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Is your company considering a domain name change?

Is your company considering a domain name change?

Experts weigh the pros and cons of custom domains.

The Internet as we know it is about to change. This could create huge new opportunities for businesses to strengthen their brands, as well as huge new threats to their trademark rights. No wonder so many companies are uncertain about how to respond to the coming new domain name system.

There are currently 22 generic top-level domains (gTLD), such as .org, .biz and .mobi. There are approximately 250 country code top-level domains (ccTLD), such as .us. For most businesses, however, there are only a few top-level domains (TLD) that really matter—the most important of which, by far, is .com.

Starting Jan. 12, 2012, the non-profit group that manages the Internet, the Internet Corporation for Assigned Names and Numbers (ICANN), is throwing the doors wide open to new TLDs. ICANN will accept applications from organizations that wish to operate new TLDs, and these organizations can choose almost anything to be a TLD. The Internet may thus soon have hundreds of new TLDs with names like .pepsi, .car, .kids and .deloitte.

“This has the potential to change how we all act on the Internet. If there’s a deluge of new TLDs, businesses and consumers alike will need to relearn how to find what they are looking for on the Internet,” says Erin Hennessy, at partner in Bracewell & Giuliani.

Costly Consideration

It is unclear if there will be a deluge of new TLDs. An organization will need to pay millions of dollars to obtain, run and publicize a new TLD, according to experts, and the return is uncertain. No one knows if Internet users will forsake the familiar .com in favor of new TLDs, or whether new TLDs will languish in obscurity.

Nevertheless, many businesses are seriously contemplating applying for TLDs. They believe getting a TLD will help their marketing efforts (see “Gaining Ground”).

Lots of businesses also want to own aTLD for defensive reasons. A company with a unique brand name, such as Kodak or Lego, need not worry that its brand will be registered as a TLD by another firm. But a business with a more common brand name could find that if it doesn’t register its brand as a TLD, another will do so. For instance, if Delta Air Lines Inc. doesn’t apply for .delta, Delta Faucet Co. might.

Similarly, if a company doesn’t apply for a gTLD that is relevant to its industry, a rival might snap up the name. “What if a competitor registers .book and you are Barnes & Noble?” says Hennessy.

Because of these defense concerns, prudent companies will keep an eye on TLD applications. ICANN will publish these soon after the application period closes on April 12, 2012, and if a TLD would conflict with a company’s trademark rights, that company can file an objection.

Second-level Scams

The new TLDs create new opportunities for cybersquatters (who register others’ trademarks) and typosquatters (who register misspellings of others’ trademarks). These scammers, however, are unlikely to register any TLDs. “It is so expensive to register [a TLD] and the process is so demanding, it is unlikely the fly-by-night scammers will be able to fool anyone,” says Christopher Glancy, a partner at White & Case.

The scammers are far more likely to do in the new TLDs what they have done in existing TLDs: register second-level domain names that infringe others’ trademarks. (Second-level domain names appear immediately to the left of the last dot in a URL, such as “ford” in www.ford.com.) Registering second-level domains is fast, cheap and easy. Getting a domain name back from a scammer, by contrast, can require legal action that costs a trademark owner tens of thousands of dollars.

To combat cybersquatters, ICANN added trademark protections for the new TLDs. ICANN required a Trademark Clearinghouse be set up, where trademark owners can register their marks. Whenever an organization seeks to register a second-level domain name in a new TLD, the entity processing the application (registrar) must compare the requested domain name with data in the clearinghouse. If the application is for someone else’s trademark, the applicant must be notified of the mark owner’s rights. If the applicant doesn’t withdraw its application and subsequently obtains the domain name, the registrar must notify the trademark owner of the registration.

Similar protections apply during a new TLD’s sunrise period—the prelaunch phase of a TLD during which owners of trademarks may register their marks as second-level domains. If someone seeks to register a domain name identical to another entity’s mark in the Trademark Clearinghouse, the registrar must notify the mark’s owner about the application. The owner can then file an objection to the application.

However, these new protections have two major limitations. They apply only when an applicant requests a domain name that is identical to a mark in the clearinghouse. The owner of “Lego,” for instance, would not be notified of an application for “legos,” “leggo” or “legotoys.” And the protections apply for only the initial stages of a new TLD. They can be discontinued in a new TLD once the TLD’s second-level domain name registration has been open for 60 days. As a result, the protections “are not anywhere near as useful as they should be,” says Steven Metalitz, a partner in Mitchell Silberberg & Knupp.

Speedy Solution

ICANN also has required new TLDs to provide trademark owners with a new avenue of redress against scammers: the Uniform Rapid Suspension system (URS). The URS, like the current Uniform Domain-Name Dispute-Resolution Policy (UDRP), is an arbitration process that applies when one party has registered a domain name that is identical or confusingly similar to another’s trademark, the registrant has no legitimate interest in the domain name, and the domain name was registered and is being used in bad faith.

The URS is supposed to be far speedier and less costly than the UDRP, but some experts are skeptical about the untried system. “It might not be much faster or cheaper than the UDRP,” says Metalitz.

And the URS has some disadvantages compared with the UDRP. The biggest is that the complainant in a URS proceeding has a much higher burden of proof. In URDP, the burden is on the alleged cybersquatter to disprove the allegations against it. In URS, the complainant trademark owner must prove its case by “clear and convincing evidence” with “no genuine issue of material fact.” Depending on how these standards are interpreted, it may be extremely difficult for trademark owners to vindicate their rights using the URS, some experts fear.

“We will have to see how strictly they interpret ‘no questions of fact,’” says says Phillip Barengolts, a partner in Pattishall, McAuliffe, Newbury, Hilliard & Geraldson. “Will it be the same as a motion to dismiss standard or a summary judgment standard? If the former, the URS will get relatively little use.”

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Steven Seidenberg

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