Brian R. Cheslek, Price, Heneveld, Cooper, DeWitt & Litton, LLP, Grand Rapids, Michigan, USA
Although the internet is historically known for its fast-paced evolution and rapid advances, none of the developments to date have heralded the type of full-scale metamorphosis that the new generic top-level domain (gTLD) rule changes will likely cause. The Internet Corporation for assigned Names and Numbers (ICANN) recently proposed a program that will allow for a virtually unlimited number of gTLDs. Currently, 21 gTLDs like “.com,” “.net” and “.org” service the internet’s 1.5 billion users. If the proposed changes occur, the world wide web will expand to include a limitless number of others, such as “.gucci,” “.johndeere” or “.auto.” This modification to gTLDs has the potential to fundamentally alter the ability of intellectual property owners to protect their niche in the internet’s ever growing virtual community.
In addition to allowing an unlimited number of qualified applicants to obtain domain strings with new top-level domains, the proposed plan also allows them to operate their own registries. A finalized Applicant Guidebook is expected to be released sometime after the June 2009 ICANN meetings in Sydney, Australia. The first round of applications is not expected to begin until December of 2009.
The considerable costs associated with developing and implementing this new policy will be placed on applicants. Anticipating approximately 500 gTLD applications in the first round, ICANN plans to charge a $185,000 fee to apply for a proposed gTLD. In addition, after purchase, the gTLD owner must pay a registry fee of at least $25,000 per year. Finally, each applicant will be required to provide financial guarantees that the applicant has the resources to operate the gTLD for a period of at least three years. In the event that two or more entities apply for the same gTLD, the contention may be resolved by self resolution, comparative evaluation, or auction.
After an applicant has cleared the initial valuation phase of the process, the application is posted on the ICANN website for review by third parties. Third parties can object to the application on at least one of four grounds. These include objecting because the gTLD string is confusingly similar to an existing TLD or an applied-for gTLD, the gTLD infringes existing legal rights of another, the gTLD is contrary to generally accepted norms of morality and public order, or there is opposition to the gTLD application from a targeted community.
In considering whether a gTLD is an appropriate business tool, a prospective gTLD owner should appreciate that new gTLDs represent virtual real estate that can be secured and controlled by a single entity. The gTLD owner will have exclusive control over every domain using that particular gTLD. Internet users may opt to use branded gTLDs as they are likely to be trustworthy and highly visible. Scammers will not be able to register domains under a new gTLD without consent by the gTLD owner. This additional control should provide gTLD owners with exceptional security and minimize the likelihood of fraud because cybersquatters, typosquatters, and pharming attackers will not have access to any strings with that gTLD. From a business perspective, the gTLD owner controls the registry that accepts second-level domains. Accordingly, the owner can limit second-level domain name purchases to companies with whom it has an advantageous relationship in the marketplace. Additionally, some marketing professionals have predicted that the domain name system will evolve into a hierarchy of corporations that internet viewers will associate with greater wealth, prestige, and authority. For example, whichever entity owns the “.auto” gTLD could have limited control over numerous valuable domains related to automobiles and vehicles, including those of trademark owners such as Ford Motor Company, Audi A.G. Corporation, Toyota Motor Corporation, and other competitors in the automobile industry.
The negative side of this modification to the current system is most obviously cost. The $185,000 application fee is generally non-refundable, however, in certain cases, refunds of the fee may be available for applications that are withdrawn before the evaluation process is complete. Outside of the application fee and annual fees, the owner must also devote funds and internal resources to managing the domain name, operating the registry, and promoting the new domain name in order to attract users and advertisers. Some preliminary financial analyses indicate that the total costs related to buying and maintaining a single gTLD will likely range between $500,000 to $1,000,000 in the first 18 months. Another negative factor is uncertainty. The benefits to owning a new gTLD are unclear at best. Until the new rules are implemented, it is difficult to ascertain whether a new gTLD will drive additional traffic to a gTLD owner’s website, or whether consumers will continue to value a domain name with a traditional gTLD (i.e. “.com”).
Regardless of the ultimate value the new system brings or takes from the internet, companies involved in e-commerce should not ignore the new gTLD rule changes. Companies with valuable brands or trademarks should consider evaluating the strength of existing trademarks, service marks, and related intellectual property in terms of the possible loss of strength of that mark as it relates to visibility and marketing in an online forum. Of course, many companies will conclude that their current second-level domain name is sufficient and therefore there is no need to register a new gTLD. Companies that do not purchase a gTLD should consider actively monitoring newly filed gTLD applications. Careful auditing is necessary to evaluate whether new gTLDs will be harmful to existing marks or possess the potential to create new business opportunities. Although at this stage there are far more questions than answers, financial, marketing and legal professionals generally agree that intellectual property owners should exercise caution as the new gTLD rule changes are implemented.