. Even with the establishment of its Uniform Domain Resolution Policy (UDRP), the expansion of the gTLDs from seven to 21 has exponentially increased the cost of brand protection for trademark owners. And, like all costs associated with doing business, these additional costs are eventually pushed down to consumers.

Not only do brand owners have to contend with cybersquatting abuses, but they must also react routinely to the use of their brands in other nefarious activities such as phishing and consumer fraud. Given this reality, the expansion of open gTLDs from 21 to a potentially unlimited and ever-growing number is a serious concern that threatens to overwhelm brand owners’ enforcement efforts and budgets.

Building a strategy
The current business climate created by the recent worldwide economic downturn has already forced many brand owners to be more selective in their enforcement efforts. For example, Yahoo! is utilising new tools to ensure that its enforcement activities are effective, both in terms of cost and potential remedy.

That’s why I am also participating in the ICANN process as a member of the recently constituted Implementation Recommendation Team (IRT), which is working towards identifying proposed solutions for brand abuse in the new gTLD rollout. Yahoo! is hopeful that the solutions put forth by the IRT will be adopted by ICANN, and I would recommend that trademark owners who are concerned about the new gTLDs should actively participate in the public comment periods.

IF WE HAD KNOWN THE ABUSES THAT WERE TO BE PRACTISED AND THE ASSOCIATED COSTS, WOULD INDUSTRY HAVE SAID ‘NO’ TO COMMERCIALISING THE INTERNET?

But, even though the expansion of the domain name system raises some very serious questions, the prospect is not all doom and gloom. For some trademark owners, the possibility of a brand-specific TLD could be a wonderful opportunity.

By maintaining their own .brand, businesses could redefine the internet experience for their customers.

There are still open questions around the concept of brand-specific TLDs and, for this reason, trademark owners interested in exploring this concept should follow the process surrounding the implementation plan for the new gTLDs closely. They should also be consulting legal counsel now about this possibility to ensure that they are ready to apply when ICANN begins to accept applications in late 2009/early 2010.

In my opinion, there are some serious hurdles for ICANN to clear before it can begin this process. Specifically, the organisation must design and implement effective rights protection mechanisms to ensure that trademark owners have cost-effective and efficient solutions to combat brand abuse within the domain name system. Without real workable solutions in place, I believe the uncontrolled expansion of the domain name system will harm consumer confidence which, in turn, will threaten the security and stability of the system.


THREE: MANAGING THE INCREASE IN DOMAIN NAME DISPUTES
Yes, domain name disputes are on the rise but a way to resolve them is already in place, says Alistair Payne, head of the IP Group at Matheson Ormsby Prentice

One of the great innovations in protecting IP Rights and in alternative dispute resolution of the last decade has been the UDRP. It was developed as a fast and economical administrative procedure for resolving TLD name disputes involving cybersquatting in 1998. Since then, more than 20,000 domain name disputes have been resolved under the UDRP.

The main reason for its success is that the UDRP is fundamentally simple and efficient with a limited mandate of protecting legitimate trademark and trade name owners against cybersquatting. Service providers administering the UDRP and panellists deciding cases have very much kept these principles in mind in developing a body of decisions across the range of circumstances that involve cybersquatting. As a result, there is a high incidence of consistency of decision, and experienced practitioners in the area can advise clients on the likelihood of success in making a complaint under the UDRP with considerable certainty.

From a complainant’s perspective, going to litigation is now very much seen as a fall-back option. It is reserved for circumstances that might take the case outside the scope of the tests under the UDRP or where it is more complex than just cybersquatting. There is almost no other basis on cost- or time-efficiency grounds to justify litigation.

From a respondent’s perspective, the onus under the tests in the UDRP is very much on the complainant to demonstrate that the respondent has no legitimate interest in the disputed domain name and has registered and used it in bad faith.

Hurdles for the complainant
While the UDRP provides for express circumstances in which registration or use in bad faith are deemed to occur, there remains the requirement that the complainant must jump both the ‘no legitimate interest’ and ‘bad faith’ hurdles in order to succeed – and this is after having demonstrated that it owns trademark rights which are identical or confusingly similar to the disputed domain name. In other words, the complaint will fail if any element or ‘limb’ of the test is not fulfilled, which means that even if a respondent does not file submissions in response, the presiding panellist must determine whether the complainant has provided sufficient evidence to satisfy each limb of the test.

Despite this control on whether complaints can succeed, there is a very high complainant success rate under the UDRP. One of the largest administrative service providers, the World Intellectual Property Organization (WIPO) Mediation and Arbitration Center, reports that complainants succeed in 85% of its cases. Anecdotally, it appears that relatively few decisions to transfer or cancel a disputed domain name are subsequently reviewed by national courts. WIPO’s statistics indicate that there has been a substantial increase in the number of complaints filed under the UDRP since 2003-04, with the rate peaking in 2008. Many more complainants and respondents come from the US than anywhere else. France and the UK are the next most frequent sources of complainants, and the UK, China, Canada and Spain the next most frequent locations for respondents.

The substantial increase in complaints since 2003-04 is largely attributable to the increased take-up of the internet, the continuing rise in cybersquatting cases and the success of the UDRP. It does not appear to be as a result of the additional range of TLDs (such as biz, .tel etc) introduced over this period as, according to WIPO’s statistics, nearly 90% of all disputes concern .com or .net.

However, the recent approval by ICANN of a further extension to the domain name system may change that. According to the first draft of the guide for applicants, it will be possible for trademark owners to apply for their own trademark in the format .brand, a generic word such as .travel or a geographical identifier such as London. There will be criteria dictating the basis on which an organisation may apply for each category of new gTLD and there is a proposed ‘legal rights’ basis for objecting to an application. An ICANN committee is looking at additional procedures to counter abusive use of the new gTLDs.

Eventually, the UDRP system will sit side by side with the yet-to-be finalised objection and anti-abusive use procedures for the new gTLDs. There is no current indication that complaints under the UDRP will slow down; if anything they are likely to increase as internet-based commerce gathers further momentum. As a result, this proven model of international alternative dispute resolution is here to stay.


PROMOTING COMPETITION TO STIMULATE INNOVATION
The growth of the internet should be innovation-led, just as it was at the very beginning, says Paul Levins, ICANN’s executive officer and vice president of corporate affairs

Innovation is not demand-led. There were never demands for Facebook; there were never crowds calling for Skype; I’m old enough to remember anger when FM radio was introduced (‘I’ve already got a radio – why do I need one with two bands?’). The expansion of gTLDs brings with it well-understood concerns about trademark protection and malicious use of the internet. Those concerns are measurable and the problems able to be contained. What’s not measurable, what should not be contained, is innovation. Competition and choice are key platforms in creating innovation and they are the key drivers of this expansion.

The proposed introduction of new gTLDs is not an overnight sensation. ICANN has not suddenly dreamt up this expansion and, without warning, decided to spring it upon the internet community. Indeed, the idea has come from the internet community itself and was brought to its current point through 10 years of thought, testing, research and discussion.

Those discussions involved a wide variety of stakeholders including governments, individuals, businesses, IP constituencies and the technology community. It was only in October 2007 that the GNSO, one of the groups that advises the ICANN Board of Directors on policy, approved a set of recommendations for the expansion of the TLD. The ICANN Board agreed that the expansion could be implemented at a public meeting in June 2008 (one of three held every year since ICANN was established 10 years ago). In other words, the decision to introduce the new gTLDs sprang from a 10-year-long, bottom-up, multi-stakeholder-fed process that is at the heart of policy formation at ICANN.

Enabling competition
Those who have studied the issue believe the expansion will result in improvements for internet users. University of Chicago economics professor Dennis Carlton in his preliminary report on the impact of new gTLDs on consumer welfare said: ‘The likely effect of ICANN’s proposal is to increase output, lower price and increase innovation. This conclusion is based on the fundamental principles that competition promotes consumer welfare, and restrictions on entry impede competition.’

But, what of the concerns? ICANN has made it clear this expansion will not proceed until IP-related concerns are addressed. There is already a range of protections in place in the Draft Applicant Guidebook; for example, the applicant needs to demonstrate that they will protect rights of others, there is a post-delegation right of appeal and the existing protections and appeals mechanisms will continue to apply. In addition, last month, after receiving comments on the first Draft Applicant Guidebook, the ICANN Board set up an Implementation Recommendations Team to give answers to the concerns expressed. That team is independent and made up of IP experts; in other words, those people most affected and with expert knowledge of the domain name system. It will deliver solutions.

On the question of malicious use, advice is currently being sought from the entire internet community and ICANN’s Security and Stability Advisory Committee. These abuses should not be underplayed. They cause businesses and trademark holders heartache, chew up time and are expensive. But, they are not new to this gTLD expansion. They have been with us since the internet was commercialised. There are bad actors that practise abuse and ICANN as much as anyone else wants to eliminate them. But that does not mean we should limit opportunity. It means we must look to the opportunity presented by increasing gTLDs, to see how new contracts can be developed to better protect consumers, businesses and internet users, and crack down on abusers. If we had known the abuses that were to be practised and the associated costs, would industry have said ‘no’ to commercialising the internet?

There are already many innovators keen to get going: city-based names (.NYC, .Paris, .London, .Berlin); community-based (.eco; – supported by Al Gore; .green; .cyn – for the Welsh-speaking community); and, most recently, .sport, supported by Olympic sports bodies. But .sport exhibits the tensions around this issue. Individual sports federations (some of which are represented at the Olympics) have been strongly supportive, while the Olympic Federation has forthrightly expressed its concerns.

The internet is one of the greatest innovations in human history because it allows anyone to innovate. Ideas can compete on a global stage. Individuals can reach others across the world. That has occurred through a concerted effort to make it as open and as accessible as possible, through coordination, notcontrol. The expansion of gTLDs is intended to increase competition, choice and openness. The problems can and will be controlled, but we should not seek to control the opportunities this innovation will produce.


ICANN welcomes comments and feedback on how best to proceed with the new gTLDs. You can have your say when the next Draft Applicant Guidebook is open for public comment at ww.icann.org
 

This article first appeared in IP Review, issue 26