23 Oct
2015

How the new gTLD regime affects brand owners

When the new generic top-level domain (gTLD) programme became a reality in 2011 after an Internet Corporation for Assigned Names and Numbers (ICANN) meeting in Singapore, a significant number of brand owners expressed concern over the lack of attention paid to the protection of their digital assets. Cybersquatting was a growing problem for organisations within the 300 or so existing gTLDs at the time, and there was a general feeling that the domain name industry as a whole was not doing enough to prevent IP abuse and infringement. These concerns were heard and a number of measures were put forward to protect brand holders’ digital assets when the programme launched in 2013.

There was also the question as to whether more domain names were needed at all. Some saw the introduction of the new gTLD programme as an opportunity to feather the nests of those already deeply entrenched in the industry – ICANN, the existing registries and the registrars. ICANN’s messaging focused on the need to make the Internet a safer place and one that fosters innovation. It claimed that introducing fresh blood into an industry that had become stale would improve the Internet for everyone: the ‘.big bang’ would lead to evolution rather than revolution.

Two years into the programme, more than double the original 300 gTLDs are now operational. Yet despite the fact that we are still only halfway through the release phase of the programme, there are growing calls from some quarters for a second round of applications.

A number of commentators have tried to come up with metrics to determine the success not only of each individual gTLD that was launched since October 2013, but also of the programme as a whole. However, it is hard to find one measure that could be used by brand owners to determine whether they should be seizing the opportunities offered with both hands – or at least mitigating the risks that have arisen from the launch of the new gTLDs.

Trademark Clearinghouse

One of the most successful instruments put in place has been the Trademark Clearinghouse (TMCH). ICANN stipulated that the main purpose of this central database of trademarks is to enhance the protection of intellectual property. A total of nine applicants tendered to run the service, with Deloitte eventually chosen to build the central repository (to which every new gTLD registry must connect) and provide authentication and validation services. The TMCH was designed to provide an early warning system for trademark holders should someone attempt to infringe their intellectual property during the initial registration phases of each gTLD. Based on previous gTLD launches such as ‘.asia’, ‘.eu’ and ‘.xxx’, it was anticipated that over 100,000 trademarks would be submitted to the TMCH.

While the current number of valid objects in the TMCH is significantly less than the estimated number (37,151 as of June 2 2015), it has proved to be incredibly effective in preventing cybersquatting and IP abuse in the sunrise period. The early warning system of presenting a potential breach of trademark notice to would-be applicants in this initial registration phase has proved to be over 90% effective (ie, only one in every 10 domain names is registered once the warning notice is displayed). Any organisation which has utilised the TMCH essentially gets a first-mover advantage in securing its digital assets. In the high-paced, often cut-throat digital environment, the opportunity to get one step ahead of the competition is of paramount importance to some brands – and this is the opportunity that the TMCH delivers.

As a cost-effective rights protection mechanism, the TMCH has proved to be the most successful element of the new gTLD programme so far – and with some of the most eagerly anticipated and potentially most popular gTLDs still to be released, it is still not too late for brand and trademark owners to take advantage of the benefits and protection that it offers.

Domains Protected Marks List

With over 600 of the new gTLDs being launched without any major restrictions, brand owners face the headache of formulating a strategy that balances these new opportunities against the threat of cybersquatting and potential reputational damage to their brands. It would be foolhardy for any brand, irrespective of the depth of its pockets, to attempt to register its trademarks in every one of the 600 open gTLDs. While some brands did follow this strategy when the first dozen or so were released in January 2014, it soon became apparent that there was no need for registrations in each and every one – an organisation really does not need to proactively own a ‘.bike’, ‘.plumbing’ and ‘.kitchen’ gTLD unless it is really operating across many verticals.

When the results of the applications for gTLDs were announced back in June 2012, one of the new registry names on the list was Donuts. Formed by a number of industry veterans, Donuts applied for over 300 generic-term gTLDs, ranging from ‘.academy’ to ‘.zone’ and everything in between. It quickly moved to announce that it was impractical to expect brand holders to register in each and every one of its gTLDs; instead, Donuts created a new rights protection mechanism called the Domains Protected Marks List (DPML). Such proactivity from a registry was rare and this type of product had not been seen in the domain industry before.

The DPML allows trademark holders to effectively block either the exact trademark string or a variant of it (as long as the full trademark appears in the blocked term) across all of Donuts’ gTLDs for a period of five years for a uniform fee. When the dust has settled and all duplicate applications for the new gTLDs have been sorted out, it is expected that Donuts will run around 220 new gTLDs, meaning that the DPML will cost trademark owners around $3 a year per domain to block – a fraction of the cost of an active registration. Two other registries, Rightside and Minds + Machines, have followed Donuts’ lead, meaning that it is now possible for a brand or trademark holder to use this blocking mechanism in around 55% of all gTLDs.

Uniform Rapid Suspension

Some organisations initially decided to wait and see what would happen in terms of potential third-party registrations using their brand and trademarks. They took some comfort from the introduction of a new dispute process which every new gTLD registry supports – Uniform Rapid Suspension (URS). Previously, the most effective route that an organisation could take to legally recover a third-party domain name that infringed intellectual property was via the Uniform Domain Name Dispute Resolution Policy (UDRP). However, the UDRP process is cumbersome, costly and time consuming, with the burden of proof resting on the complainant. A World Intellectual Property Organisation judge eventually rules on each case, but due to the time the process takes, significant brand and reputational damage can be inflicted.

This was a major concern for brand owners, which saw the explosion of the gTLD space as increasing the amount of litigation that they would be forced to undertake in order to recover their digital assets. Once again, ICANN heard these concerns and moved to introduce a simpler mechanism to quickly and cost effectively remove infringing domain names from cybersquatters. The URS process is designed to allow trademark owners which have used the TMCH to file a complaint against third-party registration and obtain a decision within a few working days. The advantage of the URS is that it significantly reduces the period in which an infringing domain name can be used for maleficent purposes, as well as reducing the cost of filing a case. However, the burden of proving that the infringing domain name was registered in bad faith and was intended to confuse is much higher and – most importantly – the name is only suspended until expiry, rather than transferred to the complainant.

So far, the URS process has been successfully used by a host of global brands, including IBM, Nissan, Lufthansa and Virgin; but it should not be viewed as a front-foot strategy by brand owners. It is there as a failsafe – almost a last resort. Over 350 cases have been heard by the National Arbitration Forum (the most popular of the URS providers) since the gTLD programme launched, with infringements most commonly taking place in the ‘.club’, ‘.email’ and ‘.top’ gTLDs.

Negative gTLDs

In the last few months the mood of brand and trademark owners has been darkened slightly by the launch of a number of gTLDs that could be classed as having negative sentiment. No organisation wants to see its brand or trademark being associated with negative comment or inappropriate material. The launch of the ‘.adult’, ‘.porn’ and ‘.sucks’ gTLDs has probably taken up more column inches than the rest of the 400-plus new gTLDs released to date – especially after celebrities such as Taylor Swift made a lot of noise about protecting their brand. ICM – the registry behind ‘.adult’ and ‘.porn’ – had previously launched ‘.xxx’, which was introduced to the domain name space in order to allow those involved in the adult industry to essentially create a space online specifically for themselves. ICM understood the concerns of trademark holders when it launched ‘.xxx’ in 2011 and introduced an option for organisations to block their key brands and trademarks for a fixed fee. It has offered a similar solution under ‘.adult’ and ‘.porn’, which at least makes it an easy decision for organisations to make in order to protect their brands.

Possibly the most talked-about new gTLD launched so far has been ‘.sucks’. The name itself is not that controversial – while it has a negative connotation in the United States, in other territories it has a much softer, almost jovial meaning. The main issue has been the pricing strategy put in place by registry Vox Populi. While the sentiment in the registry was undoubtedly positive – as reflected in its marketing messages of “customer-led advocacy” and “fostering debate” – brand and trademark holders saw its launch very differently.

Opportunities and future developments

While so far this chapter has focused on the defensive elements of the programme, the abundant opportunities presented by the expansion of the domain name space should not be ignored. A simple look at the secondary domain name market in the last few years shows that ‘.com’ gTLDs have been a valuable commodity: ‘insure.com’ sold for $16 million, ‘hotels.com’ for $11 million and ‘fund.com’ for $10 million. The new gTLD programme gives brand owners the opportunity to be creative to the left and right of the dot for the first time, without having to invest millions of dollars. For example, ‘cheap.flights’, ‘street.lighting’ and ‘fan.club’ will have been registered significantly cheaper than ‘cheapflights.com’, ‘streetlighting.com’ and ‘fanclub.com’ would have cost on the secondary market. The opportunities for these premium generic names are significant for organisations. Understanding how customers find their brands through searches is the first step, followed by defining what keywords are used and then looking at how they can be replicated within the new gTLD programme. While Google (along with others) has kept relatively tight-lipped on how it will treat new gTLDs in terms of searches, a number of search engine optimisation experts have already performed their own experiments which suggest that in a number of instances, the keyword to the right of the dot is playing a part in search rankings.

So what does the future hold for brand owners? One limiting factor on the programme’s popularity so far has been usage and examples of where brands are actively adopting new gTLDs. The total domain name universe currently stands at over 290 million, with just 6 million of these relating to the new gTLD programme. These are early days, of course – but organisations want to see how other parties are using the programme for innovation and improving security, and whether these developments will provide them with a compelling reason to adopt new gTLDs. Some organisations which applied for their own gTLD – known as ‘.brands’ – have looked at securing first-mover advantage in their respective markets. These include Barclays (‘home.barclays’) and BMW (‘i3-de.bmw’); however, there are few examples so far of similar-sized global companies using the gTLDs.

The existing list of generic names includes geographic-related terms such as ‘.london’, ‘.nyc’ and ‘.paris’. This could lead to a fragmentation of the Internet the likes of which we have never seen before, similar to what happened to the television industry when satellite and cable access became widespread. In the United Kingdom, viewers had been used to accessing five channels up until 20 years ago. Now we have thousands at our fingertips, with specific channels for sport, food, music, drama and news. Could this type of fragmentation happen in the internet space? The new gTLD programme could certainly facilitate this – instead of generic search engines such as ‘google.com’, could we see a ‘google.menu’ for us to search for recipes or takeaways or ‘google.amsterdam’ to create a specific search index for the capital of the Netherlands?

While some brand owners may dismiss the new gTLD programme as another fad, they should not simply ignore it. The programme offers some time-limited opportunities to ensure that their brands are present, protected and prosperous on the Internet, keeping them one step ahead of competitors and the miscreants who are looking to profit from or – worse – damage their intellectual property. A strategy to take advantage of these opportunities and mitigate the risks can be put together and implemented quickly, enabling any organisation to be part of the evolution of the Internet.

NetNames

37th Floor, 25 Canada Square

London

E14 5LB

United Kingdom

Tel +44 870 458 9401

Web www.netnames.com

Stuart Fuller
Director of commercial operations
[email protected]

Stuart Fuller is director of commercial operations at NetNames and specialises in the issues affecting brands online. He focuses on the rise of online threats and domain name management, particularly within the retail, financial services and IT sectors. Mr Fuller is a recognised expert in the new generic top-level domains programme and is frequently published in a wide variety of internet, marketing and trademark protection publications.