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Advisory – Coming Soon – For Better or Worse – Unlimited Numbers of New Generic Top Level Domains

December 2011

Currently, there are twenty-two generic top-level domains (“gTLDs”), such as .com, .net and .org, as well as over 250 country code domains (“ccTLDs”), such as .us (United States), .de (Germany) and .jp (Japan), available to Internet users. To date, the Internet Corporation for Assigned Names & Numbers (“ICANN”), the organization responsible for managing the domain name system and developing policy on the Internet’s IP addressing system, has taken a very measured approach to adding new gTLDs. That is all about to change.

From January 12 to April 12, 2012, ICANN will be accepting an unlimited number of applications for new gTLDs, consisting of virtually any alphanumeric string. For many businesses, the prospect of operating a gTLD that matches their brand and is under their control may be attractive. For most businesses, the prospect of policing their trademarks against cybersquatters in hundreds of new gTLDs is unwelcome and, to say the least, distressing. This advisory will discuss the potential uses for new gTLDs, the application process for new gTLDs, the bases for opposing a gTLD application and the new remedies that will be available to trademark owners against abusive domain name registrations in the new gTLDs.


Possible Uses of a New gTLD

The new gTLDs will be of two primary types: Standard and Community-based gTLDs.

Community-based gTLDs are those designed to operate for the benefit of a clearly defined and established community with a restricted population. The gTLDs must have registration and use policies related to their community-based purposes. Applicants must be a representative of the defined community and the affected community must support the application. Only members of the defined community may register a domain name in a Community-based gTLD. An example of a Community-based gTLD is .apache

All other gTLDs are considered Standard gTLDs, which are generally open to any applicant, but may also have registration restrictions and requirements.

Applications for Community-based gTLDs will receive priority over applications for Standard gTLDs, but applicants for Community-based gTLDs must satisfy more stringent requirements than applicants for Standard gTLDs.

There are a number of different uses or purposes for new gTLDs. For example:

Businesses may apply for a Brand gTLD, which may be used for a variety of purposes, including intra-company activities, promoting a brand to the public or providing consumers with greater security measures. Examples include .nike and .canon.

Governments or inter-governmental organizations may apply for a Geographic gTLD, which may be used to verify the authenticity of the governmental services or to promote tourism or local businesses. An application for a Geographic gTLD may be filed either as a Community-based gTLD or a Standard gTLD. Examples include .nyc, .london and .africa.

Organizations or businesses may apply for Industry gTLDs (or Category gTLDs). Depending on how they are presented, these applications may be filed as a Community-based gTLD or a Standard gTLD. Examples include .news, .bank and .pharmacy.

The Pros and Cons of More gTLDs

According to ICANN, new gTLDs “are expected to bring innovative services and greater choice to Internet users through increased competition, and engender broad participation through the introduction of internationalized domain names and community-based gTLDs into the Domain Name System.”

ICANN has also stated that it anticipates receiving as many as 2,000 applications1 for new gTLDs. If that number turns out to be accurate, it would suggest that there has been an unmet demand for new gTLDs. That said, ICANN has indicated that no more than 1,000 new gTLDs will be issued in the first year and that there is no set timetable for a second round of new gTLD applications. Thus, the high level of interest may also reflect a concern about being left behind.

The formal process for establishing the process and requirements for new gTLDs began in October 2008. Throughout this period, some groups, notably the business/trademark owner community, have consistently challenged the need for additional gTLDs, particularly in light of the relative lack of popularity of top-level domains other than .com. As of December 5, 2011, there were almost 99 million .com domain names. The next highest number of registrations are in the .net gTLD, with approximately 14.3 million.

Moreover, trademark owners across the world have encountered innumerable examples of cybersquatting, i.e., the bad faith registration of second level domains that are confusingly similar to established trademark rights. According to the Coalition Against Domain Name Abuse (CADNA), the annual cost to trademark owners resulting from diverted traffic, the loss of goodwill and the costs of enforcement are in excess of $1 billion. The prospect of multiplying these costs by hundreds (if not more) of new gTLDs is overwhelming to many brand owners.

Some groups, however, seem certain to profit from this process. ICANN is charging an $185,000 evaluation fee for each new gTLD applicant. In addition, the operators of new open gTLD registries, domain name registrars and ICANN, will share the fees paid for new domain name registrations.

Whatever the pros and cons, absent litigation (or, perhaps, the threat of litigation), the new gTLD application process will begin on January 12, 2012.

The Requirements for Operating a New gTLD

ICANN has published a 352 page “Guidebook for New gTLD Applicants” setting out, among other things, the various and detailed information and documents that are required of new gTLD applicants. Broadly speaking, applicants must answer a series of questions to establish that they have the financial, operational and technical capability to operate a gTLD registry. Points are awarded for the responses to each question and there are minimum requirements for the number of points awarded for each section and in total.

An applicant must commit to running the gTLD for at least ten years. It must provide financial projections for the first three years of operations and escrow a sum equal to its estimated operating costs for three years. Each applicant, its key directors and officers and its major shareholders must undergo background screening in the areas of their business diligence and any possible criminal or cybersquatting history.

As noted above, qualified Community-based gTLD applicants for a given string will receive priority over a Standard gTLD applicant for the same string. In order to qualify as a Community-based gTLD applicant, the applicant must earn 14 out of 16 possible points on certain specific criteria, such as providing a clear and straightforward definition of membership in the community, establishing that the community is of considerable size and longevity, showing that there is a nexus between the proposed string and the community and submitting proof of support from the community.

If there are no qualified Community-based gTLD applicants for a particular string, all of the qualified applicants for that gTLD may either negotiate a settlement or participate in an auction, with the highest bidder being awarded the gTLD.

Oppositions to New gTLDs

ICANN has stated that the names of applicants and the gTLDs they seek will be released simultaneously at the end of the submission period. Third parties will then have the opportunity to object to a gTLD application on any of the following grounds:

String Confusion Objection: the gTLD is confusingly similar to an existing gTLD or ccTLD or a currently proposed gTLD;

Legal Rights Objection: the gTLD will infringe the existing legal rights of the objecting party, including rights in a registered or an unregistered trademark;

Limited Public Interest Objection: the gTLD is contrary to generally accepted norms of morality and public order; or

Community Objection: a proposed Community-based gTLD can be opposed by a significant portion of the targeted community.

“Expert” arbitration panels will decide contested objections. There will be a filing fee to bring an objection, currently set at $10,000 for a single-person panel and $23,000 for a three-person panel. A party that wishes to object based on more than one ground must file separate objections for each ground. The applicant may reach some form of settlement with an objecting party, respond to each objection or withdraw the application.

Protections For Trademark Owners in the New gTLDs

Currently, a trademark owner who seeks to stop the use of a domain name that is confusingly similar to one of its trademarks has limited options:

It may send a demand letter to the domain name registrant. However, even if the listed contact information for the registrant is accurate, the letter likely will be ignored.

It may send a request to the registrar through which the domain name has been registered, asking that it be transferred, but registrars typically do not respond to such requests.

It may bring a complaint under the Uniform Domain Name Dispute Resolution Policy (“UDRP”), the mandatory arbitration proceeding, applicable to domain name registrants registered through an ICANN-accredited registrar. The complainant must establish that it has rights in a trademark that is identical or confusingly similar to a domain name; the registrant has no rights or interests in the domain name and the domain name has been registered and it is being used in bad faith. Remedies include transfer of the domain name to the trademark owner. The filing fee for a UDRP complaint is $1,500 or more, a lawyer is typically required to prepare the complaint and the proceeding are generally completed within 45-60 days of the complaint filing.

It may file a civil complaint in court, asserting claims under the federal AntiCybersquatting Consumer Protection Act (“ACPA”) or on other grounds.

In response to concerns raised by trademark owners as to the prospect of exponential opportunities for abusive domain name registrations, ICANN has created additional protective mechanisms for trademarks:

Trademark Clearinghouse: Rather than having to prove its trademark rights each time that it makes a claim, owners of trademarks that are registered at the national or international level and are in use will be able to establish its trademark rights through a centralized Trademark Clearinghouse.

Sunrise Service: Trademark owners will have an exclusive 30-day period to register second-level domain names that are identical to their trademarks in each new open gTLD.

Trademark Claims Service: During the first 60 days of open registration for domain names in each new gTLD, applicants for a second-level domain name that is identical to a mark in the Trademark Clearinghouse will be given notice of a potential claim by the trademark holder and will have the option to withdraw the application. If the domain name is registered, the trademark owner will then receive notice of the registration and will have the opportunity to bring a claim.

Uniform Rapid Suspension (“URS”) Procedure: The URS is a mandatory arbitration similar to the UDRP, but is supposed to offer a quick and streamlined remedy for “clear-cut” cases. Complainants will, however, be required to prove their claims by “clear and convincing” evidence. Unlike the UDRP, the only remedy will be suspension of the domain name until the end of its registration term (trademark owners will have the option of paying to extend the term for an additional year).

Trademark Post-Delegation Resolution Procedure (“PDDRP”): The PDDRP provides a remedy against registrars that exhibit a pattern or practice of profiting in bad faith from the sale of infringing domain names. Proof of “affirmative” conduct by the registry operator will be required and the burden of proof is “clear and convincing evidence.”

Recommendations

Organizations considering applying to operate a new gTLD should analyze the use to which it would be put, the start-up and the annual costs of operating the registry, the potential benefits from operating the registry and the potential downside if competitors apply and they do not.

Organizations should monitor new gTLD applications and consider raising objections. Trademark owners that are considering opposing a new gTLD application should investigate whether any other objections have been filed to the gTLD.

All trademark owners should register their important marks with the Trademark Office in their country and record the registrations with the Trademark Clearinghouse. Trademark owners should also decide on a budget for brand protection.


1A list of announced applicants is published at http://valideus.com/resources/gtlds-list. A broader list of possible applicants for new gTLDs and their targeted top-level domains is published at http://dot-net.com/applicants/all.

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