Will thousands of new top level domains change the internet?

Protecting trademarks in the new domain space will increase costs – that will presumably be passed on to consumers.

Twenty year old university student Sarah
"Trademark protection works less well when wielded as a blunt tool - it should be crafted with precision so as not to impair competition or internet freedom," writes author [AFP]

The process of introducing new generic top level domains is already underway. Generic top-level domains, or gTLDs, are the suffixes at the end of web addresses, such as .com, .org and .net. We could have as many as 1,400 new gTLDs sometime this year. While the gTLDs may be “just code” – a set of internet protocols authorised by ICANN, the Internet Corporation for the Assigning of Names and Numbers – this development could radically change the architecture of the internet. 

Alternatively, it could only have modest impact on how we navigate information on the internet and the supremacy of .com could persist. Either way, two outcomes seem clear. First, the change will produce winners and losers and will not result in a level playing field for competition. Second, trademark rights holders have had tremendous influence on the process of introducing new gTLDs and will experience lasting results both in the domain space, and in the global protection of trademarks.

Recently, ICANN, the body that is responsible for managing the domain name system of the internet, approved what it refers to as “one of the biggest changes ever to the Internet’s Domain Name System”, under which, for the first time ever, ICANN is giving companies the opportunity to create and control new top level domain names.

Internet domain names consist of multiple components, including a top level domain name, then a second level domain name, and, in some cases, lower level domain names. Take, for example, my law school’s website, www.wcl.american.edu. The top level domain name is the suffix, “.edu”. The second level domain name is “american”. The lower level domain is “wcl”.

Until now when a business wanted to establish a web address, it would do so only by acquiring a second level domain name because businesses did not have the opportunity to claim a unique gTLD. The major impact of ICANN’s recent action is that businesses and other organisations will now have the ability to claim a customised gTLD. Instead of using a second level domain name under a gTLD such as “.com”, a company can use its company name as the gTLD itself, such as “.google”. Or, it could acquire a gTLD in a generic term, such as “.search”.

Historic expansion

Everyone seems to agree that this will be a historic expansion of internet domain extensions. The move is the biggest change to the internet’s domain naming system since “.com” was introduced 26 years ago. This first development opened up the formerly academic and military internet system to commercial use. 

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This next major expansion follows an existing steady expansion of domains and domain disputes. There exist already 246 million registered domains. Last year, there was a 12 percent growth in registered domains. Likewise, the number of disputes over domain names has steadily increased over the past decade. WIPO (the World Intellectual Property Organziation), which arbitrates a little over half of the disputes saw a record-setting 2,884 domain name disputes last year alone. This roll-out of new gTLDs will no doubt swell the number of new domains and domain disputes in the years to come.

ICANN’s decision to add unlimited new gTLDs, which was first announced in January 2012, follows years of intense discussion and debate in the internet and trademark communities. Its policy and guidelines went through more than seven revisions. However, not everyone is happy with the final results.

ICANN’S new gTLD programme will likely expand the current name space from our current 21 gTLDs to around 1,400 gTLDs. On June 13, 2012, it was revealed that ICANN received 1,931 applications for new gTLDs. ICANN had estimated that it would receive 250-500 applications. The number of applications is remarkable when one considers the application fee of $185,000 and the annual fees of $25,000 per gTLD. Do the math: ICANN received $357,235,000 in application fees alone.

Many predict that this influx of new gTLDs, and ensuing onslaught of new second level domains, will have an exponential impact. But will the internet change? And if so, how? Modest predictions are that there will certainly be more cybersquatting – the practice of registering an internet domain name that is likely to be wanted by another entity for the sole purpose of licensing or selling it to them at a profit.

There will likely be more reliance on search engines, and less direct navigation – the method of arriving at a website by typing the address directly into a browser’s address bar – by internet users. Another big change will be the addition of gTLDs in non-Latin script for the first time. Of the 1,931 applications, 116 were for gTLDs in non-Latin script.

ICANN has announced that the first new gTLDs will move to the delegation phase of assigning the new gTLDs to applicants on April 23. This is somewhat surprising as there are a host of questions and concerns remaining. For instance, who gets the gTLD in situations where there are a number of competing applications? For example, 13 companies applied for .app. ICANN has said that it hopes these contests can be resolved amongst the applicants, but if not, these popular gTLDs will be auctioned to the highest bidding applicant, providing yet another source of revenue to ICANN.

A much more significant issue is whether any generic word should be owned by a company for use as a closed registry. For example, nine companies, including Amazon, applied for .book. Amazon indicated in its application that it would operate .book as a closed registry meaning that it would not permit a market in .book second-level domains. Thus, no publisher, author, reviewer, or significantly, other e-book merchant would have access to the .book domain. Internet users seeking information about books in the .book domain would be captive to Amazon, a single company. 

Many have charged that the ICANN policy of allowing such generic closed registries will lead to anticompetitive results. It would allow already dominant, well-capitalised companies to entrench market power. This result flies in the face of the original purpose of creating new gTLDs. The expansion of the domain space was supposed to increase competition, consumer choice, internet freedom and market differentiation. How do closed, generic domains accomplish this mission?

Protections for trademarks

If you search for information on the new gTLDs, you will invariably find numerous criticisms from trademark owners, and those who represent them, to the effect that the expansion of new gTLDs leaves trademark owners vulnerable to cybersquatters and other villains. They have successfully lobbied for more and stronger trademark protections. Nevertheless, they remain unsatisfied. Almost no one is asking whether or not there may be too much trademark protection in the system.

As it stands, the protection offered to trademarks in the new gTLD space is much stronger than currently exists in the 21 extant domains. Trademark owners were opposed to the expansion of domains. But as they could not stop the train, they negotiated to get the domain name policy they were not prescient enough to ask for 26 years ago when .com was introduced.

What did they achieve? A range of “Rights Protection Mechanisms” has been established. Several of these are “pre-delegation”, meaning they establish objection procedures prior to any new gTLDs being delegated. Chief amongst these is the Legal Rights Objection, administered by WIPO. Under this mechanism, the owner of a registered or unregistered mark can challenge a gTLD application that either takes unfair advantage of the distinctive character or the reputation of their mark, unjustifiably impairs the distinctive character or the reputation of their mark, or otherwise creates an impermissible likelihood of confusion between the gTLD and their mark. Basically, if the applied-for gTLD harms the mark under any theory of trademark law anywhere in the world, the trademark rights trump the gTLD.

But these protections raise questions never before addressed by trademark law. For instance, Google applied for .esq “to provide content and offerings related to law and⁄or targeted at users seeking lawyers”. ESQ is also a trademark for watches owned by Movado. Might .esq create confusion between the gTLD and the mark? Might the gTLD impair the reputation of the mark? Who knows? Traditionally, trademark law has evaluated the mark and the potential infringement in their context to answer these questions. But a bare gTLD application provides little if any context. 

ICANN's decision to add unlimited new gTLDs, which was first announced in January 2012, follows years of intense discussion and debate in the internet and trademark communities.

by Christine Haight Farley

Another important trademark protection mechanism is the Trademark Clearinghouse, which already went into operation on March 26. This mechanism does something never done before: it creates a world-wide central registry for all trademark data. This database is open to any mark that is registered, court validated, or protected under statute or treaty anywhere in the world. The Deloitte accounting firm was selected by ICANN to administer the database. Trademark owners pay Deloitte $150 annually to use the service.

The Trademark Clearinghouse has two main benefits. The first is that marks in the database get priority second-level domain registration. ICANN has mandated that all registries/registrars operate both a sunrise period of 30 days, and trademark claims period of 90 days when launching each new gTLD. The sunrise period allows trademark owners to register their marks as second level domains in advance of the general public. 

Thus, upon registering with the Trademark Clearinghouse, Apple gets to register www.apple.farm before any apple orchard and the singer Madonna gets to register www.madonna.religion before any Catholic organisation. The second benefit is that the owners of marks in the database will receive alerts if an application for a second-level domain contains their mark. 

In addition to the Legal Rights Objection and the Trademark Clearinghouse, trademark owners can enjoy a superfast Uniform Rapid Suspension system, which quickly suspends offending domains at a fraction of the cost of a Uniform Dispute Resolution Procedure (UDRP) complaint, and a Post-Delegation Dispute Resolution Procedure in addition to the UDRP. These are the ICANN promulgated rights protection mechanisms. Any new gTLD owner is of course free to provide trademark owners with additional or stronger protections.

Donuts anyone?

Ever heard of a company called Donuts? It is now a business to watch as it has the distinction of having filed the most gTLD applications. It applied for 307 new gTLDS, all of them generic terms, and all for open registries whereby companies wishing to use one of Donuts’ gTLDs will have to pay Donut for its use. Some of its applications include .app, .group, .delivery, .photos, .pets, .band, .wedding, .city, .news, .tickets and .email. 

This company was formed only to take advantage of the new gTLD programme. It sourced over $100m in capital. Again, do the math: Donuts spent $57m in application fees, and would owe $7.6m in annual fees to ICANN if all of its applied-for gTLDs are delegated. If successful, it may become a major internet player. 

Donuts, which is by contract obligated to provide all ICANN rights protection mechanisms, has developed an additional eight trademark protections of its own. For instance, its Domain Protected Marks List blocks the reuse of trademarked words in second level domains across all of Donuts’ domains once a mark has been validated. For a fee, a trademark owner thus has a one stop shop to prevent any cybersquatting on their mark. Win win? 

Uncertainty is never attractive for businesses. And undoubtedly the new gTLD programme does create some uncertainty. Protecting trademarks in the new domain space will increase costs, costs which will presumably be passed on to consumers. On the other hand, the overprotection of trademarks in this space may have undesirable effects. For instance, a high rate of defensive registrations will likely render the new gTLDs less useful. Trademark protection works less well when wielded as a blunt tool. It should be crafted with precision so as not to impair competition or internet freedom.

Christine Haight Farley is a professor of law at American University Washington College of Law who teaches and writes about intellectual property law.