With dramatic changes to the internet’s top level domain registration system around the corner, Jonathan Mayner answers some frequently asked questions and considers what brand owners can do now to prepare.
Topic: Domain names
Who: The Internet Corporation for Assigned Names and Numbers (ICANN)
When: Applications open from January 2012
Law stated as at: December 2011
As reported in Marketinglaw in June 2011, the system for creating and operating generic top level domains ("gTLDs") for internet addresses is to be expanded. From 12 January 2012 "any established public or private organisation anywhere in the world" may apply to create and operate its own gTLD, in addition to the 22 currently available gTLDs. Successful applicants will become registry operators for an initial ten year period under registry agreements with ICANN and subject to meeting ICANN's requirements for domain name registry operators.
This article gives brand owners further details on the application process, answers some frequently asked questions and discusses some of the issues that brand owners should be thinking about in light of the pending reforms.
What are top level domains?
A top level domain ("TLD") is the string of letters or other characters to the right of the dot in an internet domain address. Some TLDs are used as country identifiers, however those which are not (such as .com, .org, .net etc.) are referred to as gTLDs. The new regime would allow any private or public organisation which meets certain criteria to register a new gTLD which can comprise any combination of characters. These may be general terms such as .cola or .bank but could be brand-specific such as .pepsi or .hsbc.
A successful applicant for a gTLD will effectively become the operating registrar for the gTLD and as such can decide whether or not the gTLD will be:
(i) closed (allowing only selected parties such as group companies or business partners to register second-level domains under it); or
(ii) open (allowing anyone to register a domain name under it).
When can businesses apply for a gTLD?
The initial application period will run from 12 January 2012 to 12 April 2012. Further application periods are likely to arise, however as yet none have been confirmed.
What are the benefits of applying for a gTLD?
By registering and operating a gTLD, it is anticipated that brand owners will be able to send a strong signal that they are an innovative business which takes its online presence seriously. Large businesses with a significant presence in information technology, digital media or social networking may be expected to be early adopters. Additionally it is anticipated that the use of brand names as gTLDs will have a positive impact on a brand owner's online marketing activities, such as search engine optimisation and keyword marketing.
Businesses which register a closed gTLD and only permit registration of second-level domains by selected entities such as group companies, business partners or authorised agencies will have the opportunity to create an online space which may be viewed by consumers as a trusted and reliable portal for the goods and services on offer.
From a legal point of view one of the most important functions of registering a brand-specific gTLD is to protect the brand, in particular from the risk of registration of a gTLD identical or similar to the brand by a third party. While cybersquatting of gTLDs is not likely to be a significant problem (see more below), if a company does not register its own brand as a gTLD the possibility exists that another business could register it, leading to costly dispute proceedings under the ICANN rules, higher risks of trade mark infringement (by the gTLD registrar and possibly by any second-level registrants) and brand dilution.
Will the system be open to abuse by cybersquatters?
No domain name system is likely to be immune from the threats posed by cybersquatters or persons registering domains identical or similar to brand names in bad faith. That said, the substantial costs associated with applying for an operating a gTLD will likely operate as a bar to opportunistic applications (see below). Additionally, the ICANN review process will include an analysis of the applicant's business, financial forecasts, criminal history and any history of cybersquatting.
The extent to which a new gTLD is open to abuse by opportunistic registration of second-level domains will to a degree be within the control of the business which registers and operates the gTLD dependent upon whether or not an open or closed gTLD is created. ICANN's Trademark Clearinghouse (see below) will provide a mechanism for trade mark owners to be notified of potentially infringing applications for second-level domains. Additionally, a Uniform Rapid Suspension procedure will be set up with the intention of providing an efficient and inexpensive mechanism for dealing with obvious instances of cybersquatting.
What are the costs involved?
As indicated above, the costs involved in registering a gTLD are considerable. The initial evaluation fee which must accompany any application for a new gTLD has been set by ICANN at USD$185,000. In cases where applications are withdrawn at certain stages of the application process, the applicant may be entitled to a partial refund of the evaluation fee.
Further fees may be payable in certain circumstances, such as an additional USD$50,000 payable should ICANN deem it necessary to carry out an extended registry services review. Such a review may be required where ICANN believes that significant security or stability issues may arise around a proposed gTLD service. Further fees may be payable in relation to disputes arising throughout the application process.
In addition to the cost of actually applying for a gTLD, applicants will have to consider the substantial costs associated with actually setting up and operating a gTLD and must provide detailed submissions on such costs and their financial planning as part of the application process.
Can brand owners object to a potentially infringing application?
The application process provides for objections to gTLD applications to be raised by either ICANN or third parties. The grounds on which an objection may be raised are:
(i) String confusion: where the gTLD applied for is confusingly similar to an existing TLD or another gTLD applied for in the same application round;
(ii) Legal rights objections: where the gTLD applied for infringes the legal rights of the brand owner raising the objection, including registered and unregistered trade mark rights;
(iii) Limited public interest objections: where the gTLD applied for is contrary to generally accepted legal norms of morality and public order that are recognised under principles of international law; and
(iv) Community objections: where there is substantial opposition to the gTLD application from a significant portion of the community to which the gTLD string may be explicitly or implicitly targeted.
To trigger objection proceedings the objector must submit its objection to the relevant Dispute Resolution Service Provider ("DRSP") within a specified deadline. The DRSP dealing with legal rights objections will be The Arbitration and Mediation Center of the World Intellectual Property Organization.
Objection filings must be accompanied by a fee estimated to range from USD$1,000 to USD$5,000. The applicant may then file a response and enter the dispute resolution process, withdraw the application or seek some form of settlement with the objector.
Should the objection proceed to the dispute resolution stage the parties will have to make advance payment to the DRSP of estimated costs in the case, with the successful party receiving a refund of their advance payment. The adjudication fees may be calculated as either a fixed amount or based on an hourly rate for more complex disputes. ICANN's guidebook estimates the costs in fixed fee disputes may be as low as USD$2,000 to $8,000 with disputes funded at an hourly rate costing up to USD$56,000 for adjudication by a one member panel or USD$122,000 for a three member panel.
What should brand owners contemplating an application be doing now?
Brand owners contemplating applying for a gTLD during the initial application period should, if they have not already done so, begin consulting internally among their information technology, marketing, finance and legal teams on the feasibility of registering and operating a gTLD. As most businesses will lack the resource, I.T. infrastructure or know how required to set up and operate a domain registry it should be expected that significant external expert advice will also be required.
As the application process provides for objections to applications on the basis of existing trade mark and other rights it will be prudent to carry out appropriate trade mark searches for the text of any proposed gTLD, particularly if the text is not identical to a registered trade mark already owned by the applicant. This will assist in identifying possible sources of objection to the application and should feed into any feasibility assessment. Even where the text of the gTLD applied for is identical to a registered trade mark owned by the applicant, it may be prudent to carry out an audit of the relevant trade mark portfolio to ensure that those rights are validly registered and can be relied upon in any objection proceedings which may arise.
Careful consideration will have to be made of the ways in which any gTLD can be commercially exploited and financial forecasts will have to take account of the length of the application process (estimated at between 9 and 18 months) and the heavy set up costs likely to be incurred before the gTLD can generate any revenue for the business or add value to the brand.
What should all brand owners be doing now?
Whether or not an application is contemplated brand owners can still take steps to protect their brands from a legal point of view. The new regime will provide tools and mechanisms to assist brand owners in enforcing their rights, outlined below. In preparation for using these tools brand owners should now be auditing their portfolio of trade marks to identify any obvious omissions in their protection strategy and ensure that their basis for any objection on a legal rights ground is on a sure footing.
In order to mitigate the risks of trade mark infringement by third party applicants for gTLDs comprising registered trade marks, ICANN will establish a Trademark Clearinghouse (the "Clearinghouse"). The Clearinghouse will act as a database of trade marks which have been registered, are protected by statute or validated through some other judicial means. Importantly, marks which are still undergoing an application process or are subject to opposition proceedings are not eligible for inclusion in the Clearinghouse.
Inclusion of a trade mark in the Clearinghouse will permit the brand owner to:
(i) apply to register the trade mark as a second-level domain under new gTLDs before registration is open to the general public (during a so-called Sunrise period); and
(ii) receive notification of any third party's application to register the trade mark as a second-level domain that is identical to the mark (the registrant will similarly be notified that the domain applied for is identical to a registered trade mark).
In order to include their trade marks in the Clearinghouse brand owners will need to submit some proof of ownership of the mark (such as the trade mark registration certificate) and a supporting declaration.
The Clearinghouse will be operated by a service provider under contract with ICANN and fees will be payable to the Clearinghouse by brand owners who submit their trade marks for inclusion in the database as well as gTLD operators who will be obliged to utilise the Clearinghouse data to protect the rights of trade mark owners in the implementation of pre-launch rights protection mechanisms. As yet the Clearinghouse service provider has not been appointed and no fees have been set.
Publication of gTLDs applied for
After the initial application period closes in April 2012, ICANN will publish a list of gTLDs applied for which will include the identity of the applicant. Brand owners should review this list (and lists published following any subsequent application period) for gTLDs which may infringe their trade mark rights and consider raising any appropriate objections.
More generally brand owners should consider putting resource and systems in place to monitor gTLD and second-level domain applications and consider whether any second-level registrations should be sought under the new gTLDs, if only to prevent third parties from exploiting them.
Why this matters:
In practice most brand owners will likely decide not to apply for a gTLD, primarily in view of the cost outlays involved and because few businesses possess the requisite resource, know-how or inclination to operate a domain name registry. That said it may be expected that some large businesses may apply for some brand-specific gTLDs or that industry groupings may seek to set up some more general gTLDs to facilitate differentiation of their members' online presence from that of non-members.
The anticipated proliferation of domain names under the new gTLD system will present challenges to brand owners in terms of the extra burden of monitoring for and taking action against potential trade mark infringements and brand dilution generally.
Brand owners would be well advised to monitor applications for new gTLDs and utilise the Clearinghouse to position themselves to take early action against potentially infringing applications for second-level domains. Undertaking audits of trade mark portfolios and protection strategies and developing a coherent monitoring strategy at this stage will stand brand owners in good stead should any specific issues arise once the initial application process is underway.