Front-Running Fiends


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The practice of front running is nothing new.

In the world of securities, it's a well-known illegal practice that occurs when a stock broker executes orders on his own account before filling orders previously submitted by his customers. Even before the stock market came into existence, American settlers in the late 19th century discovered ways to pre-emptively file a claim on a parcel of unoccupied, but desirable, territory.

Now front running seems to have leapt from the worlds of pioneers and stock brokers into the realm of the Internet as domain name front running, which is the practice whereby someone gets wind of demand for an unclaimed domain name and nabs it before the prospective buyer has a chance to purchase it.

The practice, which formerly was relegated to rumors on blogs and Internet message boards, came into the mainstream in October 2007 when the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit that administers the Internet, released a special advisory on the topic.

Although the advisory was fairly vague, stopping short of confirming that domain name front running truly exists, it gave legitimacy to the problem. This laid the groundwork for a class action lawsuit filed in late February against domain name registrar Network Solutions and ICANN on accusations of practicing and abetting domain name front running.

"There's always been a conspiracy theory that registrars were monitoring and watching what domain names people were searching for," says Eric Fingerhut, a partner in Howrey's IP group. "Now it seems that there may be some truth to this."


Domain Deviants
Even in its advisory, ICANN states it is unsure of how front running occurs. However, several theories have gained prominence in technology and trademark circles.

One of the main theories is that covert third-party software on a user's computer enables front running. These types of applications, often called rootkits or malware, can infiltrate a computer without the user ever knowing about it. The software sits on the machine and can track and transmit various types of data, including searches and keystrokes. Experts believe that it's possible some domain front runners deploy this software to track company domain name searches.

But the overriding theory on front running is that its perpetrators are actually the domain registrars themselves. When a company wants to register a domain name, such as insidecounsel.com, it typically goes through a domain name registrar. A registrar is a company that has earned accreditation from ICANN to register domain names.

Popular registrars include eNom Inc., GoDaddy.com and Network Solutions. Users of these sites can conduct a domain name availability search to see if the desired domain is already registered by another party.

The theory is that unscrupulous registrars are tracking these availability searches and are either registering these domain names themselves or
granting access to the search lists to third parties.

"If a registrar reserves the domain name themselves and the company later decides it wants to buy the name, then the company would have to go through that particular registrar to do so," says Josh Braunstein, general manager at CT Corsearch, a provider of clearance and protection solutions for trademark and IP professionals.


Test Case
Accusations that registrar Network Solutions engaged in this practice have landed the company in court.

On Jan. 31, Chris McElroy visited Network Solutions' Web site and inquired about the availability of the domain name "kidsearchnetwork.com." According
to court documents, the registrar informed McElroy that the domain was available. Not wanting to pay Network Solutions' $34.99 annual fee for the domain, McElroy immediately sought out a cheaper price on rival registrar GoDaddy.com.

However, when he conducted an availability search on GoDaddy.com, the domain was no longer available.

Curious as to why the domain would one minute be available and the next minute be locked up, McElroy conducted a search on Whois.net, a domain name registry database, to find the owner of kidsearchnetwork.com. To his surprise, the name had been registered by Network Solutions.

"The theory is that this is anticompetitive behavior," Fingerhut says. "Network Solutions holds onto the name, preventing the searcher from obtaining a lower price." McElroy filed a class action suit Feb. 25 on behalf of everyone who conducted an availability search through Network Solutions and subsequently registered domains through the site.

As of press time, the company had not yet filed a response to McElroy's complaint. Because no court case to date has dealt with domain front running, experts believe this case may determine the legality of the practice. In the meantime, Network Solutions has made its practice more apparent to its users by announcing a "Customer Protection Measure" notice to its site.

The notice states, "Network Solutions may reserve domain names that are searched on our Web site for up to four days. During this period, these domain names will only be available to register at networksolutions.com. ... By holding the searched domains at Network Solutions for a short period, it allows our customers time to decide whether this is the domain name they really want to register."

If Network Solutions loses the lawsuit, experts predict it will have little effect on trademark law. However, it may have a larger effect on registrars.

"It could have a deterrent effect on the rest of the registrar community," Fingerhut says. "They would know it'd be wise either to not engage in this
practice or, at the very least, conspicuously tell the Internet community this is what they're doing."


Safety Steps
Fortunately, technology can help companies avoid domain front running. Using CT Corsearch's Advantage Screening, users can conduct availability searches without the risk of a registrar buying the domain out from under the user.

"We have access to search a trusted database of domain names that we
aren't passing off to anybody else," Braunstein says.

Also, there are some best practices companies can use to prevent domain front running.

"The best course of action for a company is to register the domain name immediately after searching for its availability, even if you're not sure you need it, because the cost is less than to buy it from someone else," says Margie Milam, general counsel at MarkMonitor Inc., which provides companies with brand-protection solutions.

ICANN is also doing its part. The organization is urging those with information regarding possible domain name front running to report incidents.

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