Alert September 29, 2009

Proposed Introductions on New Generic Top Level Domains Could Significantly Affect Trademark Owners

The Internet Corporation for Assigned Names and Numbers (“ICANN”) has announced plans to create an indefinite number of new generic top-level domains (“gTLDs”) and will accept the first applications for such new gTLDs as early as the first quarter of 2010. Currently, users are limited to 21 gTLDs, including .com, .org, .net and .info. But pending final approval of the implementation plan, ICANN will remove this restriction and allow eligible parties to apply for virtually any self-selected gTLD, including trademark-specific domains like .coke or .google, generic terms such as .sport and .bank, geographic terms such as .paris, as well as virtually anything else. The proposed changes will also permit the registration of gTLDs featuring non-Roman characters.

According to ICANN: “Opening up these addresses so new names can appear could produce a new wave of innovation – innovation for businesses and billions of non-English speakers.”1 ICANN claims that this initiative comes in response to demand from the Internet community and that many potential registrants are thrilled at the possibilities the new gTLDs present. Proponents view the change in the domain system as an opportunity to increase their visibility in an Internet space presently dominated by the overcrowded .com domain.

More established brand-holders and many members of the trademark bar, however, have generally remained skeptical if not hostile to the proposal. They see no pressing need for additional gTLDs and believe their introduction will only impose on brand owners significant costs and burdens (neither of which are needed in this economic climate) to protect their brands from countless new opportunities for cybersquatting. To the extent that there is “demand” for new gTLDs, opponents believe that the demand is coming from the registrars which will benefit enormously from the potentially infinite new pool of names to be bought, and not from potential registrants, or brand owners. The six-figure application/evaluation fee, which ICANN insists is no higher than is necessary to recover the costs associated with the new program, opponents argue, is excessive bordering on extortionate, and the potential for consumer confusion created by the new domains is far too great.

Background

When ICANN was founded in 1998 to, among other things, manage the domain name system, there were eight existing gTLDs. Many of these original gTLDs (e.g., .com, .edu and .gov), in fact, continue to be the most widely used gTLDs today. Soon after its founding, ICANN started to clamor for the introduction of additional gTLDs (the implementation of which would, of course, result in additional revenues for ICANN). That work culminated in the introduction of seven new gTLDs in late 2000, including .aero, .biz and .coop. A further round of new gTLDs, which included .asia, .jobs and .mobi, was then introduced in 2004. In December 2005, the Generic Names Supporting Organization (“GNSO”) was called on to create a standing policy to guide the introduction of new gTLDs. Its policy development work continued until September 2007 when it issued its final report. ICANN subsequently approved the GNSO’s recommendations in June 2008 and embarked on its current plan to dramatically expand the Internet domain system. After a series of draft applicant guidebooks, public comment periods and delayed launch dates, a final applicant guidebook is expected in December 2009, allowing the first round of applications to be filed in early 2010.

No Sunrise Period for Trademark Owners

ICANN’s original plan did not automatically reserve gTLDs for trademark holders. Instead, the new gTLD registration process will operate on a first-come, first-served basis.2 Thus, companies will soon have to decide whether to spend the over $150,000 per name filing fee to register their brand-specific gTLDs (e.g., .nike) or risk seeing their marks registered by someone else. Companies will also have to decide whether to apply for any variations in spelling, spacing, hyphenation, abbreviation, gripe names, common typographical errors, etc., to protect against typosquatters, scammers and phishers. Moreover, with every potential new gTLD for a generic term, brand owners in the relevant industry will have to think seriously about whether they want to register first the generic term itself, and then whether to register their marks as domains under that top-level domain. Thus, for example, a large brand-centric company like Coca Cola would face a number of daunting and expensive choices. They would need first to consider registering key trademarks as gTLDs like .coke, .cocacola, .sprite and so on. But they would also need to decide whether to register generic terms like .cola, .soda and .drink. And then they would have to decide whether to register domains within those gTLDs like coke.drink, sprite.soda, and so on. The permutations are limited only by the imagination and the budget.

How ICANN Plans to Protect Trademark Owners Against Infringing gTLDs

In order to provide some protection for brand-owners, ICANN’s plan calls for an objection-based process for dispute resolution where third parties can object to a gTLD application before ICANN approves it. An objection, which will be considered before a panel of qualified experts, can only be based on one of four grounds:

  • String Confusion. An applied-for gTLD string cannot be “confusingly similar to an existing TLD or to another applied-for gTLD.”
  • Legal Rights. An applied-for gTLD string cannot “infringe existing legal rights of the objector.”
  • Morality and Public Order. An applied-for gTLD string cannot be “contrary to generally accepted legal norms of morality and public order that are recognized under international principles of law.”
  • Community. An applied-for gTLD string will be refused if there “is substantial opposition . . . from a significant portion of the community to which the gTLD string may be explicitly or implicitly targeted.”

The objected-to applicant must either file a response or withdraw the application. If it does neither within 30 days, it will be deemed to be in default and the objection will prevail. By withdrawing the application, the applicant will be entitled to a partial refund of its evaluation fee – the amount of which depends on the stage in the process at which the application is withdrawn.3 The non-refundable portion of the evaluation fee (at least 30%, or $55,000) serves as a significant deterrent against frivolous applications.

ICANN is also implementing a process where new gTLD applicants are required to describe within their applications their Rights Protection Mechanism (“RPM”) for second-level domains. That is, once a new gTLD is up and accepting registrations, how will the registrar resolve disputes between competing applicants for names immediately to the left of the “dot”?  ICANN will publish these RPMs at the same time it makes the applications available to the public. The RPMs must, at the very least, ensure that all second-level registrations will be subject to ICANN’s well-known Uniform Dispute Resolution Policy, which governs .com (and other) domains. But it remains unclear how stringent these RPMs must be.

Relying on ICANN’s Processes May Not Adequately Protect All Trademarks

ICANN’s protective mechanisms should discourage most entities from applying for gTLDs that are frivolous or obviously violate the trademark rights of others, as should the costly application fee and (if the application is approved) the mandatory annual service fee (at minimum, $25,000 per year). Furthermore, ICANN’s dispute resolution process should prevent the approval of any applications from obvious scammers/cybersquatters, assuming trademark owners object in a timely manner. It is important to note, however, that ICANN will not notify trademark owners in advance if another entity has applied for a gTLD that includes the owner’s brand. Indeed, ICANN will not take any affirmative steps to determine whether a new gTLD application contains a third party’s trademark. Accordingly, trademark holders, particularly those which do not register their brand-specific domains, will have the burden of monitoring ICANN’s website regularly for potentially infringing gTLD applications.

Relying on ICANN’s processes, however, may not adequately protect all brands. In cases where trademark infringement is not obvious, for example, trademark owners run the risk of coming out on the losing end of the dispute resolution process. Furthermore, a domain that is similar to, or even the same as, an owner’s brand may not necessarily be objectionable, as companies often have trademarks in the same word or phrase for different goods or services or in different jurisdictions. For example, is Delta Airlines entitled to the .delta gTLD, or is Delta Faucets?

Similar domains, even if not infringing, can nevertheless pose practical problems for people looking for the site of a particular brand on the Internet. Search results, for example, will return all similar names as plausible hits. And with the introduction of an unlimited number of new gTLDs, not to mention second-level domains, the number of hits will dramatically increase, making it far less likely (and perhaps at some point, virtually impossible) for a user to find the site he or she is looking for. Indeed, the new domain system will make Internet searching much more complicated and the web much less user-friendly. No longer will Internet users be able to simply tack “.com” to the end of a brand’s name to find a site. Sometimes these problems can be serious. Take the example of an organization that fraudulently creates a site that looks similar to that of a brand owner and then requests private account information, like credit card information. If such a scam (known as pharming) were successful, not only would this cause tangible problems for the brand’s customers but it could also cause customers to mistrust the brand in the future.

Planning Ahead

Recognizing that there are still significant trademark protection issues left to resolve, on March 6, 2009, the ICANN board unanimously passed a resolution requesting the GNSO’s intellectual property constituency to assemble an implementation recommendation team (“IRT”) composed of an internationally diverse group of experts to develop and propose solutions to the trademark issues that have arisen with regard to the introduction of new gTLDs. On May 29, 2009, the IRT published its final report to the ICANN community.

The report outlines five solutions that, according to the IRT, address the most salient trademark issues but also represent only the bare-minimum protections to safeguard trademark owners’ rights. Summarized, the five solutions were to:  (i) create an “IP Clearinghouse,” which will function as an information repository, to reduce the cost and administrative burdens of protecting trademarks; (ii) require all new gTLD registries to take part in a Uniform Rapid Suspension System; (iii) implement a post-delegation dispute resolution mechanism much like the one proposed by the World Intellectual Property Organization; (iv) make “thick WHOIS” mandatory for all registered names; and (v) adopt a revised algorithm for determining string confusion. In a recent hearing before Congress, ICANN would not commit to implementing any of the five recommendations, but indicated that two of them, “thick WHOIS” and streamlined dispute resolution, would be mentioned in its next applicant guidebook, due out in October 2009.

The controversy over the new gTLDs coincides with, and has complicated, the upcoming renewal deadline of ICANN’s contract with the U.S. Government to manage the domain system, which is due to expire this coming September 30. ICANN is eager to be free of government involvement, but opponents of the new gTLD system argue that the controversy is proof that ICANN is not yet ready to be completely independent. Two members of Congress, Reps. Howard Coble (R-NC) and Lamar Smith (R-TX), recently wrote to ICANN to express these concerns, stating that the domain expansion is “likely to result in serious negative consequences” for trademark owners and the public, and that “Given the late consideration of intellectual property concerns, the lack of a credible independent analysis on competition issues in the context of proposals to expand gTLDs, as well as ICANN’s less-than-stellar track record on a variety of other issues, … we have serious misgivings about the prospect of terminating the formal relationship between the U.S. Government and ICANN….”

In the meantime, trademark owners should start thinking about how to protect their brands in light of the new domain space. On February 18, 2009, ICANN released a second draft of its applicant guidebook and accompanying explanatory memoranda detailing the gTLD application and registration process. ICANN also published an analysis of the hundreds of public comments it received in response to the first draft. These materials can be found on the ICANN website here. Brand owners should review these materials thoroughly.

Companies will have to give serious thought to registering their brand-specific gTLDs (and any variations in spelling, spacing, etc.) and should budget for this cost very soon. Moreover, all companies, even those that plan on registering their brand-specific names, should become familiar with ICANN’s dispute resolution processes in the event they have to protest any infringing top-level and/or second-level domains.

Conclusion

Despite significant criticism and limited public support, ICANN insists that its plan to expand the current Internet domain system is good for consumers and good for business. In the long run, as the Internet continues to expand and its reach becomes increasingly global, this may be true. But one point is clear:  there is no current market demand for new gTLDs. Instead, the new domain name system will come at a cost, both literally and figuratively, to trademark owners. Trademark owners will have no choice but to spend a significant amount of time and money to protect their brands, with no immediate prospect of a tangible return on that investment.