By Andy McNeil*

A pdf version of this article may be downloaded here.

Introduction – A Primer On Current gTLDs

For many of us, “.com” is the necessary element for most of the Internet addresses we use on a daily basis for shopping, banking, news or entertainment (think amazon.com, wellsfargo.com, cnn.com and espn.com, for example).  The seemingly ubiquitous .com suffix is formally known as a generic top-level domain name (or “gTLD”) in internet parlance.  Although there are 20 other gTLDs such as .net, .info, etc., .com is by far the most popular gTLD.[FN1] Suffice it to say that most Internet users, including this author, when faced with a domain name featuring anything other than a .com suffix, are immediately confronted with suspicions of inferiority and concerns regarding legitimacy.[FN2] Although the number of Internet users continues to grow exponentially, the number of available gTLDs to meet the ever-growing need for unique domain addresses has remained static.  It appears, however, that the “.com-centric” way of Internet-addressing is prepped for change, and in a big way.

The Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit entity chosen by the U.S. Department of Commerce  in 1998 to oversee the Internet’s  naming system,[FN3] is formulating plans for expanding the naming rights for gTLDs.  While proponents of this gTLD expansion—including ICANN—argue that this expansion will provide for greater innovation and choice among Internet users and businesses, opponents contend that this expansion is akin to opening a Pandora’s Box of problems for those with a significant intellectual property presence on the Internet.  Considering that there are more than 270 country specific gTLDs, the scope of this unprecedented expansion is significant for those businesses with an international Internet presence.

The mechanism for the application and management of new gTLDs, known formally as the Applicant Guidebook, has been in the works since at least October 2007[FN4] and is closer than ever to being finalized (the latest draft of the Applicant Guidebook was issued in December 2010).  According to this latest (and some say final) draft of the Applicant Guidebook, during the initial rollout of the program, the sale of new gTLDs is to be limited to “[e]stablished corporations, organizations, or institutions in good standing,” and not “individuals or sole proprietorships.”[FN5] Owners of a new gTLD will be able to sell “subdomain” names and will be able to exercise significant control over rules for who can register a subdomain.

On the highest level, the possibility for an infinite number of new gTLDs will allow similar companies and organizations a specialized web “suffix,” such as .apparel, for example.  But this singular example also highlights the problems with the expansion of gTLDs—who would own and manage the commercially desirable gTLDs (such as .apparel)?  Taking the previous example further, what about synonymous gTLDs: .attire or .clothing or .wardrobe, for instance?  Could (or should) these closely related gTLDs co-exist?

The initial round of applications for new gTLDs is expected to begin as early as the second quarter of 2011.[FN6] On one hand ICANN has stated that the increase in the number of gTLDs is not expected to affect the way the Internet operates, but on the other, ICANN admits that the new gTLDs have the potential to change how individuals and businesses use the Internet.[FN7] This article sets forth a high level review of the gTLD process and addresses some of the business and legal implications of this virtual re-working of the domain nomenclature as we know it.  In particular, this article addresses some of the issues and opportunities that smaller companies with trademark rights may face upon this imminent expansion of available gTLDs.

Two Options Under The New gTLD Process

While the new gTLD process presents two immediate options for all trademark owners, only one option is worthy of practical analysis for the vast majority of those with trademark rights.  For those corporations with ample coffers and the ambition to be the rulers over their own gTLD kingdom, so to speak, the first option is owning and managing a gTLD that either reflects a company’s trademark (such as .levistrauss) or some other term related to their business (such as .dungarees).  Under this expansion, new gTLD owners will be permitted to sell “subdomain” names to third-parties.  Given this, .levistrauss will likely not be as broad and appealing to designers, manufacturers, distributors and retailers of blue jeans as the more generic .dungarees, for example.  While the former might represent a strong brand presence, the latter is likely a more viable candidate for exploitation among the various layers of the blue jean commercial chain.  Either option warrants significant analysis on the business, legal and financial fronts.

The keys to the gTLD kingdom will not be cheap, nor will these metaphorical keys be easy to use.  Although applying for, managing and owning a new gTLD will be time- and resource-intensive, the complete picture in terms of costs to a prospective gTLD owner remains unclear at this point.  Although certain initial costs associated with acquiring a gTLD are known (just the gTLD evaluation fee will be $185,000), other costs are unknown.[FN8] The costs involved with third-party objections to a gTLD application (think of the hypothetical Guess Jeans vs. Levi Strauss challenge over the right to buy and manage the gTLD for .dungarees, for example), or auctions that may occur in the event that multiple applicants are vying for the same gTLD, notwithstanding the resources to maintain and manage the new gTLD once obtained (whether run internally or outsourced), are uncertain.  Most experts estimate that the total costs for obtaining and operating a gTLD could top $2 million during the first one to two year period alone.[FN9] Although the specifics of the application process are beyond the scope of this article, suffice it to say that this process will be rigorous and, as with any significant and far-reaching business decision, must be approached with the requisite level of diligence to ensure success.  Any entity applying for a gTLD must be prepared to submit detailed financial, legal and technical documents as part of the vetting process to establish its qualifications to operate and manage a gTLD registry.[FN10]

gTLDS For The Rest Of Us – Practice Pointers For Trademark Owners

Most trademark owners will not be able to justify the tremendous resources, responsibilities and uncertainties associated with owning and managing their own gTLDs.  Thus, in light of the imminent expansion of gTLDs, the prudent trademark owner should consider how to both protect her brand once the gTLD flood gates are opened, as well as how to capitalize on this opportunity to improve her business.

If owning and operating a gTLD is not in the cards, then trademark owners have other options to protect their trademark rights.  Previously brand owners could obtain—for a nominal cost with little or no technical upkeep—a defensive domain name registration to protect their trademark, such as levisfeellikeburlap.com, for example.  This “obtain and park” mentality is not feasible under the proposed gTLD expansion due to the requirement that a gTLD applicant must operate a functioning registry once obtained.  If a brand owner chooses to forgo the application and operation of a gTLD (as many will surely do for the reasons highlighted above), these owners will find themselves in a position to “wait and see” which gTLDs are granted, who owns which gTLD, how the relevant new gTLDs are being marketed, the public response to the new gTLDs, etc.

Currently there are two stages of trademark rights assessment in the proposed gTLD application process.  Upon receipt of an initial gTLD application, ICANN will perform its own examination of the application, during which it will consider the likelihood of confusion with existing or applied-for gTLDs.  If an application passes this initial examination, it will enter an “objection phase,” where those with trademark rights will have the opportunity to file a formal objection to an applied-for gTLD on various grounds, with disputes to be resolved by a third-party independent dispute resolution service provider.  This public objection phase will be similar to the Uniform Dispute Resolution Process (“UDRP”) currently available to trademark owners against potentially infringing domain names.  As in UDRP proceedings, the “complaint” in the objection phase of the expanded gTLD review process must contain all of the objector’s arguments and evidence (i.e., no discovery or subsequent briefing).  Likewise, these objections will be heard by a third-party panel, and if the objector prevails before the panel, the gTLD application will be rejected.

As of the latest draft of the Applicant Guidebook, there are four separate grounds on which a trademark owner may object to a gTLD application:[FN11]

1.  String Confusion Objection: the gTLD is confusingly similar to an existing gTLD or to another applied-for gTLD string in the same round of applications;

2.  Legal Rights Objection: the gTLD string infringes the existing legal rights of the rights holder;

3.  Limited Public Interest Objection: anyone (not just a rights holder) has standing to object that a gTLD is contrary to generally accepted legal norms of morality and public order; and

4.  Community Objection: “established institutions” have standing to object that there is substantial opposition within the targeted community to the applied-for gTLD.

Throughout the development of the Applicant Guidebook, ICANN has attempted to balance the opportunities of expanding the gTLD universe with the intellectual property rights of trademark owners.  Third-party organizations (such as the International Trademark Association) have and continue to advise ICANN on the implications of the proposed gTLD rules, and ICANN has consistently encouraged forums for public comment and review of these policies, including those contained within the Applicant Guidebook.  While ICANN has repeatedly offered its assurances surrounding the transparency of this process, trademark owners looking to protect and/or grow their marks once the gTLD application is underway are strongly encouraged to undertake the necessary steps to monitor this process, as all gTLD applications (likely in a truncated/redacted form) will be available on ICANN’s website.[FN12]

Once brand owners weather the gTLD process and the available gTLD landscape is clearer, they will have the opportunity to apply for second-level registrations, defensive registrations and/or dispute resolution actions for thesecond level of the newly  approved gTLDs that are owned by a third-party (think .dungarees.designsbysarah or .bluejeans.availableatsamsboutique, where .dungarees and .bluejeans are owned by Levi Strauss and Guess).  These examples highlight one of the major concerns to smaller trademark owners in the new gTLD campaign—namely what to do if numerous closely-related gTLDs are approved and become operational (e.g., .dungarees vs. .bluejeans vs. .denim).  While this example assumes that ICANN would approve all three of these hypothetical gTLDs, which is unlikely given that ICANN will review each application for a likelihood of confusion analysis, at this stage we simply do not know how, or on what basis, this likelihood of confusion analysis will be made.

Conclusion

Only time will tell which of the new gTLDs (if any) will obtain the popularity of .com in their respective industries/applications, and it is simply too early to tell which of .dungarees, .jeans or .bluejeans, for example, will be the “it” gTLD for the latest and greatest brand or trend in denim.  Of course, this assumes that the new gTLDs will supplant the existing gTLDs, and .com in particular, as the preferred suffix for Internet users.  It also remains to be seen whether any of the new gTLDs will be commercially viable (given the high costs of acquisition and maintenance), or whether this process will result in a “land rush” as was experienced during the rapid .com boom in the 1990s.  The vast majority of trademark owners will have to let the dust settle between the mega-corporations vying for a particular gTLD before initiating a realistic analysis of the viability of any given gTLD.  Once this dust does settle, any analysis of a prospective gTLD must consider the marketing, business and legal implications for choosing a particular gTLD over another.  This analysis, just like the expanding gTLD landscape, should be approached with a fresh re-evaluation of a company’s domain name and trademark marketing strategy, including the manner in which a company monitors and enforces its intellectual property rights on the Internet.

 


* Andy McNeil is an associate in the Intellectual Property Litigation Practice at Morris, Manning & Martin LLP. He is a graduate of Georgia Institute of Technology (B.S. 2001) and Syracuse University College of Law (J.D. 2005).

[FN1] Dennis Fetterly, Mike Manasse, Marc Najorc, & Janet L. Wiener, A Large Scale Study of the Evolution of Web Pages, Software—Practice and Experience, 2004, at 213-237.

[FN2] Although no empirical data can support this claim, this is merely the opinion (albeit well-formed) of the author.

[FN3] See ICANN About, http://www.icann.org/en/about/ (Last Visited Feb. 11, 2011). Although ICANN still operates under the oversight of the U.S. government, steps have been taken in recent years to decrease the United States’ control over the nonprofit corporation.

[FN4] A set of policy recommendations was approved in October 2007 by ICANN.

[FN5] ICANN, New gTLD Agreement: Proposed Final Version, gTLD Applicant Guidebook, at 1-16 (Nov. 2010), http://www.icann.org/en/topics/new-gtlds/draft-rfp-clean-12nov10-en.pdf.

[FN6] See infra note 10.

[FN7] See New gTLDs – Frequently Asked Questions – gTLD History & Policy Development, ICANN (Feb. 4, 2011), http://www.icann.org/en/topics/new-gtlds/strategy-faq.htm#history.

[FN8] Once acquired, the owner of a new gTLD must pay ICANN $6,250 per calendar quarter in addition to a $0.25 registry level transaction fee per domain name registered per year after a threshold of 50,000 domain names have been registered.  [ICANN, New gTLD Agreement: Proposed Final Version, gTLD Applicant Guidebook, at 12 (Nov. 2010), http://www.icann.org/en/topics/new-gtlds/draft-rfp-clean-12nov10-en.pdf].  An owner of a new gTLD must abide by these obligations for a period of ten years.

[FN9] Jaime Angeles et al., To TLD or Not to TLD, That Is the Question, INTA Bulletin,  Nov. 1, 2010, at 5.

[FN10] “All applicants for new gTLDs will need to meet very specific operational and technical criteria in order to preserve the security and stability of the Internet.” New gTLDs – Frequently Asked Questions – Application & Evaluation Process, ICANN (Feb. 4, 2011), http://www.icann.org/en/topics/new-gtlds/strategy-faq.htm#application.

[FN11] Infra note 5, at 1-12.

[FN12] www.icann.org (last visited Mar. 7, 2011).