Anticipating The GTLD Gold Rush Of 2009

January 21, 2009 IP Law360

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If you thought 2008 was a wild ride, wait until the Internet Corporation for Assigned Names and Numbers (ICANN) begins taking applications for new Generic Top Level Domain names (gTLDs) in June 2009.

If the proposed changes are adopted, then intellectual property lawyers are likely to be in the forefront of efforts to either apply for gTLDs or, just as likely, to fight against efforts to register gTLDs that should not be registered.

Currently, there are an estimated 174,000,000 registered domains. The number has grown between 15 and 30 percent per year for the past five years. There are, however, only 21 gTLDs, including familiar standards like .com, .biz., .net, etc. In addition, there are about 250 two-letter country code gTLDs, such as .uk, .it, etc.

As a result, when preparing a comprehensive U.S. trademark opinion, attorneys often find that virtually every English word is taken, along with every catch phrase and every two-to-five letter combination plus the .net., .biz, etc. variations.

This often makes it very difficult for a new trademark user to register the URL of the trademark of his or her first choice. Scam artists, including cybersquatters, typosquatters and domain tasters, have made the situation that much worse.

In order to ease the pressure, and perhaps generate more income for itself, ICANN has proposed vastly increasing the number of available gTLDs. While it is understandable that ICANN may want to do so, it isn’t clear that there is a great groundswell of public support for the concept.

A proposed first set of guidelines was published for public comment last fall. The public comment period closed Dec. 8, 2008. ICANN is now in the process of digesting the public comments into “Version Two” of the Guidelines, which should be published in March. Following a four-month communication period, ICANN plans to begin accepting applications for gTLDs in June 2009.

The good news is that ICANN is attempting to do something constructive about the glut of domain names. The bad news is that the Law of Unintended Consequences (a term popularized by Edward Tenner, probably the most original thinker of our time) is at work with a vengeance.

The first major problem is cost. The application fee alone is $185,000, plus a mandatory $75,000 per year to keep the gTLD alive for a minimum of three years.

Several bloggers have pointed out, however, that the cost to go through the complete process could easily exceed $1 million once you figure in attorney fees, subcontracted evaluators, challenges, etc.

ICANN has defended the costs, alleging it is necessary to recoup the $12 million it has spent implementing the open gTLD system.

The problem is, of course, during a time of severe economic duress such as we saw in 2008, clients may not be able to afford to file or fight a gTLD. By one estimate, there will be between 1,000 and 2,000 new gTLDs registered over the next five years. That could be more than $2 billion in legal costs to clients and domain name users.

Obvious conflicts are another problem. ICANN has historically been sympathetic to community-based groups (e.g. groups consisting of a restricted population) when they come into conflict with open applications.

Unfortunately, the published guidelines don’t mention that problem, and the comments received during the past comment period appear to be more concerned with moral and censorship issues than they are with more practical problems.

For example, suppose that the International Brotherhood of Magicians or the International Brotherhood of Motorcycle Campers (both legitimate organizations) wanted to register .ibm as their gTLD. Should International Business Machines be entitled to exclusive use of .ibm?

Should Delta Airlines or Delta Faucets be entitled to .delta?

How about Remington Tires, Remington Tools, Remington Firearms, Remington Shavers, etc. — who is entitled to .remington?

Who should be entitled to .indian? Indigenous American natives or citizens of India?

Who has better rights to .shoe? Nike? Adidas?

What about .football? The NFL? The AFL? The NCAA? Manchester United?

You get the picture.

The biggest downside is that organizations who previously had been happy with their little .com will get sucked into a very expensive legal process at a point in time when our economy is going through one of the worst patches since the Great Depression.

There are several smart things to do at this point. First, wait and see what the final gTLD guidelines will be when they are published this spring.

Second, make sure your client is aware that this issue is coming and that it could be expensive. It may turn out that your client wants to apply for a gTLD — in which case the client should consider doing so sooner rather than later.

Third, be aware that this kind of thing attracts front-runners who may send notices to your clients on paper looking like it comes from the U.S. Government hawking their gTLD services.

Trademark attorneys are very familiar with notices that clients receive from U.S trademark renewal scams, which arrive on official-looking letterhead warning that the clients’ trademarks are going to expire and requesting money for a renewal.

In the meantime, we can hope that the new ICANN Version Two Guidelines will address some of the problems outlined above.

The opinions expressed are those of the author and do not necessarily reflect the views of Portfolio Media, publisher of Law360.