Domain names: reform or revolution?

Background
Domain names are a tool used to access the Internet. When a user types in www.microsoft.com, .com is the top-level domain, microsoft is the second-level domain and microsoft.com as a whole is the domain name. To date, private parties can register only second-level domains; they can decide which second-level domain they wish to register in association with a top-level domain selected in a pre-determined list approved by Internet Corporation for Assigned Names and Numbers (ICANN).

All this will change in 2012. Individuals and companies will be admitted to file applications for new generic top-level domains (gTLDs) in order to distinguish them from top-level domains associated with a country or territory (eg, .uk or .us). The new gTLDs will not necessarily be truly generic. Indeed, they may consist of a generic word such as .sex or .fashion, or of a registered trademark such as .microsoft or .prada.

In general, trademark owners have not welcomed the new gTLDs, fearing that they may offer new avenues for infringement to cybersquatters, in particular Far Eastern trademark and domain name pirates whose links with organised crime are now well known. ICANN has tried to appease the international trademark community by making the introduction of the new gTLDs part of a much larger reform of the domain name system, which would also affect traditional top-level domains. Much of this is still at draft stage, with the projects changing frequently.

Trademark clearinghouse
A first proposal by ICANN is to institute a trademark clearinghouse: a special register where trademark owners can re-register their trademarks. New registrars managing the gTLDs, and eventually also existing registrars, would check new applications for second-level domains against the clearinghouse. For example, if a company owned and managed a new .fashion register, and it received an application for prada.fashion, it should reject the application if the trademark PRADA has been re-registered with the clearinghouse.

Failure to register a trademark with the clearinghouse will not prevent the trademark owner from acting against a confusingly similar domain name through further administrative proceedings or legal action. However, there will be a significant advantage in using the clearinghouse, since it should cause many infringing domain names to be rejected ex officio at no cost to the trademark owner.

Further details and the related costs of the clearinghouse have not yet been released.

Uniform Rapid Suspension System
A second innovation proposed by ICANN is the Uniform Rapid Suspension System (URS), which is potentially attractive to trademark owners. It will introduce quicker – although, according to the latest drafts, not much quicker – and considerably cheaper administrative proceedings for those trademark owners currently using the ICANN Uniform Domain Name Dispute Resolution Procedure (UDRP). Panellists will present concise grounds for their decision – to be reached within one month – and the costs will be as low as US$300 for an action against one domain name. There is also a provision custom-tailored against cybersquatters which register multiple variations of the same domain name infringing the same trademark. If a respondent is attacked via the URS for more than 26 domain names by the same trademark owner and elects to file a response, it must pay a response fee or lose automatically the case.

ICANN insists that the URS will not replace the current UDRP, but should be used for more obvious cases of piracy and cybersquatting only. However, some foresee that if and when the URS is launched, it will soon replace the UDRP, with the latter reduced to a niche function.

New gTLDs
New gTLDs will not be easy to obtain. Applicants must pay a fee of US$185,000. In order to discourage futile applications, in case of rejection by an examining panel the applicant will receive only a partial refund of 35% to 80%, depending on the case. The rules also state that applications by individuals or companies with a record of cybersquatting or online sales of counterfeit products will be rejected, although it is unclear exactly how ICANN will verifiy this.

The only restrictions to registration concern gTLDs that:

• Are confusingly similar to current top-level domains (eg, .infos is likely to be rejected as a gTLD for being too close to the already existing top-level domain .info).
• Are technically unstable (particularly in case of non-Latin characters). 
• Are identical to geographical names for which permission from the relevant territorial authorities will be needed.

Applicants should also prove their financial good standing and should present their applications directly (ie, without using an agent or lawyer). Examination by teams of examiners will focus on these issues. Such examiners will not raise ex officio objections based on existing trademark rights. These may be raised only ex parte by the interested parties after publication.

For the first 500 gTLDs – ICANN says that it lacks the capacity to handle more than 500 in one year – a window will open on 12th January 2012 and close on 12th April 2012. A second window for another 400 gTLDs will open on a later date to be announced. On 27th April 2012 the applications will be published before examination. In November 2012 there will be a second publication of applications which have passed the examination.

It has yet to be determined at what stage trademark owners and other interested parties may file objections, but it is already clear that the term will be final and non-extendable, and that the new gTLDs can be launched only after this term has expired or any objections have been rejected.

There will be different tracks for different objections based on technical grounds, confusion with existing top-level domains, public order or objections by the relevant community. The track based on existing legal rights – both registered and common law trademarks, trade names, copyright and personality rights – will be managed by the World Intellectual Property Organisation (WIPO) in Geneva, Switzerland. The procedure will be similar to the UDRP, with three key differences:

• Only English will be allowed as a language.
• If the gTLD owner does not file a response, the objection will be automatically accepted.
• The gTLD owner should pay a response fee: if it fails to do so, the objection will be accepted automatically. In this case, unlike when prosecuting an application for a new gTLDs, the parties may be represented by an agent or lawyer.

No final decisions have been made regarding fees. For cases based on existing legal rights, including trademarks, ICANN has clarified that it is up to WIPO to determine the fees. A preliminary schedule released by WIPO lists a WIPO handling fee of US$2,000 (one panellist) or US$3,000 (three panellists), and honoraries of US$8,000 for a single panellist and US$20,000 for a panel of three. The respondent (ie, the gTLD owner or applicant) should pay part of these fees, but it is unclear whether this part will be 50% of the total or less. If an objection is filed against multiple gTLDs by the same applicant (eg, the same company may have applied for .microsoft and .friendsofmicrosoft), the fee should be obtained by multiplying 80% of the basic fee by the number of gTLD applications objected against. If multiple parties file objections against the same gTLD, and they are consolidated into a single case, each party should pay 60% of the basic fee. The winning party recovers no contribution to its costs. However, panellists may decide that the case was decided more quickly than expected, and that part of the fees should be reimbursed to the parties.

The WIPO fee schedule is hypothetical. Some panellists are insisting that they should be paid an hourly fee, with a maximum originally mentioned by ICANN of US$56,000 for a single panellist and US$122,000 for a three-member panel. Obviously, these higher fees would discourage many trademark owners from filing objections and WIPO is defending its proposed schedule. If the application is rejected as the result of an objection, the gTLD applicant will lose 80% of its filing fee of US$185,000.

Trademark Post-Delegation Dispute Resolution Procedure 
The trademark community has alerted ICANN to the risk that a party may obtain a generic gTLD and then misuse it for infringement. For example, somebody may obtain authorisation to operate the .fashion gTLD, and then start registering domain names such as prada.fashion, chanel.fashion and similar in the names of cybersquatters (perhaps associated with the gTLD owner itself), offering very limited recourse to the trademark owners. In this case ICANN has proposed the Trademark Post-Delegation Dispute Resolution Procedure (TPDDRP), a variation of which is the Registry Restrictions Dispute Resolution Procedure, to be used when the granting of a new gTLD has been accompanied by specific restrictions for the owner on which domain names it should accept, and those restrictions are not respected.

The potential consequences for the gTLD owner are serious, ranging from suspension of its option to register new domain names to revocation of the licence to operate the gTLD altogether. Because of these rather draconian consequences, it is expected that the PDDRP will be more complicated (including a second-degree review following an appeal) and expensive with respect to objections against new gTLDs. However, details and costs have not yet been released.