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Historic Change to Domain Name System has Broad Implications for Brands

11 Jul, 2011 By: Janet F. Satterthwaite, Jeffrey Knowles


The organization that governs the Web’s Domain Name System, ICANN, voted recently to launch the application process enabling creation of an unlimited number of new top-level domains. The controversial decision marks the largest changes ever to the Internet’s Domain Name System and is dogged by objections from trademark owners and others concerned about Internet security and increased costs.

Although few companies have yet to announce their plans, many will likely apply for top-level domains relating to their brands, such as “.canon.” Several groups have announced plans for apply for affinity-based domains such as “.eco,” “.fam” and “.zulu.” And industry terms such as “.hotel” or “.direct” will likely generate significant interest. It is currently unclear whether an organization in an industry will be able to register an industry term, such as “.direct” and then refuse to allow competing companies to register domains under that top-level term.

High Barriers to Entry
For many companies, the cost of registering a top-level domain may not be worth the perceived value to the brand. Companies should budget as much as $500,000 to get a top-level domain up and running. Application fees to serve as a top-level registry will cost as much as $185,000. In addition to the filing fee, companies will likely incur significant consultant and attorney fees. Applicants will need to show sufficient technical expertise and the capability to run a domain name registry. Those who do not have the expertise required will need to hire, at great expense, a service provider to run the system.

Cybersquatting
The good news is that prohibitive costs and high barriers to entry will discourage the arbitrary purchase of top-level domains by squatters hoping for a big payday. Although few companies will have to deal with others snatching up top-level domains, the countless new domain names created by the top-level expansion will create tempting targets for cybersquatters. Once top-level domains are established, companies will need to modify their policing and registration strategies to account for the new domains. Companies practicing defensive registrations may want to continue buying relevant domain names unless and until the number of top-level domains makes the practice prohibitively expensive.

One potential downside for companies is that new domain registries may be located outside the United States and thus not within reach of the U.S. anti-cybersquatting consumer protection laws.

Brand-Friendly Measures
Two measures that may ease the pain of the top-level expansion are the sunrise periods that will enable brands to register domains before they are available to the general public, and plans for a trademark clearing house that will enable companies to register their marks one time instead of submitting proof of eligibility to each separate top-level registry. As an added safeguard, brands will have the opportunity to oppose applications very similar to their marks.

Although all of the details are not yet nailed down, it is clear that companies have a variety of strategic, business and legal issues to consider as ICANN moves closer to making a virtually limitless number of top-level domains available.

Jeffrey D. Knowles and Janet F. Satterthwaite are partners in Venable LLP’s advertising, marketing and new media group. Knowles is chair of the group. Contact Knowles at (202) 344-4860 or at jdknowles@venable.com. Contact Satterthwaite at (202) 344-4974 or at jfsatterthwaite@venable.com.


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