Dangers Inherent in New Top Level Domain (gTLD) Sale
Piracy on the Worldwide Web:
What Trademark Holders Need to Know About ICANN’S New Top Level Domain Name Decision
By Loren Lunsford, Esq.
On June 20, 2011, the Internet Corporation for Assigned Names and Numbers (“ICANN”) announced that its Board of Directors had approved a plan to allow an increase in the number of available generic top-level domains (“gTLDs”). Top-level domains, TLDs, are the right most label in a domain name. Examples of which are .com, .org, .info, .us, .dk, etc. TLDs with two letters are designated as country code TLDs (“ccTLDs”). Accordingly, .us is the ccTLD for the United States, .de for Germany, .dk for Denmark, .ch for China, and so forth. TLDs with three or more letters are gTLDs. These are the commonly found .com, .org, and .info. There are currently 22 gTLDs.
According to a press release, due to ICANN’s recent decision “internet address names will be able to end with almost any word in any language.” As further stated in the press release, “virtually every organization with an online presence could be affected in some way.” This is especially true for trademark owners and their need to police their marks on the internet. Not only will trademark owners need to police the use of their trademarks in domain names, which will become increasingly harder with an infinite number of gTLDs to deal with, but also in the gTLDs themselves, i.e., .nike.
The fear is that cyberpirates and cybersquatters will obtain domain names and gTLDs utilizing trademarked words and terms and either hold them ransom, demanding excessive payments from the trademark owners, or will use the trademarked terms to drive traffic to their own websites selling competing products. There are laws in place, both in the United States and internationally, that protect trademark owners from this type of infringement. However, the costs in pursuing multiple cyberpirates and cybersquatters can quickly mount, especially for smaller companies.
ICANN’s release of new gTLDs is set to begin in January, 2012. In an effort to provide protection to trademark owners, ICANN has drafted application procedures which will allow trademark owners to participate in the application process – the process gives the trademark owner a voice, allowing them to object to applications they believe would infringe on their trademarks.
Trademark owners would be advised to develop a strategy now, well ahead of the beginning of the application process, on how they propose to protect their marks in light of ICANN’s decision to open the field of gTLDs. The following summary of the application process will aid trademark owners in developing their strategy.
ICAAN’S new gTLD application process
ICANN has set out the new gTLD application process in the “gTLD Applicant Guidebook” (“Guidebook”) published on May 30, 2011. As the Guidebook states, it has yet to be approved and remains subject to further consultation and review.
The Guidebook places several barriers before potential cyberpirates and cybersquatters, in an effort to keep them at bay. The first hurdle, and a not so insignificant hurdle, is the evaluation fee. At the opening of the application period, potential applicants must first register in the TLD Application System, and pay a deposit of $5,000. Following registration and the payment of the deposit, an application must complete the full application and pay $180,000, as the remainder of the evaluation fee. The total $185,000 application fee should dissuade casual cybersquatters and cyberpirates out of the application process.
Additionally, ICANN does not permit individuals to apply for gTLDs, and corporations applying for gTLDs must demonstrate financial capability to operate a gTLD registry and financial planning in preparation for long-term stability of the new gTLD. As part of the evaluation process, ICANN also reviews whether the applicant has a history of cybersquatting or cyberpiracy. The initial barriers in the application process may provide some comfort to trademark holders that their marks will not be held hostage by squatters and pirates. Others, however, may want to take more proactive steps to protect their intellectual property. These owners can either make protective registrations – applying for their own gTLDs, or participate in voicing their objections during the application process.
Those companies desiring to file defensive registrations are advised to make the decision now and to begin gathering the documentation and information necessary to complete the gTLD application. The initial registration period is short (60 days) and limited to 1000 gTLDs a year, regardless of how many applications are received. Because of the high evaluation cost, most companies will find that applying for their own gTLDs is not worth the expense. Trademark owners not desiring to make defensive filings can still protect their intellectual property by making formal and informal objections during the evaluation process.
At the close of the application period, if an applicant has submitted a complete application and paid the required application fee, the application enters into the evaluation process. Incomplete applications and applications without a full evaluation fee payment are not considered. Applications passing the initial administrative completeness check are then posted to the public for comments.
Once an application is posted, the public is invited to post comments related to the application. The public comment period lasts 60 days and is open to everyone to submit their comments. This comment period provides an opportunity for a trademark holder to make informal comments directing evaluators to deficiencies in a specific application and to the existence of possible trademark infringement.
Public comments are not formal objections and are not treated as such. The evaluators are not arbiters deciding the merits of a trademark dispute. By making an informal public comment, a trademark owner is hoping that the evaluator will acknowledge the comment and provide the applicant with an early warning highlighting the potential trademark infringement, and that the applicant voluntarily withdraws the application. Barring voluntary withdrawal, a trademark owner’s last line of defense against the issuance of a potential infringing gTLD is to file a formal objection.
Objection Process and Dispute Resolution
The objection period lasts for 7 months, within which time a trademark owner may file a formal objection. There are only four bases for formal objections: String Confusion; Legal Rights; Public Interest; and Community Objection. Trademark issues fall within the Legal Rights category. You must be the rightsholder in order to file an objection in the Legal Rights category. Formal objections are not filed with ICANN, but rather with the appropriate Dispute Resolution Service Provider (”DRSP”) for the applicable objection category. The DSRP for the Legal Rights category is the Arbitration and Mediation Center of the World Intellectual Property Organization (“WIPO”).
Objections are filed electronically. The electronic addresses for filling objections have yet to be created. Objections must be submitted in English. All objections must be filed separately. If an Objector wishes to object on more than one ground or to more than one application, the Objector must file separate objections with the appropriate DRSP(s).
Objections must contain the following information:
1. The names and contact information of the Objector;
2. A statement of the Objector’s basis for standing; and
3. A description of the basis for the objection, including:
a. A statement of the ground upon which the objection is being filed;
b. An explanation of the validity of the objection and why the objection should be upheld.
Upon receipt of an objection, WIPO will appoint a case manager. Unless the parties agree otherwise, the dispute will be resolved by a Single-Expert Panel, the expert being appointed by WIPO from its List of Experts. The parties, however, can agree to have the dispute resolved by a Three-Expert Panel. In such cases, each party submits a list of three experts from WIPO’s List of Experts, in order of preference. One of each party’s preferences, if available, will be appointed to the panel. The third expert is selected by WIPO and is the presiding expert.
WIPO requires a payment of fees in its dispute resolution procedures. The DRSP fee is $2,000 for a Single-Expert Panel and $3,000 for a Three-Expert Panel. In addition, there are panel fees: $8,000 for a Single Expert Panel and $20,000 for a Three-Expert Panel.
ICANN’s decision to increase the number of gTLDs requires trademark owners to be diligent in policing their marks. The high cost of the gTLD application process, combined with a trademark owner’s ability to object during the evaluation process, should help to minimize the potential for cyberpirates and cybersquatters to obtain gTLDs which infringe on trademark owners’ rights.
There is still the possibility that innocent applicants will attempt to procure a gTLD which contains someone else’s trademark or tradename. In those cases, the informal comment period would provide forewarning to the innocent applicant allowing them to voluntarily withdraw a potentially infringing application and receive a partial refund.
Large corporations with readily recognizable trademarks, would likely be justified in securing a gTLD comprised of the trademark, examples would be .nike, .apple, .microsoft.
Although there are safeguards in the gTLD application process to protect against cyberpiracy and cybersquatting, trademark owners will need to continue to be diligent in policing their marks in the secondary market. Domain name registries will be purchasing new gTLDs. They will in turn sell domain names containing those new gTLDs. Cybersquatters and cyberpirates can then purchase these domain names.
For example, say a domain register applies for and is granted the gTLD “.inc”. .inc has the potential to become a well known gTLD along the lines of .com, .org, or .info. With the introduction of vastly greater numbers of gTLDs, policing one’s trademarks becomes infinintely more difficult. There have been laws enacted to curtail cyberpiracy and cybersquatting, which also make it easier for a trademark owner to enjoin the use of its trademarks in an infringing domain or have the domain transfered to the trademark owner. But policing one’s trademarks among a myriad of new gTLDs will be difficult and enjoining infringing domains will be very costly.
My advise to trademark owners: Get involved early. If you are a large corporation, secure the gTLDs for your world famous marks. Smaller companies, review the gTLD applications. If you find that there are applications that infringe your trademarks, make a public comment or attempt to resolve the matter informally by contacting the applicant. If that fails, file a formal objection.
In the secondary market, you are going to have to pick your battles. Not all new gTLDs are going to make a mark on the internet. It will not be worth the cost of disputing every infringing domain name associated with every new gTLD. At the same time, trademark owners cannot ignore infringers. If a trademark owner does not police its mark and take efforts to curb infringement, that inactivity may give rise to equitable defenses to the infringer.
In short, the ICANN’s new gTLD decision cannot be ignored by trademark owners. Trademark owners are cautioned to develop a plan as to how they will confront potential cyberpiracy and cybersquatting under the new rules.