New Web suffixes are changing the rules

Suppose the Wharton School wanted to register Wharton.biz as a domain name using one of the seven new Web suffixes approved last month by the Internet Corporation for Assigned Names and Numbers (ICANN). Then let's say that Joe Wharton, owner of a dog grooming business in Iowa City, wanted to register Wharton.biz to advertise his pet service. Finally, suppose an English professor at the University of Pennsylvania wanted to set up Wharton.biz to sell potential customers a selection of his writings on the American author Edith Wharton.

Given that all of these parties have legitimate interests in the name Wharton.biz, who gets to use it?

Right now, the answer to that question is unclear. What is clear, however, is that last month's decision to add seven new domain names to the Internet's virtually unlimited real estate will have an impact on companies' efforts to protect their trademarks and brands. The newly approved names, which offer alternatives to the well-known trio of ".com," ".net" and ".org," include five specialty domains, ".aero," ".coop," ".museum," ".name" and ".pro," as well as two general suffixes, ".biz" and ".info," which will most likely be available to anyone.

And that's where it can get a little wild.

According to David H. Bernstein, a partner in the intellectual property practice group and litigation department at Deveboise & Plimpton: "Once these seven new names are successfully assimilated, you can be quite sure there will be more to come. Whether ".com" continues to be the Park Avenue of the Internet remains an open question, but at some point there may be dozens or hundreds of top-level domain names available. That's when companies might decide there is no good reason to spend the huge amount of resources it would take to register all of their major brands in every single domain."

Consider a company like Unilever, Bernstein says, which has a large number of extremely well-known brands. "Is it worth it for them to try and protect every brand in every top level domain, or is that too burdensome and expensive?" Bernstein asks. Intel, he adds, has already rejected that approach. "If someone puts up pentium.net and is selling competing chips then you go after them in court because it's trademark infringement, not cybersquatting. But if someone puts up pentium.net and it's their dog's name, who cares?"

Consumer behavior will no doubt play a role in how businesses approach these expanded online choices. Take the new name ".aero," which will most likely be restricted to airlines. "If consumers come to understand that you go to .aero for airline companies, then Delta, for example, wouldn't need delta.com anymore," says Bernstein. "United wouldn't need ual.com anymore and so forth." In addition, as search engine technology becomes more sophisticated, and as consumers find ways to get to pages through these search engines rather than by domain names, "we may find that domain names become irrelevant. We may find, far in the future, that people will access information on the Internet through means other than guessing at the domain name."

Back in the present, however, new domain names also suggest new playing fields for cybersquatters, generally defined as people engaging in any abusive action that involves registering a domain name without a legitimate interest in it. Cybersquatting, says Wharton legal studies professor Dan Hunter, is usually done with the intent of harming a competitor or extorting money in exchange for release of the name.

The act of cybersquatting, however, has been substantially curtailed by the Anti-cybersquatting Consumer Protection Act (ACPA) and the Uniform Dispute Resolution Policy (UDRP), two measures adopted within the last two years that were designed to bring law and order to this one particular area of the Internet gold rush. "If you think people are still going out there and preying on big companies by registering their famous marks all over the place, then yes, these people will have another seven opportunities to do so because of ICANN's recent action," says R. Polk Wagner, a University of Pennsylvania law professor. "But that part of the cybersquatting business has pretty much gone away thanks to the ACPA and UDRP." "My impression," adds Wharton legal studies professor Edward T. Swaine, "is that a lot of the easy riches have already been realized and now cybersquatting brings with it a clear risk. Also, cybersquatters have competed against themselves pretty effectively; it's hard these days to find good names" and make money off them.

Under the Anti-cybersquatting Consumer Protection Act, if a company owns a trademark name and someone is cybersquatting that name without a good faith reason for doing so, the company can sue in federal court. (The case is usually heard in Virginia, which is the home state of Network Solutions, the central registrar for all ".com," ".net" and ".org" names.)

The only problem, Hunter says, is that the remedy, like most court actions, is expensive, time-consuming and, especially for businesses not familiar with the American justice system, confusing.

Within a year of the passage of the anti-cybersquatting law, an alternative was proposed by the World Intellectual Property Organization (WIPO), one of four dispute-resolution providers that arbitrate disagreements involving the registration and use of Internet domain names. Geneva-based WIPO suggested to ICANN that as the Internet's oversight body, ICANN should require people or entities who register names to agree to dispute resolution when an argument arises over usage of that name. ICANN agreed.

"So if you are a businessperson and you are unhappy over someone cybersquatting your name, you pay $1,500, choose a provider (like WIPO) and make the case for getting your name back," says Hunter. "The other side, by virtue of having registered the name, has already agreed to this mandatory arbitration proceeding. If you win, the registrar is ordered to award you the disputed name. The registrar must comply because it is part of its deal with ICANN." (Registrars are both nonprofit and for-profit organizations that apply to ICANN for the right to register Web addresses in their generic domain. For-profit registrars, such as Network Solutions, make their money by charging applicants a fee for that process.)

How does this actually work out for companies? While both the ACPA and the URDP offer businesses added protection, Hunter says, "it doesn't prevent cybersquatters from, for example, registering familiar names followed by suffixes, such as AOLentertainment.com, or AOLnetworks.com. It's hard for a business to think of every suffix, and it's also time consuming for a company to keep going back to the dispute resolution system each time there is a problem."

The other concern is that dispute resolution doesn't apply to country-code domain names (which make up a number of the approximately 250 suffixes worldwide). "All countries and many territories have their own name space," says Hunter. "There is ".fr" for France, ".de" for Germany, ".it" for Italy and so forth. And each country has its own registration requirements. If a company feels that its name or trademark has been appropriated in these spaces, there may be no way to challenge it."

Wagner has other concerns about the URDP: "Take the case of someone registering walmartsucks.com as a parody site. Would you think that if you clicked on walmartsucks.com you would be going to the official site? Of course not. But Walmart was able to take that domain away even though it wasn't being put up there for cybersquatting purposes.

"What we are seeing now is a second wave of litigation which has less to do with the concern that people are trading off the goodwill of others, and more to do with opportunistic efforts by big companies to try and scoop up good domain names if they can and avoid allowing others to use domain names that criticize them. Unfortunately, in the UDRP and to some degree in the ACPA, there is not a lot of sensitivity written into the law in terms of these other kinds of permissible uses."

Wagner also worries that the UDRP panels in charge of settling disputes are being asked to decide issues of trademark law, even though they are not judges and there are no rules of evidence, no discovery, no appeals process and so forth. "The original intent was not to get involved in trademark law, but to just have an orderly mechanism by which disputes could be decided. Now, however, we are getting a kind of creep. The panels are in some cases overstepping their mandate."

Despite these concerns, the ACPA and URDP get high marks from practitioners, partly because they serve different but complementary functions. "My view of the UDRP is that it's meant only for the most obvious and abusive cases of cybersquatting," says Bernstein. "It's a one-shot deal...There is usually no response from the alleged cybersquatters because they have been caught with their hand in the cookie jar and have no defense."

The ACPA is intended for more complicated cases. Under this particular act, says Swaine, "a plaintiff can get injunctive relief and also significant damages, which chills, at least at the margins, some of the more persistent cybersquatters. This law is often reserved for the really big offenders."

In either case, the best strategy for companies is to make sure their basic trademarks are reflected in all the countries they trade in or are proposing to trade in, as well as in the ".com," ".org" and ".net" spaces, says Hunter. "That applies also to the introduction of any new brand. Register it internationally. Most big companies have learned that lesson but a lot of smaller ones haven't.

"In addition, where you provide certain services, in conjunction with your brand name, you should look to tack on those services at the end of your name. AOL already does this. But say you are a furniture company called Furnwood. You should of course register the company name, but also Furnwoodbed.com, Furnwoodchair.com and so forth, making sure to register each major product line. It costs anywhere from $5 to $35 a year per registration. It's a defensive strategy."

And now that ICANN has approved seven new domain names, that strategy, say some observers, is even more important. According to an analyst at Stamford, Conn.-based Gartner, the new domain names, when added to the existing ones, "will force the average Global 2000 organization to register a total of at least 300 name variants by 2001." The group recommends that any organization "that has or plans to have an Internet presence develop a domain naming strategy that goes beyond dot-com, with multiple names registered in multiple registries...for both offensive and defensive purposes."

Bernstein, however, says that each company should decide for itself what strategy is best. Look at your business model, analyze how people will use the Internet for your goods and services, and decide whether it's critical to have multiple entries to your company site through many names, or whether it's better to have an umbrella site.

The difficult issue, he says, concerns cases where a number of parties have a legitimate right to a domain name, as in the Wharton example he offered earlier. "Look at the names 'delta' and 'acme,'" he says. "There are hundreds of businesses that use these words in their name. Companies and trademark owners should be focused on how new names will be fairly allocated when there are competing legitimate interests. Defensive registration is one way, but it's very expensive."

Hunter, it turns out, is a judge for WIPO. The group receives about seven new cases every day, and renders judgment within a space of two weeks. Hunter recently issued a ruling in a dispute between Digital City, of Dulles, Va. (owned by AOL) and Smalldomain of Surrey, United Kingdom, over Smalldomain's use of the name digitalcitymap.com. Digital City owns a Web-based consumer portal found at digitalcity.com that provides information about numerous U.S. cities, including, for example, local weather, shopping, entertainment, sports, visitor's guides, etc. Smalldomain is a land surveyor based in England.

Digital City had claimed that the English company's domain name (digitalcitymap.com) was confusingly similar to its own (digitalcity.com), that Smalldomain had no rights or legitimate interest in the domain name and that Smalldomain had shown bad faith by its unsolicited offer to sell the domain name to Digital City.

In a nine-page opinion, Hunter ruled that Digital City had "failed to prove that (Smalldomain's) registration is identical or confusingly similar to (Digital City's) marks..." and that the domain name digitalcitymap.com therefore remains registered to Smalldomain.

In another case, not assigned to Hunter, America Online brought a claim against Deyan Vassilev of Sofia, Bulgaria over his use of the domain name icqwap.com. The ICQ mark has been used by AOL since November 1996 as part of its instant messaging service and is a play on the words "I seek you." Approximately 100,000,000 subscribers worldwide use this ICQ product, says AOL in its complaint, making it "the world's largest online communications community." (The "wap" in Vassilev's domain name stands for wireless application protocol.) In the complaint, AOL charges that the ICQ mark is "extremely well known" and that Vassilev's registration of it was made in "bad faith," supported by the fact that he offered to sell the name to AOL for $10,000. In addition, AOL states, the Web site opened by Vassilev "contains commercial advertising, and consequently the site must have been created for the bad faith purpose of confusing customers and profiting from consumer confusion with the famous ICQ mark of AOL..." The panel ruled in favor of AOL and ordered that registration of the domain name "icqwap.com" be transferred to AOL.

One final issue for companies to worry about in the wake of the new suffix choices, says Hunter, is that registrars are now testing technology that will allow people to register names in ".com," ".org" and ".net" using alphabets that are not Roman/Arabic. "For example, Coca-Cola's trademark in Chinese will look like gibberish to anyone but the Chinese. That means that speculators, or cybersquatters, can register these names as soon as the alphabets are approved, without fear of immediate retaliation. They could do this for Coke, Nike, IBM and every major brand under the sun. At this point, there is nothing companies can do to protect themselves, except register their names as soon as the different alphabets become available. It takes a lot of vigilance."

 
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