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Domain Names, Trademarks, and Squatters

About The Author

Chris Bridges (Executive Editor)

Chris is an IT and Data Protection solicitor at a top 20 full service firm and the founder of Keep Calm Talk Law. He also contributes to Computers and Law and other sector specific publications.

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Whilst the layperson may not know what a domain name is, it is undoubtedly something every person is familiar with. Domain names are essentially internet name spaces, for instance keepcalmtalklaw.co.uk or google.com. In the grand scheme of a company’s IT budget, domain names can be a low value asset. The cost of a domain name varies depending on whom you register with, but as a ballpark figure, you can typically pick up a .com domain for around £6 a year, or a .co.uk somewhere around £4 a year.

However, do not let this negligible face value fool you. Domain names can be an invaluable asset to a company, even if unused. Domain names can be like concert tickets. You might go to a festival, see a new act on the BBC Introducing stage and buy tickets for their intimate concert in a few months’ time, for a measly £5. However, during that time, the act find huge success and are at the top of the charts. People are now willing to pay £60 for a ticket. Unfortunately, ticket touting is frowned upon, and can land you in trouble, so you decide not to sell the ticket on.

Domains names, like concert tickets, may start life as a low value dispensable asset, but this can quickly change. Whilst annoying for any company operating online, it is not illegal to tout them. The best price in public knowledge for the sale of a domain name was a shocking $16 million USD for insure.com (~£9.5m in GBP). The value of this domain name is obvious, it describes exactly what it is selling, insurance. Whoever paid £6 to register that domain name is laughing. However, this is not the only way a domain obtains value. At 6th on the list of the most expensive domains, we find FB.com, a common acronym for a popular social network, and surprise surprise, the buyer was Facebook, for $8.5 million USD (a very good day for the American Farm Bureau Federation, the original owner, who had until then used it as their primary domain). Now if you browse to this address, you are simply redirected to facebook.com. You may think this is tantamount to flushing $8.5 million USD down the toilet, but you would be wrong.

Domain names such as Facebook.com, Google.com or keepcalmtalklaw.co.uk or any other valuable brand are no longer just a namespace (I might be joking about that last one, but its valuable to me!). They have become an integral constituent, if not the most important, of their respective companies’ brand portfolio, even if they are not per se intellectual property.

Despite this, the modern age of internet dependence has made domain names one of the most valuable brand assets a company can own, and because of this, they are given serious attention by trademark law. This makes them extremely interesting.

Where the registered domain bears some resemblance to a pre-existing trademark, and it has been registered maliciously or has taken an unfair advantage of rights the registrant does not own, there may be some recourse under trademark law. Given this, top-level domain (TLD) registrars (the companies, institutions or governmental organisations that own, operate and administer a top-level extension, e.g. .com or .uk) have taken some steps to help prevent disputes, and settle any disputes in a timely and cost efficient manner. However, there is no global consensus on the exact ways in which this utopian equilibrium should be achieved.

ICANN

The Internet Corporation for Assigned Names and Numbers (ICANN) is the ‘big-daddy’ of domain registrars, responsible for the co-ordination and allocation of top-level domains. Whilst they do not register domains themselves, they grant the rights to a TLD to a registrar.

To help achieve the aforementioned equilibrium, ICANN have decided to introduce a trademark clearinghouse for all new TLDs. Any registrar taking control of a new TLD must agree to abide by the clearinghouse protocol.

The clearinghouse protocol has two stages:

  • When a TLD is launched, trademark holders with their rights verified by ICANN are able to register new domains relating to their trademark prior to them becoming publically available. This is called the Sunrise Period, and lasts a minimum of 30 days (the sunrise listings all appear to have gone for 60 days);
  • For at least 90 days thereafter, the TLD is in the trademarks claims period. Here, when a user attempts to register a domain that corresponds to a trademark that has been verified by ICANN, the user is presented with a notice that by registering this domain they may be liable to a trademark claim. If they acknowledge the notice and register anyway, the rights holder is notified, allowing them to take immediate action.

On the face of it, this appears to be strong protection for namespaces under new TLDs, and with the vast surge in new TLDs due over the coming years to combat a lack of availability; this will be welcomed with open arms by intellectual property departments globally.

On a side note, London businesses would be wise to protect their IP portfolio by registering with the clearinghouse ASAP, with the .london TLD having launched on Tuesday 29th April 2014 (Sunrise ends 31st July 2014).

Nominet

Although a TLD registrar nominated by ICANN, Nominet have controlled the .uk TLD for a long time, and therefore do not fall under the new rules. As the TLD operator of .uk, Nominet also control all second level domains (SLDs) under .uk, including .org.uk, .co.uk and .me.uk to name a few, and have delegated management of several to governmental purposes, such as .ac.uk, .gov.uk and .mod.uk.

However, Nominet are making a major advancement in a couple of months’ time. From 10th June 2014, the .uk TLD will be available to all (previously Nominet have only made names under SLDs available to the public). This still does not fall under the new ICANN rules, as Nominet have always had this power, but have never chosen to use it.

Pinsent Masons’ out-law.com recently interviewed Nominet’s senior legal counsel about what protections it has in place for rights holders, and they do not reflect ICANN’s scheme nor do they intend to. Nominet does, and will continue to, accept all new registrations by default. Rights holders’ only form of redress is to bring proceedings via the courts, or to use Nominet’s free dispute resolution service.

The reasoning behind this decision is clear: trademark law is vastly complicated. For instance in the UK, a company may hold a trademark in relation to any number of 45 different categories. Having a trademark over one category does not and cannot prevent someone using the same or a similar name over an entirely different category. Whilst a company may hold a trademark over several of these categories (and often do due to a certain degree of overlap), they are unlikely to provide services or products spanning all of them. An automated detection system can never detect the true purpose of a domain name purchase. This only becomes apparent once the domain is in use, making post-registration disputes seemingly better suited.

Nominet do however offer a notification service that informs a trademark holder when their trademark is registered. Furthermore, for the new .uk domains, the owner of the equivalent .co.uk has reserve until 10th June 2019, so there is at least some protection in place.

So which approach is right?

First, Nominet are wrong to say “it would be wrong to automatically prevent registrations of domain names just because trade mark rights are engaged”; this is not what ICANN are doing. ICANN are merely making potential registrants aware of the potential for a claim against them. It is up to them to assess whether to continue.

However, this does raise an interesting point of whether this could scare away a potential registrant unjustifiably. Yes, it could. However, it would not be difficult for a potential registrant to do some of their own due diligence. If it were me, I would rather be scared initially, and find out I am in the clear and can proceed or alternatively am not clear and need to re-think my brand, rather than registering a domain, spending lots of money on further branding, only to find I have infringed a trademark and need to return to Old Kent Road.

Therefore, I think they both have it right to some extent.

Nominet is correct in saying it is best left to post-registration, as that is when the real purpose becomes apparent. Therefore, having an around the clock notification service for rights holders is probably the best way to help rights holders police their rights.

I also believe ICANN is right to notify a potential registrant of a potential trademark claim. However, ICANN’s clearinghouse only operates for the first few months of a TLDs existence, which is troubling, as there is no way easy way for a rights holder to police their rights thereafter.

However, I do not think either of these fully address the domain name dilemma, or even recognise what it is.

The Real Problem. The Real Solutions.

In my eyes, the above is rather trivial. No great steps are made, trademarks are, and always will be, an issue to resolve post registration. It is the only way possible.

I believe the biggest problem with the domain name system is the vast amount of speculative buyers that inhabit it.

Some individuals and organisations make it their business to acquire every potentially valuable domain name under the sun, knowing that one day; one of those might be the next fb.com. Now this might be rare and a longshot, but according to this paper, the median resale value of a domain is $500 USD, so whilst a big hitter might be rare, there is serious scope for making a quick buck.

Often purchasers of these re-sale domains will be start-ups. They have developed an amazing brand for their new product, and go to register the domain but it is taken by a speculative buyer (often known as a domain squatter). How much they end up paying ultimately depends on how valuable the brand is to them, and how much of a pig (for lack of a better word) the squatter is in negotiation. This kind of sounds like extortion, but regrettably it is perfectly legal. Even the most diligent of start-ups could come across this roadblock, and many will treat the availability of a domain name as a key factor in branding choice to avoid being extorted.

These squatters should be frowned upon the same as ticket touts.

Within ‘domain squatters’, I am encompassing several categories of speculative buyers:

  1. Mass-Buying Squatters. Those that buy up domains on mass (perhaps, over 20, or another relatively low number), with no legitimate business reason other than to re-sell;
  2. Malicious Squatters. Those that buy domains under TLDs, specifically to sell the domain on to a trademark holder at an inflated price. E.g. if someone bought google.london;
  3. Typo Squatters. Those that buy ‘typo domains’ to sell onto a trademark holder, or someone with malicious intent. Such examples could be gooogle.com (note the extra o), or natwestt.com (the extra t). [Do not visit the latter! Really. Don’t.] The latter is particularly worrying, as domains like this are often used for phishing (mimicking another site and stealing your details, i.e. the legitimate Natwest site, and your online banking details!).

Mass-Buying Squatters

Domain squatters buying on mass cause significant problems for start-ups. The domain is just sitting there, unused, other than to extort a budding business. This is like slapping innovation in the face, and it needs to stop. Companies and individuals should be limited to buying a certain amount of dormant domains. Over and above this limit, they should have to justify their use on their registration, and if this use later appears to be falsely stated, the domain should be revoked and put back on the open market.

Is this overly harsh? Is domain squatting a legitimate business? I personally do not think so. However, I am sure there are plenty that would disagree. My biggest qualm with the practice is, in the vast majority of cases, it involves no skill, and is frankly parasitic: getting something for nothing.

Malicious Squatters

The issue here is clear; such squatters are deliberately breaching trademarks to extort the rights holder. Whilst there are already remedies for right holders to deal with this in trademark law, it can be extremely expensive. For domains registered under Nominet’s TLD, .uk, disputes can potentially be solved via the free dispute resolution service. However, this is not uniform across registrars. The only uniform policy that exists is ICANN’s Uniform Domain-Name Dispute Resolution Policy. This is policy can be extremely costly, with filings starting at $1,500USD.

This is a drop in the pond for large corporations, but a serious setback for start-ups and established SMEs.

Again, this could potentially be resolved by requiring registrants of domains with trademarks over them to justify their usage on registration, and for the domain to be revoked if this usage is not fulfilled within a prescribed period.

Typo Squatters

Registrations of typos are not noticed by ICANN’s notification system, which is a flaw in-itself. However, the wider issue could be solved in the same way as above, with pre-registration justification of use. Requirements for near misses such as this should be have even stricter rules imposed on them due to the damage they can potentially cause to the end user of the internet should the domain fall into the wrong hands.

Round Up

It is clear that domain names provide a minefield which any modern business must navigate. Because of this minefield, there is no easy solution that adequately protects trademark holders whilst not preventing legitimate registration of domains. The best solution seems be notifying both the rights holder (all the time, not just for the first few months of a TLD) and the registrant of a potential trademark claim, and asking the registrant of a flagged domain for justification of use. However, such a notification system must include typos.

Whilst this seems a burden on the registrant, a relatively short justification could do the job. All they would need to do is highlight the purposes of their business, which would prove no issue if they fall outside of squatting or the activities the rights holder has rights over. This need not prevent registration on the spot, but would provide a useful tool for rights holders to assess whether their rights have been infringed after the fact, and would allow quick resolution of a dispute if the registrant’s justification was shown to be a falsehood.

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Tagged: Commercial Law, Intellectual Property, International Law, Technology

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