Publication

December 2008Client Alert

Branding the Internet: Custom Top-Level Domain Names

The Internet Corporation for Assigned Names and Numbers (“ICANN”) has approved a proposal that will fundamentally change the Internet’s addressing system. Beginning in early 2009, ICANN, as the Internet’s primary oversight organization, will allow domain name registrants to purchase custom top-level domain names defined by any string of characters a registrant selects.

A top-level domain (TLD) is the rightmost portion of an Internet address, often identified as the string of characters that immediately follows the last dot. Currently ICANN recognizes only twenty-one generic TLDs, including the familiar .com, .gov, and .biz endings. With the implementation of the new proposal, that number may grow exponentially, as the global domain name system (DNS) will expand to include characters from non-ASCII scripts (for example, Arabic or Chinese characters) in addition to the standard ASCII characters (a-z, 0-9) that have traditionally defined TLDs.

ICANN’s proposal opens the door to a potentially infinite number of Internet suffixes, giving entities and organizations the ability to turn brands into web addresses by using company names or related generic or descriptive terms as TLDs. For example, Google might register .google, a restaurant might apply for .pizza, or New York City might use .nyc. “The potential here is huge. It represents a whole new way for people to express themselves on the Net,” Dr. Paul Twomey, president and CEO of ICANN said of the new plan. “It’s a massive increase in the ‘real estate’ of the Internet.”

The new naming system is not without concerns. Its inception brings both great opportunity and great risk to intellectual property owners. The opportunity to register a custom TLD is attractive to many, as a custom TLD provides space for brand differentiation and reinforcement and can provide a vanity presence on the Internet. However, the proposed registration process also brings with it the significant possibility for conflict between and among intellectual property owners.

TLDs corresponding to trademarks will not be automatically reserved for trademark owners. Instead, ICANN’s plan calls for an objection-based mechanism that will enable trademark owners and other intellectual property rights holders to assert, via arbitration proceedings, that proposed TLD strings would infringe their legal rights. A presiding dispute resolution panel from a designated dispute resolution provider will then determine whether the potential use of the applied-for TLD takes unfair advantage of the distinctive character or the reputation of an objector’s trademark or service mark or whether the potential use unjustifiably impairs the distinctive character or the reputation of the objector’s mark or otherwise creates an impermissible likelihood of confusion between the applied-for TLD and the objecting party’s mark.

With such a system, prospective registrants who do not have senior trademark rights may succeed in registering TLDs that are trademarked terms of another party if such other party does not object during the proscribed time for objection. ICANN will post for public review a list of completed TLD applications after the close of the application period. But under ICANN’s proposed protocol, there is a presumption that qualified applicants, that is, those applicants demonstrating the requisite technical, financial, and operational capabilities in addition to filing a complete application, will be approved for TLD registration unless there is a competing application in the same round or unless a third party asserts a successful objection to registration.

Where more than one applicant asserts legal rights to register a particular TLD, an auction process may determine the winner by awarding that TLD to the highest bidder. Accordingly, some trademark owners may find themselves in bidding wars to obtain their desired TLDs. Meanwhile, other applicants seeking to register identical or very similar strings will be directed through a comparative evaluation process. ICANN will review every applied-for TLD for string confusion by assigning each TLD an algorithmic score for visual similarity between each applied-for string and each of other existing and applied for TLDs. The Algorithm and user guidelines are available at http://80.124.160.66/icann-algorithm. The algorithmic string similarity score is one objective measure considered by the application review panel, but the panel will also consider each applicant’s dedicated registration policies, the nexus between an applicant’s proposed string and its impact on the community, community establishment, and community endorsement, with an auction to the highest bidder serving as the possible determining factor in the award of the TLD.

ICANN recognizes that the dilemma of how best to allocate new TLDs has no easy solution, but notwithstanding the myriad of unresolved intellectual property issues and procedural concerns, ICANN intends to proceed with implementation of the new registration system. Public comments to date have been overwhelmingly critical, but ICANN, in comments published at its site, states that it is "aware of all of the concerns" and that it has "considered them very carefully.”

As a practical matter, the anticipated application fee, currently estimated to be $185,000 per TLD, may deter speculators. However, the high fee may also serve as a barrier to entities or organizations without significant financial resources. ICANN has indicated that it may reduce the fees charged to non-profit applicants and for those in developing countries.

ICANN is currently refining the proposed registration process, working to clarify the requisite minimum technical criteria that will be required for those obtaining TLDs and developing what it describes as a pre-TLD assignment checklist for applicants. ICANN recently released a Draft Applicant Guidebook and is seeking public comment on its proposed TLD assignment guidelines and policies via the ICANN website (www.icann.org). Comments may be submitted on or before December 8, 2008, and the Final Applicant Guidebook will be released in early 2009.

Whether a new TLD will ever replace or even rival .com as the preferred and most valuable Internet suffix remains to be seen. Indeed, several new TLDs, such as .mobi (for mobile phones) have entered the global DNS in the past without creating great fanfare or arousing significant concern with IP owners. Nonetheless, as ICANN changes the landscape of the Internet, new challenges will surely confront trademark owners.

Trademark owners may wish to begin developing a protection strategy, deciding whether to offensively or defensively register their marks or company names as TLDs and further to consider whether to seek registration of related generic or descriptive terms that may be valuable for their business activities. Though the costs are considerable, active participation in this new TLD registration process may be a useful way for rights owners to protect their intellectual property.

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