Alert June 29, 2011

New Risks of Cybersquatting with .XXX Domain

September 2011 will see the launch of a new top level domain (“TLD”) specifically designed for web addresses devoted to adult content: .XXX. The introduction of this new adult-oriented TLD presents perhaps as many opportunities for cybersquatters as it does for companies in the adult entertainment industry legitimately looking to identify themselves to prospective customers. Consequently, trademark owners who do not want their brands associated with adult content will have to be pro-active to ensure their key marks are protected.

The Internet Corporation for Assigned Names and Numbers (“ICANN”) announced in April an agreement with ICM Registry enabling the release of the new .XXX TLD intended for use by the adult entertainment industry. Given the controversial nature of this TLD, there were prolonged negotiations between ICANN and ICM Registry, in which ICANN insisted upon stricter compliance and reporting requirements than have been imposed on operators of other TLDs. Developments in these negotiations have been watched closely by the trademark community in light of the special concerns brand owners have about the possibility of their brands being associated with adult entertainment and pornography – concerns that were heightened by the paucity of detailed information on Rights Protection Mechanisms (“RPM”) released by ICM Registry.

Finally, in May 2011, IPRota issued a much-anticipated white paper outlining the procedures that will be made available to trademark owners to protect their marks prior to the launch of the TLD. London-based IPRota is “a specialized provider of rights protection and related services, [and] has been contracted by ICM Registry to assist with the design detail and implementation of the .XXX rights protection mechanisms at launch.” IPRota describes itself as being “passionate about the protection and defence of intellectual property on the Internet.” The company was recently formed for the express purpose of designing and implementing RPM programs for new TLDs. .XXX represents its first such project.

The proposed RPM scheme for .XXX provides brand owners with two avenues for protecting their marks prior to launch: pre-registration and a “Sunrise” program. The options are not mutually exclusive; interested parties can and should take advantage of both.

Pre-Registration

The pre-registration process, which is already open to trademark owners, allows trademark owners to signal their interest in defensive registration of a trademark in the .XXX space. Pre-registration essentially enables brand owners to put a flag in the ground with respect to their key mark(s), and places the brand owners on ICM Registry’s mailing list to receive notifications such as when the Sunrise periods will begin, fee information, and forms, but provides no other substantive advantages during the Sunrise, Landrush and general registration periods to follow. There is no fee associated with the pre-registration process, and the form is currently available here.

Sunrise

The second and more important phase of the process is the “Sunrise B” period, scheduled to begin sometime in September 2011. (“Sunrise A” is a separate program for trademark owners inside the adult entertainment industry – more on this below.) ICM Registry and IPRota have not yet announced the exact date on which Sunrise B will begin – yet another reason to take advantage of the pre-registration process. Once the Sunrise B period does open, it will last for “up to” 30 days.

During Sunrise B, owners of registered trademarks can reserve their mark(s) to ensure that those mark(s) cannot be registered as .XXX domains. To qualify, the mark must be registered at the national level in a country where the applicant conducts bona fide business at a substantial level, and the registration must have been issued before the date of the Sunrise application. The term to be reserved must be identical to the word element(s) of the registered mark. ICM Registry is not accepting Sunrise B applications itself; these will have to be submitted through the various independent domain name registrars.

The Sunrise B application will have a one-time fee associated with it, which will vary from registrar to registrar. Original estimates of $50 to $75 have now risen to $200 to $300 or more. The total includes a payment to the individual registrar (which will vary) as well as ICM Registry’s underlying fee (which has not been disclosed).

If there are no competing applications, a term reserved through Sunrise B will be removed from the pool of available .XXX domains. Internet users who attempt to access a reserved URL will encounter a placeholder web page indicating that the domain name is reserved and unavailable. (IPRota explains that allowing these domain names to resolve to a placeholder page “is designed to prevent ‘synthetic DNS’ or non-DNS resolution systems from hijacking queries to these domain names.”) Who-is information for the domain will reflect the address of the registrar and not the Sunrise B applicant.

If there are more than one Sunrise B applications for the same term (for example, if Delta Airlines and Delta Faucets both want to block delta.xxx), the term will be reserved in exactly the same way as if there were only a single applicant.

But what if your trademark is identical to an adult entertainment trademark or domain name that was the subject of a Sunrise A application? The Sunrise A program will run concurrently with Sunrise B, and will permit companies inside the adult entertainment industry to place an early claim on terms for which they already hold trademark or domain name registrations. In cases where a Sunrise B claim conflicts with a Sunrise A claim, ICM Registry will take no sides. The Sunrise A applicant will be notified of the Sunrise B claim, and will be given the opportunity to withdraw their application. The Sunrise B applicant also will be notified of the competing claim. If the Sunrise A applicant does not withdraw its application, the domain will be registered despite the Sunrise B objection. The Sunrise B applicant’s only recourse will be remedies already available under civil law and/or a dispute resolution procedure (similar to UDRP, but the details of which have yet to be announced). In any dispute, the Sunrise A registrant will not be able to claim lack of notice of the competing rights.

Following the end of the Sunrise terms, there will be a two-week quiet period during which no applications will be accepted, followed by a 14-day “landrush” period for adult-entertainment companies to claim unreserved domains. Thereafter, open registration will commence on a first-come, first-served basis, but registration will only be open to companies in the adult entertainment industry that must commit to use the domain to deliver adult content.

What Next?

In addition to the exact start date and duration of the Sunrise periods, and the exact cost of a Sunrise B application, the trademark community still has many unanswered questions regarding the introduction and implementation of this TLD.

The pre-registration and Sunrise programs are limited, of course, to trademarks already registered. ICM Registry and IPRota have not yet announced what, if any, rights protection mechanisms will be available for marks introduced after the end of the Sunrise period. The white paper’s vague response is that “it is anticipated that a service to deal with this requirement will be introduced in 2012 but it is unlikely to be as cost effective as the options offered during sunrise.” Also mentioned, but without detail, are a proposed rapid takedown service and a version of the ICANN Uniform Dispute Resolution Policy. Presumably there will be some sort of procedure for owners of new trademarks to reserve or block the mark from .XXX registration (if it is not already registered) subject to a fee, which evidently will be more than the currently estimated $300. Trademark owners will have to factor this potential cost into their budgets going forward.

Also unclear is the duration of the Sunrise B “block.” ICM and IPRota have only stated that the term will be blocked for as long as reasonably possible while ICM holds the contract for this TLD from ICANN. The term of that agreement is 10 years, and there is no guarantee that any successor organization would continue to honor the Sunrise B rights.

As with any top level domain, new or existing, brand owners must be vigilant in protecting their trademarks against cybersquatters. The stakes are of course higher here, where the TLD in question is expressly intended for sexually explicit material. There can be no doubt that cybersquatters will try to exploit any opportunity created by this new TLD at the expense of trademark owners. Clients are encouraged to monitor the ICM Registry and IPRota websites for developments, and to keep in touch with their current domain registrar or service provider to keep abreast of developments on the technical front. Goodwin Procter will watch the situation closely so that we can provide our clients with up-to-date strategic and legal advice, and cost-effective plans for protecting brands in the .XXX sphere.