New Internet domain name options present both costs and opportunities

Companies will face new challenges related to gTLDs, but will reap benefits as well

Corporate lawyers remember well the good old days of the Internet, when there were just a few domains available: .com, .net, .edu, .gov, etc. Then the  Internet Corporation for Assigned Names and Numbers (ICANN), the company that controls Internet domain naming, expanded the number of domains considerably to include .biz, .info, .name, etc.

At about the same time, domain name piracy—where unaffiliated third parties register domain names incorporating the brands of legitimate businesses—became a commonplace scourge, forcing brand owners everywhere to expend resources knocking pirates off of illegitimately-registered domain names. The proliferation of domains made piracy easier, with more choices available to the pirates. This in turn drove more legal expense for brand owners. To combat the problem, ICANN initiated the Uniform Dispute Resolution Process (UDRP), which enabled brand owners to take their domains back from the pirates at a lower cost. So while brand owners were still forced to spend money dealing with domain name pirates, the brand owners at least had an efficient vehicle available for this purpose.

Fast forward to 2013, and we find ourselves confronting another major expansion of available domain names. ICANN now accepts applications to register nearly anything after the “dot”. Over 1900 applications for these new global top level domains (gTLDs) have been filed so far, for strings like .shop, .wine, .paris, and .apple. Many corporate lawyers are no doubt thinking, “Here we go again”. And while there may be something to that sentiment, it is also the case that the vast expansion of domain name options creates new opportunities for improvement of the Internet. It also creates a new set of challenges for the trademark system, in the U.S. and overseas.

Domain name piracy certainly takes on a new character when a pirate can register your client’s key brand to the right of the dot. No lawyer relishes the thought of seeing a third party holding the domain “.your-company’s-name”. But the cost of registering these new top level domains is $185,000 initially and $25,000 per year thereafter, much higher than the nominal cost of registering an old-fashioned domain to the left of the dot. ICANN is also requiring more disclosure of information from would-be registrants and has recently started up a clearinghouse and a sunrise system designed to protect legitimate brand owners from piracy. There is additional work underway to put a new UDRP-like process in place to resolve disputes.

While there are gaps in these safeguards, it is fair to say piracy will not be as easy at the top level (to the right of the dot) as it was at lower levels in the Internet domain name structure (to the left of the dot). But then again, with the potential hold-up value being so much higher to pirates, it is also fair to say no one knows yet whether piracy will be a major issue. One thing that is clear to all corporate lawyers: the idea of either spending a lot of money on defensive top level domain name registrations, or spending a lot of money dealing with pirates who evade ICANN’s safeguards and register your client’s important brands for ransom, is extremely unattractive. Put bluntly, dealing with gTLD pirates would be a huge waste of resources in an era when it is critical that we direct our resources to productive purposes and not wasteful ones.

Countering the downsides of the new top level domain system are some important positive opportunities. Perhaps most prominent is the opportunity for new registries to police their participants, ensuring that the goods sold under those registries are genuine, that brands are represented in accordance with the law and best practice, and that participating businesses are themselves legitimate and willing/able to stand behind the products and services they provide over the Internet. Imagine a “.health” domain through which you can be confident you are ordering genuine products from the actual companies whose brands you see advertised and where you have no concern your payment information or personal data will be misused by a fraudster misrepresenting itself as a legitimate enterprise. That would be a big step forward for the Internet, and is now possible with the advent of the new top level domain system.

Other pro-consumer opportunities are by no means unimportant: the ability of brands to more clearly distinguish themselves by establishing registries at the top level; the ability of distinctive geographical areas (Kobe, Napa, Roquefort) to accurately call attention to the famous products they provide.

So while there are new costs and risks involved in the new gTLD system, there are also clear benefits. In any event, the new system means that for the first time, domain names will take on trademark significance. This is important because it means trademark granting authorities will have to rethink their historical policies of refusing trademark protection for domain names on the grounds those names carried no independent trademark significance. That simply will not be the case when whole trademarks can be placed to the right of the dot. And as the world’s trademark offices begin accepting applications for registrations of gTLDs, we will see expense associated with filing, prosecuting and maintaining the associated registrations. Moreover, with the gTLD system being global, but trademark systems being national, we can expect a high premium on cooperation and consistency in the practices undertaken by the world’s trademark offices.

Welcome to the new world of the gTLD, a mixed bag to be sure. But with some evolution and iteration led by ICANN, proactive advising by corporate lawyers and a little patience as the new system stands up, perhaps it will, on-balance, take the Internet and our IP system to a better place.

Contributing Author

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David J. Kappos

David J. Kappos is a partner at Cravath, Swaine & Moore LLP. He is widely recognized as one of the world's foremost leaders in the...

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