The ANA sprang up in August to “vigorously oppose” the new gTLD program. Recently it has morphed into a larger group called CRIDO, and this group (which, ironically, counts among its membership companies that are actively pursuing new gTLDs) is picking up the pace by issuing more threats at ICANN, telling them that they must abandon the new gTLD program or — something. There are vague murmurs of a lawsuit, which I’ll discuss below. Their number one cause of complaint? New gTLDs will cost “the industry” money.

ICANN has seen fit to allow this opposition to go unanswered for nearly two months. It might therefore be useful to review why the CRIDO effort is doomed to failure, and why it deserves its doom. While the companies behind CRIDO and the ANA are powerful, in this case the 1% is not going to frustrate innovation in the name of keeping a small blip in “industry” costs. This article explains why they won’t succeed.

“Facts”

The ANA and CRIDO may control 99% of the money, but they have about 1% of the facts. Facts may not matter that much when you’re running a FUD (fear, uncertainty, and doubt) campaign, but for completeness’ sake it is worth pointing out that the figures being presented by the ANA and CRIDO have as tenuous a relationship with reality as Somalia does with law and order.

As Jeff Ernst of Forrester Research points out in a recent article, the ANA claims that new gTLDs will cost their members “billions of dollars” without once providing any verifiable basis for this claim.

Minds + Machines, by contrast, put together a study, “What Cost New gTLD Trademark Infringements to Brands?” that is easily replicable by anyone. Completely fact-based, relying on publicly available data, our study shows that infringements are correlated very highly with volume, and that if new gTLDs increase the number of names in the market by 15%, there would be an additional 316 UDRP filings per year, or an average of ten cents cost per trademark. If the domain name market grew more (which indicates greater public benefit), there would undoubtedly be more UDRPs, but the costs would remain very low.

GoDaddy has also done a study, which concludes that UDRPs have gone up in volume due as much to the ease of filing as to any increase in cybersquatting:

Although there is little doubt that the ongoing practice of cybersquatting factors into the tide of arbitration cases, the ease of filing, along with more vigilance on the part of IP holders, undoubtedly influenced the measurable increase in cases.

In addition ICANN has hired numerous economists, who all reach the same conclusion: yes, there will be costs to brands, and even though the public benefits are not yet clear, there are some obvious benefits that can be predicted. In general (the economists say) competition is in general a good thing, and there is certainly no compelling case to be made that the introduction of new gTLDs will cause harms that will outweigh the public good.

Last Come, First Served?

The ANA and CRIDO face a credibility problem. After 5 years (or 10 years, depending on how you count) of very public, noisy, open debate about these issues, these groups show up (or are formed) at the 13th hour, after the gTLD policy was approved and the ship had left the harbor. Where were they all these years? The ANA published some comments on the 2nd Draft of the Applicant Guidebook, but otherwise, in face of the program that they now claim is the worst thing since unsliced bread, they were completely silent. Although their absence wouldn’t matter much if they had some compelling evidence, they don’t. In effect, what they are saying is that we never gave it much thought, but now that they’ve woken up, they want everything changed. Try going to GoDaddy and telling them that you’ve suddenly realized that sex.com is valuable, and they need to overturn all their procedures and give it to you because you want it. The ANA is receiving a distinct lack of sympathy around their timing.

Congressional Hearings to Protect the 1%?

It appears that there is no appetite in Congress for hearings on this subject, even leaving aside the questions of whether the U.S. can or should act unilaterally. Of course appetites in Congress can be created, and that is what CRIDO is trying to do. But “Protect the 1%!” is hardly a rallying cry in the U.S. these days.

What Does the U.S. Government Think?

The NTIA, an arm of the Department of Commerce that oversees ICANN, has been lobbied intensively by interests opposed to the new gTLD program for the better part of a decade. The extensive new protections for trademarks are one result, as is the the Early Warning System for governments worried about TLDs that might threaten law and order. Another indication of the view of the U.S. Administration comes from the modified IANA contract specification. The IANA is the largely technical function, now in ICANN’s hands, that would actually enter new gTLDs into the root zone. The IANA contract comes up for bid periodically, and it would be a disaster for ICANN to have IANA’s technical function changed into a technical + policy function — effectively adding another layer of policy development on top of ICANN’s, outside and separate from the multistakeholder model and controlled exclusively by the U.S. Government. There was some fear of this when the bid specifications first came out. The initial Notice of Inquiry said:

For delegation requests for new generic TLDS (gTLDs), the Contractor shall include documentation to demonstrate how the proposed string has received consensus support from relevant stakeholders and is supported by the global public interest.

But the amended notice says:

The contractor shall verify all requests related to the delegation and redelegation of gTLDs are consistent with the procedures developed by ICANN. In making a delegation or redelegation request, the Contractor must provide documentation verifying that ICANN followed its policy framework including specific documentation demonstrating how the process provided the opportunity for input from relevant stakeholders and was supportive of the global public interest.

In other words, the US Government has removed the policy-making component from the IANA contract. Instead of IANA making a decision about whether the application is in the public interest, IANA is now asked only whether ICANN policy was followed. This is very a much of vote of confidence in ICANN policies, and a turning away from setting up any alternate source of authority. Asking the U.S. Government to overturn a process it initiated, participated in, and supports seems forlorn — especially when just two days ago they received the blessing of the European Union, who said in a press release, “the new IANA tender is a clear step forward for global internet governance.”

Overturning 10 Years of Global Consensus Based on a Lobbying Campaign

Even if ICANN really wanted to be ordered around by trade associations, it really doesn’t have the power to just overturn policy that’s been developed through its processes. The Board does have a lot of power, but overturning the new gTLD program, with its hundreds of thousands of volunteer hours, its votes of consensus on provisions, its carefully tuned compromises, is tantamount to throwing away its entire governance model. If CRIDO really expects ICANN to abandon the gTLD program, it needs to provide a rationale of why the multi-stakeholder process is a mistake and should be jettisoned. Until it can do that convincingly, ICANN can’t cancel or even much modify the gTLD program — and the governments who have lined up behind ICANN’s governance model (including the U.S.) will have a hard time supporting any initiative that vitiates it.

ICANN Has Been Preparing for This

ICANN fully expects to be sued over the new gTLD program. They believe this for the same reason that it took them ten years to come up with the new gTLD program — there are huge number of affected people, and you won’t make all of them happy. That’s why ICANN has fully examined the legality of their program, and has set aside a lot of money to fight any challenges. Where do you think a big portion of that $185,000 fee is going to be spent? ICANN has budgeted a large amount to be spent in court. I can guarantee that ICANN has spent a lot more time thinking about this than the ANA has.

On What Grounds Would an Injunction Be Granted?

If the ANA or CRIDO were to sue ICANN, on what grounds would they succeed in getting a judge to enjoin ICANN from continuing the program? I’m not a lawyer, but I invite those who are to comment and present an compelling rationale. I haven’t heard any.

Why Are They Doing This?

The effort of ANA and CRIDO has been pretty substantial. They have already spent more in lobbying and marketing than any introduction of new gTLDs could cost them. So the question is, why? Why are they putting all this effort, so late in the day, into a cause that seems quixotic at best? The answer has nothing to do with defensive registrations, or cybersquatting. Instead, it’s because new gTLDs will change the face of advertising and branding, and like a lot entrenched industries, they’re terrified of change. Here’s what Thom Kennon, SVP and Director of Strategy at Y&R says:

Shame on the ANA for taking such a misinformed and myopic view of one of the most significant changes in how brands and consumers find each other since the birth of the commercial Web.

Although none of us have any idea of the broad, deep implications of this re-architecting of the interwebs, it doesn’t take much of a creative bent to see the powerful opportunities this will likely afford every brand — and organization, and industry and even cities, states and towns.

Unlike the ANA – whose argument here seems to be nothing more than a repetitive loop of “ICANN’s wrong, it doesn’t add up…”- some of us are working to explore what this change might offer for the future of the brands and businesses we represent.

As the ANA (and sadly any of its members who take this Luddite advice) sit on the sidelines, some of us are exploring how the early brand movers – in the right category with the right architectural strategy – can reap huge, long-term rewards and competitive advantage from leading instead of lagging.

Here’s some better advice: every single brand manager, marketing strategist, technologist, content developer and CMO should start spending some serious time understanding what these changes can and will bring to how the ‘human web’ is evolving. Be smart, nimble and opportunistic and be ready to steal the march from those who chose to worry and wait.

What Would Happen if the ANA Got Its Way?

People who have been involved in the ICANN process scratching their heads. Where were all these companies and associations over the last five years of policy developments? What is this group and what is their aim? Are they really going to sue, and do they have any hope of succeeding? Is there anything fact-based about their assertion, or is this a pure lobbying play? And since ICANN is in its usual dilatory fashion saying nothing in response to these groups, many are wondering what’s going on, and what will happen to the new gTLD program.

The ANA and CRIDO, using the same arguments, but in a louder voice, are not going to succeed in overturning a hard-fought consensus that has involved all the significant interests in the space. The arguments have been taken seriously, been given years of hearings, have resulted in numerous changes to the gTLD program to accommodate the concerns that they raise, additional protections have been put in place, and the finally the program passed on a vote by the ICANN Board. Governments, businesses, intellectual property owners, ISPs, civil society, everyone participated.

Internet innovation doesn’t stop because it upsets someone’s business model. Let me refer readers to an article published in 1995 by Newsweek (now nearly defunct). Among other the many reasons it gives as to why the Internet will never work, it says:

The truth is no online database will replace your daily newspaper… no computer network will change the way government works. We’re promised instant catalog shopping — just point and click for great deals. We’ll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obsolete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet — which there isn’t — the network is missing a most essential ingredient of capitalism: salespeople.

That’s what the ANA is saying: you need to prop up our outdated business model as an “essential ingredient” — or else capitalism will end. But actually we don’t, and it won’t.

The new gTLD program is not going to be undone. For that to happen would mean jettisoning 10 years of the ICANN experiment and all the work that has gone into it. Too many people, governments, and institutions have put in too much work, and have too much at stake for that to happen. If, on the basis of a lobbying campaign in the United States by some fearful people, a global consensus were overthrown, the splitting of the root is not far behind, and if that happens the results will be much worse for ANA and its members (and everyone else) than the introduction of new gTLDs.

New program and pricing for brands

We will be introducing a new program for brand owners who have decided to apply for a new gTLD. Features include:

• Emphasis on a complete partnership. We’ll handle the entire gTLD process, from application to operation, from ICANN questions to technical implementation, without passing you off to other consultants or technical providers.
• Reasonable flat-rate pricing, making it easy to plan, and easy to expand.
• Brand-friendly workflow once you’re up and running, making it easy to ensure that your internal registration policies are followed.
• Expert advice. Did you know that members of our team have handled the domain portfolios of many of the world’s largest companies? (Complete list upon request).
• Do you work with a favorite registrar? We work with them too. Our registry platform is connected with all major registrars, including Mark Monitor, CSC, and others. You won’t have to switch anything if you don’t want to.
• Do you want a private, fully ICANN-compliant registrar for internal use? We supply one as part of the package. We’ll help you get accredited and provide you with a complete registrar solution.

We expect that the conference will be very interesting, with lots of different points of view. ICANN Chairman Steve Crocker will be a speaker, as will many members of ICANN’s Intellectual Property Constituency, along with other prominent IP lawyers.

If you’re going to be at the INTA show, please find us on the floor or at a session. Everyone at the conference will be carrying a very handsome bag with a Minds + Machines logo, but we will be the ones wearing the distinctive Minds + Machines lapel pin.

See you at INTA, and watch this space!

Kurt Pritz from ICANN has been invited to testify. Arrayed against him are a parade of intellectual property interests, some reasonable, some pur et dur lobbyists for complete corporate hegemony over all aspects of the Internet. Not invited are any existing registries, any potential candidates, anyone representing free-speech concerns or civil society. Except for Kurt, it’s all intellectual property interests, all the time.

In short, the meeting will resemble an intervention, except without the love.

Here are the other witnesses:

• Steve Del Bianco, Net Choice. As a Washington insider, Steve Del Bianco is not a surprise choice. Last time he testified, he brandished a label-making machine, saying that new gTLDs were just labels. Expect a new prop or other easy-to-grasp soundbite prepared for the benefit of our elected representatives.
• Mei-lan Stark, Fox Legal. I’m not familiar with this person, but I wouldn’t be going out on a limb to suppose that Fox Legal hates new gTLDs, especially given that “fox” is a common English word, which makes it hard to reserve entirely to themselves.
• Steve Metalitz, Mitchell Silberberg & Knupp LLP. Steve Metalitz sticks to his guns but he is someone looking for a solution, not a disruption.
• Mike Palage, Pharos Global. Mike seems to love the exercise of government power, but sings to his own tune, preferably with a puzzling metaphor as lyrics.
• Joshua Bourne, CADNA. CADNA never met a restriction on domain names or free speech that it didn’t celebrate with a press release. A reliable source of the most extreme and outrageous positions.

Most of those testifying have been targeting Kurt Pritz for years now at ICANN meetings, and Kurt has always responded with civility. That’s why he’s a great choice on ICANN’s part. He knows the issues backwards and front; he’s polite; he doesn’t avoid questions; answers with candor; and he doesn’t get rattled.

It should be clear to everyone that there will be no new information coming out of this hearing. If previous meetings in front of this committee are any indication, the congresspeople have little insight into the issues. They will be reading the polemics handed to them by their lobbyists and staff, and will not be asking follow-up questions unless those too have been prepared. The domain press headlines will read “ICANN Spanked by Congress,” and CADNA will be issuing its usual “CADNA Congratulates House Judiciary Committee” press release.

But will it derail the new gTLD process? I think not. Happily, ICANN is a global organization. While the House of Representatives can do what it wants, the “approved” channel for governments to beat up on ICANN is the GAC, which is finally getting well integrated into the ICANN process and has become part of the ICANN community, whether you like its positions or not. Just another reason I’ve learned to stop worrying and love the GAC.

Remember, .CO is the country-code TLD for Colombia. Until this summer, you could only register names under .com.co, .net.co, etc. You couldn’t register myname.co. Now anyone in the world can register a .co name, and register it directly under the top level. Remember also that as a country-code TLD, .CO was not constrained by ICANN rules, which means that they were able to (re-) launch their TLD relatively quickly. Even so, their rules and regulations closely hewed to the latest ICANN rules, especially in regard to cybersquatting.

The response to the .CO launch was tremendous. Let’s review:

• 11,000 names applied for during the Sunrise Period
• 28,000 names sold during the Landrush Period (closed July 15, 2010)
• Total paid by applicants for Sunrise and Landrush names: over $10 million
• Total .co names registered as of this writing: 440,000

What do these numbers mean for prospective new gTLDs? Obviously, they prove that there are lots of buyers out there if the value proposition is good, and that’s a very good sign. There is no indication that people have anything against new TLDs. Quite the opposite, in fact: if it’s a good one, they’ll flock to it in droves.

But .CO is somewhat of a special case. There are a few things to keep in mind:

First, although cybersquatting of brand names was dealt with aggressively by the talented .CO team, we have to assume that many of the registrations were done in hopes of getting traffic from people who forgot to add the “m” to a .com URL. No new gTLDs will be able to benefit from similar fat-fingered mistakes, because ICANN is running a “similarity test” to make sure that there aren’t such confusions. We won’t know how much typo traffic there actually is until it comes time to renew the names. Then, speculative traffic names will either be renewed (if they received typo traffic) or will be dropped (if they didn’t). So keep an eye on next July for interesting stats.

Second, the .CO team is really good, and did everything right. They hired smart veterans and spent a fair amount of time and money making sure that brand owners and registrars knew what was happening, what the rules were, how and when to apply, etc. This had the virtuous double effect of almost completely eliminating complaints about the process and also maximizing registrations. New TLD applicants, take note.

Third, .CO had the field to itself. When new gTLDs start launching, it will probably be on a rolling schedule, but nonetheless there is likely to be more than one launch at any given time.

These are the factors giving .CO an edge, but this doesn’t mean that new gTLDs won’t be able to duplicate or surpass their success. Many of these considerations are double-edged swords. The fact that .CO is a misspelling of .COM also means that fewer real sites will get built, fewer names will be renewed, and cybersquatting problems will be relatively larger than in most new gTLDs. The fact that .CO spent a lot of money means that their profit margin is lower.

Every new TLD launch will have specific considerations and circumstances that will both help and hinder its growth. Several new gTLDs, especially geographical names and communities, will have natural constituencies that will fuel registrations. Others will have worldwide appeal. Many will not measure their success in registrations, but instead on service to their communities.

Overall, the .CO launch should make prospective new gTLD applicants very happy indeed. It is a great proof of the market, and it shows (once again) that intelligent branding and marketing will go a long way to making a project a success.

First, IBM is pleased that there will be no requirement for a sunrise period, which wouldn’t make any sense if the top-level domain were used for internal company purposes, and not sold to the public:

Second, IBM notes that as yet there is no requirement that .brand top-level domains must use registrars — again, something that makes little sense if you’re just registering names internally. (This issue is currently being hashed out by the Vertical Integration Working Group, which is in a deadlock.)

Taken together, these comments are strong evidence that IBM is, at a minimum, giving serious consideration to applying for .IBM. Canon has already announced their intention to apply for .CANON. It appears that IBM and others are set to join them soon.

Saturday, June 19

• 15:00 – 17:00 – The Government Advisory Committee (GAC) will discuss developments in the New gTLD process, including the latest Draft Applicant Guidebook (DAG 4), TLD categories, and geographic names. Many of the changes in DAG 4 are the direct outcome of GAC recommendations. If you want a preview of how the rest of the week will play out, don’t miss this meeting.

Sunday, June 20

The Generic Names Supporting Organization (GNSO) has two working sessions on New gTLDs.

• 09:00 – 10:15. Start the day observing the Vertical Integration PDP Working Group meeting with the GNSO Council. At the ICANN meeting in Nairobi, the Board pushed the community to resolve the debate on cross-ownership of registries and registrars by instituting a zero percent cross-ownership rule. This resolution disrupted some high-profile business plans. However, the Board will consider an alternate policy from the GNSO if one is created prior to the launch of the new gTLD program. Nearly 100 community members have participated in the Working Group to formulate a new policy.
• From 14:00 – 17:00 is the GNSO’s New gTLD Working Session. The GNSO will also be briefed on DAG 4 by Kurt Pritz, ICANN’s Senior Vice President.

Monday, June 21

Though some very important work is done during the three previous days, the meeting officially opens on Monday, June 21. If you are interested in the technical side of TLDs, drop in on the ccTLD Tech Day, where registry operators discuss implementing the latest standards and share experiences.

• 15:30 -17:30. Kurt Pritz will take the stage to brief the entire community on the status of the New gTLD program, the highlights of DAG 4 and — not to be missed — an accounting of the remaining open issues.

Tuesday, June 22

• 10:00 – 11:00. The new gTLD highlight on the schedule for Tuesday, a.k.a. “Constituency Day,” is the GAC’s discussion of Morality and Public order, a remaining overarching issue. Attend if you want a glimpse of how this issue could play out.

Wednesday, June 23

• 12:30 – 14:00. Update on Vertical Integration.
• 16:00 – 17:30. A panel discussion on “Reducing Barriers to New gTLD Creation in Developing Regions.” Board Resolution 20 in at the last ICANN meeting in Nairobi requested that the community “develop a sustainable approach to providing support to applicants requiring assistance in applying for and operating new gTLDs.” Working Group members will announce several proposals for consideration. Some of the proposals will be controversial as there is a requirement to recover the costs of new gTLD applications and on-going services to new gTLDs. Applicants, registry service providers, and incumbents will all benefit from attending this session.
• 16:00 – 17:30. Next door, at the same time, panelists will discuss “What brand protection and management measures entities need to consider before, during, and after the launch of the new gTLD program.”

Thursday, June 24.

• 13:30 – 18:00. You can sleep in Thursday morning, because the important public forum is scheduled for the afternoon. This is the time to speak your mind and ask questions directly to the Board before they lock down and decide how to vote on the issues Friday.

The schedule does change leading up to and throughout the meeting, so be sure to double-check the full schedule every morning to confirm dates and times.

Minds + Machines will have multiple representatives at the ICANN Brussels meeting, and we’d be glad to meet with you about our registry services, or just point you in the right direction. You’ll recognize us by our Minds + Machines lapel pins.

Until now, in public, large brands have marched in lock step in opposition to new top-level domains, ostensibly because of the high cost of defending and enforcing their marks in multiple new namespaces. The worst-kept secret in the industry, however, is that brands have been making private plans, and brand-service registrars have been prepping their clients for new gTLDs in anticipation of healthy fees for application submission services.

Canon, at least, has decided that the marketing benefits of their own top-level domain outweigh the costs. In the U.S., legal departments, which are good at identifying risk — though not necessarily expert at quantifying it –, exercise a much stronger presence in the corporate boardroom than they do in European and Asian companies.

Could it be that the highly defensive stance of U.S. intellectual property interests, hardened by the file-sharing wars, is not shared by the rest of the world’s brands?

In Japan, Canon has decided to cast its lot with the money-makers instead of the money-hoarders. I predict we will see more brands opt for engagement with the Internet by visibly branding themselves with their own new gTLD, but that the the last ones to do so will come from the United States.

Summary: A survey of the domain registration behavior of Fortune 100 companies reveals that they have not registered many of their trademarks in recently created generic top-level domains (gTLDs). A sample of 1043 brands were registered in less than 30% of the eight new open gTLDs created after 2001. If historical registration data is a guide, brands are unlikely to undertake many defensive domain name registrations in the proposed new gTLDs, and furthermore are unlikely to be the victims of cybersquatting.

Overall, the claims of brand owners that they will be forced to spend significant amounts of money performing defensive registrations in the proposed new gTLDs are not supported by the historical data, which shows that they largely do not undertake defensive registrations in new gTLDs, nor is there any extensive cybersquatting in new gTLDs.

Will new gTLDs force brand owners to register names defensively?

In a previous study, we found that the cost of enforcement of trademark rights in new gTLDs is likely to be small – on the order of $.10 per registered trademark, per year. The current study looks at the likely cost of defensive registrations to trademark holders.

A vocal group of brand owners has repeatedly claimed that the cost of defensive registrations would be “astronomical” and a “major burden on U.S. businesses.”

The following correspondence to ICANN provides a flavor of these claims:

• “…astronomical registration fees required to protect trademarks across new gTLDs.” (Overstock.com)
• “The new gTLD program raises substantial concern about costs to businesses, such as a need to file many defensive registrations, making this program like a nuisance tax which many companies cannot afford.” (Time-Warner)
• “[EOIs] would seem to be a premature invitation for mischief that will end up costing trademark owners big bucks one way or another.” (Cowan, Liebowitz, and Latman)
• “A more likely scenario would be for a business just to register site Web addresses [sic] pairing their brand name with any new extensions, such as fios.telephone or gillette.razor. But even that defense could cost marketers up to $1.5 billion, estimates the not-for-profit Coalition Against Domain Name Abuse.”
• “The scale on which owners of famous marks such as Microsoft will have to secure defensive registrations and pursue cybersquatters is staggering.” (Microsoft)
• “Brand owners are also registrants and have thousands of domains of which we use less than one hundred – all the rest are for protection. We spend a fortune to protect our brand.” (Unidentified brand owner)

Brand owners use words like “astronomical,” “staggering,” “a fortune,” and “billions.” But is it really true that new gTLDs will force trademark owners into registering new domain names that they don’t really want?

A recent study by Paul Stahura definitively concluded that the answer was a definite “no”, by examining which trademarks (in general) were registered across com, org, net, mobi, biz, info and us. Stahura concludes:

The vast majority of trademark holders are not registering their trademark in all the current generic TLDs, let alone all the TLDs.

Bhavin Turakhia of Directi agreed, and provided an explanation:

Trademark holders have no reason to register a domain name in a new TLD if the domain name is not going to get any traffic. Speculators have no reason to register a domain name in a new TLD if the domain name is not going to get any traffic, since they will be unable to generate revenue from it or sell it to the trademark holder.

Finally, Dennis Carlton, an ICANN-appointed economist, noted:

… claims that the introduction of new gTLDs will necessitate widespread defensive registrations appear to be exaggerated and are inconsistent with the oft-noted observation that there have been a limited number of registrations on gTLDs introduced in recent years.

These two sets of voices are completely at odds. On the one hand, the adamant insistence by brand holders that defensive registrations in new gTLDs are necessary and costly. On the other, equally insistent dissenting voices saying that brands neither register defensively in new gTLDs, nor do they need to. We attempted to look systematically at the data to try to determine who is correct, or if the truth is somewhere in the middle.

I. Methodology

In attempt to shed more light on the question, we took a look at the new gTLDs launched since 2000, and analyzed registration patterns of major brands across all open gTLDs.

We took Fortune Magazine’s list of the top 100 companies in the United States. Then we found the major brands for each of these companies. Some companies had just a few brands, some had many. In the case where the brand was hyphenated, we also examined the non-hyphenated version of the brand (e.g., Wal-Mart and Walmart). Overall, we looked at 1043 brands and unhyphenated brand variants. On average, this works out to about 10 brands per company.

Then, with the help of DomainTools, we examined the whois records for each brand and brand variant across 13 different gTLDs, listed below. We looked at whether the brand name was available for registration, or if it had been registered, reserved, or was otherwise unavailable for registration. (We did not examine who the owner was, because our study is looking not at the frequency of cybersquatting or fair use registrations, but rather the interest in the domain name by anyone at all, whether by the brand owner or other registrant.)

Specifically, we looked at the following gTLDs, because anyone (either the brand owner or a cybersquatter) can register a name in them with minimal effort or cost:

• .com, .net, and .org. These pre-ICANN gTLDs are open for registration by anyone on a first-come, first-served basis.
• .info – Launched in 2001. Open to anyone.
• .biz – Launched in 2001. Technically only for businesses, but in practice available to anyone.
• .name – Launched in 2002, originally intended for personal names, but now open to general registrations.
• .pro – Assigned in 2002, launched in 2006. Initially designed for certified professionals, now easily registered by anyone through a number of ICANN-accredited registrars.
• .mobi – Launched in 2005 by mTLD, targeting the mobile internet. The restriction that .mobi sites follow mTLD-sponsored standards for mobile-device viewing was never enforced. Open for general registration.
• .travel – a TLD launched in 2006 targeting the travel industry, originally quite restrictive, but now essentially open. In the past 18-24 months, the criteria of qualification has widened and is easily obtained.
• .cat – Launched in 2006. The only requirement for a .cat is that there is some content somewhere in the Catalan language, a requirement that is trivial to comply with.
• .tel – Launched in 2008. Open to all registrants.
• .asia – Launched in 2006. Registrant must be based in Asia. Most F100 companies are eligible because they have Asian operations, but even if not, proxy services are easily available.
• .jobs – Launched in 2005. Specifically targeted at companies and brand holders.

We then tabulated the results, available as Appendix 1 of this study (download the PDF version of this study for the tabulated results).

II. Results and Analysis

Confirming the insights of Stahura, Turakhia and Carlton, we found that brands are not consistently registered across open gTLDs, and that most brands owners have not registered their names in most of the newer gTLDs.

Some specific results include:

1. Brand owners register their names religiously in .com.

Defensive registrations are a real phenomenon in .com. 100% of the 1043 brands and brand variations are registered in .com. Our earlier study on UDRP filings suggests that this is where the vast majority of cybersquatting also takes place.

2. Outside of .com, even in large and established gTLDs, registration patterns are haphazard. Brand owners do not register defensively here with any regularity.

After .com, the drop-off in registrations is steep. Of the larger, older open gTLDs, we found these percentages:

• .net – 878 of 1043 (84%)
• .org – 790 of 1043 (76%)
• .info – 723 of 1043 (69%)
• .biz – 676 of 1043 (65%)

3. In smaller open gTLDs only 29% of trademarks are registered. Brand owners largely ignore new gTLDs.

For all the rest the combined coverage was a mere 29%, or less than 1/3 of the combined coverage in .com, .net, and .org. In only one of the newer open gTLDs was coverage above 50%. The results in rank order:

• .mobi – 592 of 1043 (57%)
• .asia – 461 of 1043 (44%)
• .tel – 477 of 1043 (46%)
• .name – 341 of 1043 (33%)
• .pro – 182 of 1043 (17%)
• .jobs – 180 of 1043 (17%)
• .travel – 108 of 1043 (10%)
• .cat – 59 of 1043 (6%)

4. Brand names are more likely to be registered in heavily marketed TLDs.

Among the newer gTLDs, .mobi, .tel, and .asia, which have been the most heavily marketed of recent gTLDs, had by far the most registrations, beating out even the long-established .name.

5. The cost of defensive registrations to brands results in part from the 300% markup over street price that they pay for their domain names.

Brand owners, for reasons best known to themselves, pay a significant premium over retail to register domain names through brand management companies, and this is a large component of their costs, which would be much lower if they paid street prices. Overstock.com, for instance, estimates “a conservative annual registration fee of $30 per domain name.” However, as of this writing, the retail price for a .info domain name is $.89,.biz $5.99, .net $5.99, while a .com domain name is $7.29 per year.

IV. Examples of brand registration patterns.

For the purposes of illustration, we examined the largest brands of some of the more vehement opponents to new gTLDs. We found that they do not practice blanket defensive registrations.

Verizon has vocally opposed any expansion of the new gTLD space and is a clear opponent of new top-level domains. One the key brands of Verizon is “FIOS.” Fios.com, fios.net and fios.org are all registered to Verizon. But Verizon has not registered fios.name. For under $15.00 per year, anyone can, today, register that name:

Microsoft is also a leading opponent of new TLDs and EOIs. It has, however, not registered “win32,” one of its key brands, in .tel:

Disney does not protect its theme-park brand. Disneyparks.com is registered, but disneyparks.biz is available for $8.99, as is disneyparks.asia:

Philip Morris has pre-registered its key cigarette brands across all gTLDs. But many of its non-cigarette brands are readily available, such as “triscuit”:

There are many such examples, as our study shows.

Large brands, and their brand protection agencies such as Mark Monitor, heavily concentrate defensive registrations in .com, and are far less interested in other TLDs, and when it comes to the newest TLDs, they have shown very little interest at all.

V. Conclusion

If past behavior is predictive of future actions, we will see a minimal amount of defensive registration activity in new gTLDs by brand owners, and new gTLDs will be largely ignored by cybersquatters.

A downloadable PDF of this study is available here.

A Quantitative Analysis of Trademark Infringement and Cost to Trademark Holders in New gTLDs

Will New gTLDs Increase Cybersquatting?

A vocal group of brand and trademark owners has lobbied ICANN, the US Department of Commerce, and the ICANN’s Government Advisory Committee (GAC) claiming that new gTLDs would unleash a tide of lawlessness that would cost brand holders a fortune to combat.

Owners of trademarks and brands have claimed that a new round of gTLDs would leave them facing an onslaught of cybersquatting and typosquatting, and that their policing and enforcement costs would be substantial. Here is a recent representative statement of that view:

It is possible that the new gTLD program could lead to hundreds, if not thousands of new gTLDs. This is likely to cause brand abuse, such as cyber squatting, to grow exponentially. As a result, the legal costs for brand owners associated with monitoring, registering, and enforcing domain names are likely to raise substantially. [Source: Leo Longauer, Head of Group Intellectual Property for UBS AG]

This campaign has been so effective that even intelligent observers like David Maher, Senior VP for Policy at Public Interest Registry, accept it at face value:

… there is a connection between the creation of large numbers of new gTLDs and the public interest in preventing a vast increase in cybersquatting and the spread of fraudulent practices. [Source: CircleID]

But is it really true that new gTLDs will bring a “vast increase in cybersquatting”? A wealth of relevant data allows an empirical test of this claim. Both the World Intellectual Property Organization (WIPO) and the National Arbitration Forum (NAF) keep excellent records of claims of trademark infringement brought through ICANN’s Universal Dispute Resolution Policy (UDRP).

The two main costs of domain names for trademark holders are:

1. the cost of pre-emptively registering brands in new gTLDs
2. the cost of monitoring and enforcing trademarks in new gTLDs

This study looks at enforcement, the second category. To understand the cost of enforcement, we studied the 10-year UDRP data on existing “open” gTLDs. We used the data from WIPO and the NAF, which together comprise the overwhelming majority of UDRP cases files. The sample is statistically relevant, comprising 8 new TLDs since 2001, with over 8 million domain names under management. (The study does not include Czech ADR, ADNDRC, or cases from former providers CPR or eResolution Cases. Inclusion of these cases, which deal almost exclusively with .com, .net, and .org domain names, would show an even greater incidence of infringement in legacy gTLDs compared to new gTLDs.)

This study is the first of several in which we will quantitatively examine the likely effects of new gTLDs on trademark holders.

Infringements Per Million (IPM)

A study of the UDRP case data for the last 10 years for both existing (pre-ICANN) open gTLDs (.com, .net, and .org) and for newer ICANN-created open gTLDs shows that the number of infringements within any open gTLD is quite predictable, depending primarily on the number of registrations within that TLD. (For the purposes of this study, we looked at those top-level domains introduced since 2001 that are either “open” — no restrictions on registrants — or whose restrictions are so easily circumvented, or so loosely enforced, that they are effectively “open.” Because trademark owners have not complained as loudly about restricted TLDs, we did not include them in our study. Not examined, therefore, were truly restricted gTLDs: .int, .gov, .mil, .edu, .museum, .coop, and .aero.)

To help understand the relationship, we introduce a new metric: IPM (infringements per million). The data show that among current gTLDs, IPM varies between about 15 and 40, with .com having by far the highest IPM at 41.71 infringements per million registrations.

Domain name growth across all TLDs has for the past ten years grown at a fairly steady 10 – 15% annually (Source: VeriSign Domain Name Brief). Past introductions of new gTLDs have not changed that overall growth. The new round of gTLDs, which foresees an increase of approximately 300 gTLDs (see page 6 of the 2009 ICANN Root Scaling Study, for instance), may, because of intensive marketing, increase this growth rate, but not by orders of magnitude. Based on historical data, the average IPM for the new open gTLDs listed in Table 3 below is 22.47, and 24.15 for .com, .net, and .org. Table 3 lists the IPM for each TLD.

The Data

Legacy open TLDs — .com, .net, and .org — account for the vast majority (94%) of all WIPO and NAF UDRP cases. This percentage has not changed significantly over the 10 years of data, as Table 1 below shows. (The anomalies here, in 2002 and 2007, are due to .info price promotions, where names were offered for free or near-free, which did increase infringements. Price of new TLD registrations – but not the existence of new TLDs – does increase speculative activities of all kinds.)

Table 2, below, shows UDRP claims filed in new open gTLDs.

Finding 1: Infringement correlates closely to registration volume, but .com has the highest rate.

The vast majority of infringement occurs in pre-ICANN legacy TLDs, not in the newer TLDs. To understand what is likely to happen with the new round of gTLDs, we need to better understand these numbers.

The key metric this regard is “Infringements per Million,” or IPM. Table shows 3 the IPM across open gTLDs for 2009.

Cases are calculated not by case number, but by number of domain names. The .cat and .pro TLDs are omitted from this table because for these purposes they are statistically insignificant.

We see that the number of UDRP cases is correlated with the number of registrations in the underlying TLD zone, varying from a low of 11.94 IPM (.biz) to a high of 41.71 (.com). To the extent that there is variation, the outlier is .com, with a higher IPM. Only 4% of all cases (178 out of 3817) occur in non-CNO (com, net, org) gTLDs. Only 1.5% (59 out of 3817) occurred in non-CNOIB (com, net, org, info, biz) gTLDs.

Intuitively, this makes sense: because most large brands and high volume websites operate in .com, one would expect a somewhat larger impact of typo-squatting and other infringement, even relative to the installed base. The next level of TLDs: .info, .biz, .net and .org, which cater to smaller websites, and are less viable as typo-squatting targets, have less than half the IPM ratio.

The newer group of TLDs — .mobi, .asia, .tel — fall within these broad parameters, with .mobi and .asia having a slightly higher IPM, perhaps because they were marketed to the domainer community. Nevertheless it is clear that across all TLDs the results broadly correlate to registration volume.

Finding 2: New TLDs will generate an estimated 316 new UDRP cases per year. Infringements will depend on total domain registrations, not the number of new TLDs.

Our first finding shows that the average IPM for open gTLDs created since 2000 is 22.47. What will the rate be going forward, what will be the total number of infringements, and what will be the corresponding enforcement cost to trademark holders?

Using the average 22.47 IPM for TLDs created since 2000, the new round of gTLDs would create 316 new infringements. This is calculated based on a rosy registration scenario for new TLDs; very likely, they will be less successful, and infringements will be fewer.

Last year, growth across all TLDs was 12%: this includes ccTLDs, which grew at 17% (Source: VeriSign Domain Name Brief). This is very much in line with historical growth of domain names, and we predict that the same growth trend will continue. For gTLDs, this will mean a growth from a combined total of 113 million today to 127 million in February 2011, or an additional 13.6 million names. If these additional names are distributed according to current market share, .com would go from 83.97 million names to 94 million names, .net from 12.63 million to 14.14 million, and so on.

In the past, the introduction of new TLDs has not significantly affected the growth of existing TLDs, and this dynamic is unlikely to change, at least in the short term.

Now, let us turn to the introduction of new TLDs. Suppose that with major marketing efforts the new gTLDs manage to double the growth rate of the overall market from 12% to 24%, and to capture 10% of the market in one year. (Again, this result is extremely optimistic for new TLDs.) The results would look like those presented in Table 4:

Finding 3: The expected total annual enforcement costs for new gTLDs will be less than $870,000 per year, or less $.10 per trademark worldwide.

If all 316 new infringements were filed as UDRPs, at an average cost of $5000, the cost of enforcement to trademark holders would be $1.58M. There are 1.97 million active and pending trademarks in the U.S. Patent and Trademark Office, so on a per-trademark basis (for the U.S. only – clearly there are many more trademarks globally), the cost of new gTLDs would be $.80 per U.S. trademark, and if the 2.4 million registered trademarks in China and the 825,000 European Community trademarks are included, the cost of new gTLDs is $.30 per trademark.

But we can expect trademark holders to make use of the new Uniform Rapid Suspension (URS) process, which will have a cost of $500, not $5,000. What percentage of UDRP claims would be adjudicated through the URS process? We suspect that a majority of the cases that would have gone to the UDRP will now go through a URS proceeding. The number is hard to predict, but a reasonable estimate is that 50% of the claims that are now filed as UDRPs would be filed as URS proceedings. If so, the average cost of enforcing a trademark in the domain name arena will go from $5000 to $2750, or $869,000 – that’s $.17 per trademark registered in the U.S., Europe, and China. If all the world’s trademarks were included, the cost of new gTLDs would be under $.10 per trademark worldwide.

Conclusion

Trademark and brand owners will be faced with only minor enforcement costs from the introduction of new gTLDs. While the overall cost of UDRPs today is high ($19.5 million per year) – the culprit is .com – not the 10 new gTLDs that have been introduced over the last 10 years. (Cost of defensive registrations is not considered in this paper but will be covered in a later study.)

We estimate the total enforcement cost resulting from new gTLDs to be $869,000, or under $.10 per trademark registered worldwide.

Contrast this cost to the benefits of new gTLDs. The benefits of new gTLDs have been well rehearsed, but are worth repeating here.

• Ordinary web users (as well as brands) will not be forced to spend over $10,000,000 annually to purchase .com domains in the secondary market at inflated prices.
• Major cities such as .nyc, .paris, .berlin and .london want new TLDs. They see millions in revenue, increased tourism, increased efficiency in providing Internet services to their residents.
• Thousands of jobs will be created, because each new registry will need to employ 5 – 10 people at a minimum. (As a point of comparison, Afilias, which manages .info and provides registry services for .org, has over 200 employees.)
• Linguistic communities such as .gal (Galicia), .eus (Basque), and .bzh (Brittany) see huge cultural benefits.
• Vertical TLDs with strong user bases such as .eco expect to use proceeds from registrations to help solve problems such as global warming.

The data show that new gTLDs are less likely to be involved in UDRP claims than .com. An expansion of new gTLDs is not likely to significantly increase UDRP costs for trademark holders. If ICANN introduces the Uniform Rapid Suspension (URS) provisions currently under consideration, trademark enforcement costs for new gTLDs will sink even further.

We have also prepared a PDF version of our analysis, which includes a full list of all comments and a brief description of each comment.

I. Overall Findings

The ICANN public comment for the New gTLD Program – Draft Expressions of Interest/Pre-Registrations Model closed on February 7, 2010. A total of 274 separate comments were received (several commenters made multiple comments). 183 comments (67 percent) supported EOIs, and a majority of those favored the Draft Model. 76 comments (28 percent) were opposed to EOIs. 15 comments (5 percent) were neither for nor against the Draft Model.

II. EOI Supporters

EOI supporters break down into two major categories (number of comments in parentheses). A full list of commenters, with a brief description of their comments, can be found in the attached PDF.

• Companies and Groups in Favor of EOIs (86)
• Individuals (97)

Commenters in favor of EOIs can be further divided into the following categories:

1. Prospective Applicants for new gTLDs
2. Individuals connected to prospective applicants
3. The ICANN At-Large Advisory Committee
4. The ICANN ISP Constituency
5. The ICANN GNSO
6. Independent small and medium-sized businesses
7. Independent individuals
8. Independent not-for-profit membership organizations
9. Independent not-for-profit charities
10. Existing gTLD registries
11. Existing ccTLD registries
12. ICANN-accredited gTLD registrars
13. Law firms

III. Arguments Made for EOIs

Comments of the respondents in favor of EOIs were for the most part in full agreement with the staff proposal. Some, however, had additional thoughts or reservations:

• Timetable – the delay in the introduction of gTLDs hurts legitimate applicants who relied on ICANN’s announced timetables.
• Begin the process – The gTLD process needs to get started, EOIs are a welcome first step.
• Predictability – EOIs are welcome because they will help set a predictable timetable for the introduction of new gTLDs.
• Participation – Prospective applicants are an important for making policy for new gTLDs, they have should have some official representation at ICANN.
• Anti-Trademark – trademark interests have been given too much already, should not be allowed to derail the process.
• Anti-Monopoly – vested interests have too much power; ICANN should introduce competition.
• Security – new gTLDs are an opportunity to make the Internet more secure.
• Contention – EOIs will allow contending parties to make arrangements between themselves to prevent auctions.
• “Slot” Trading – ICANN should take care about EOI “slots” becoming a speculative marketplace.
• Mandatory – Several supporters of EOIs believed they should not be mandatory.
• Confidentiality – Several supporters were concerned that too much information was being collected in the EOI; others thought not enough was being asked.
• Price – the proposed filing fee for EOIs was seen by some as appropriately high, others as too expensive.

IV. Minds + Machines Comment Form

Minds + Machines put together an online form that outlined the rather complicated arguments for and against EOIs as a way to encourage comments from those for whom the prospect of writing out an extended argument might be daunting. We further encouraged commenters both for and against EOIs to use the comment form. Most commenters using this form, but by no means all, sent in comments favorable to EOIs.

V. EOI Opponents

The large majority of commenters opposing the Draft Model represented the concerns of trademark holders: trademark associations or groups (23); trademark attorneys (21); or the legal departments of companies (15) account for more than 80 percent of those in opposition of the Draft Model. A full list of the comments, along with a brief description of each, can be found in the attached PDF.

• Trademark Groups Opposed to EOIs (23)
• Individual Companies Opposed to EOIs (15)
• Individuals Opposed to EOIs (17)
• INTA members (21)

The commenters against EOIs can be further divided into the following categories:

1. Large brand owners
2. Registrars providing domain name services to brand owners
3. Trademark and intellectual property associations
4. ICANN’s Intellectual Property Constituency
5. Large charitable not-for-profits
6. Members of the International Trademark Association (see Section VI below for further explanation).
7. Sports organizations
8. Independent individuals
9. Eric Brunner-Williams

VI. Arguments made against EOIs

The following are the primary concerns found in the comments opposed to EOIs:

• Resolution of overarching issues – The “overarching issues” need to be resolved before any EOIs.
• DAG – The Final DAG needs to be published before an EOI.
• Speculation – EOIs will promote speculative behavior including “slot” trading.
• Time – The process is moving too quickly for proper response and consideration.
• Price – $55,000 is too much for nonprofits, developing countries and for others who cannot afford it.
• No gTLDs – Any new gTLDs are a bad idea.

VII. INTA Submissions

On January 12, INTA, the International Trademark Association (INTA) sent out an anti-EOI message to its membership (full text below), exhorting them to comment, suggesting that merely registering their opinion would be sufficient as a comment. Therefore we have included them as a separate category.

Dear INTA Members,

The following notice is to bring to your attention two Internet domain name
system developments that warrant your consideration and potential action.

1. ICANN is Soliciting Input: Should it Proceed with Pre-Registrations for
New gTLDs?

The Internet Corporation for Assigned Names and Numbers (ICANN) is seeking
community views, including input from trademark owners and their
representatives, on whether it should begin accepting “pre-registrations” for
new generic Top Level Domains (gTLDs). Please click here for the ICANN
announcement.

INTA’s Internet Committee will submit comments opposing pre-registration, but
it is important that ICANN also hear from trademark owners directly.

This letter was followed by comments from INTA members that were brief and did not include a reason for opposing EOIs. A typical example follows:

To: draft-eoi-model@xxxxxxxxx
Subject: Pre-registrations for new gTLDs
From: “Lisbet Andersen” lan@xxxxxxxxxxxxx
Date: Tue, 12 Jan 2010 10:48:57 +0100

As an INTA member I have been encouraged to give my opinion on the pre-registration issue. This is to inform you that I do not support ICANN accepting pre-registrations for new gTLDs.

Kind regards
Lisbet Andersen

VIII. Conclusion

The majority of the comments in favor of the Draft Model supported all of the proposed points in the Draft Model, with some concerns about price and whether EOIs should be mandatory. Strongly, they urged ICANN to move forward expeditiously and to provide a clear and predictable timeline.

The comments against the Draft Model were for the most part opposed to EOIs and new gTLDs in general. The comments from the 21 INTA members were very short comments opposing EOIs. Some of the arguments by large brand holders were longer and did not comment on the staff proposal so much as offer their concerns about EOIs and new gTLDs. The primary concern among companies providing an explanation for their opposition was the resolution of the “overarching issues.” Security was the second greatest concern.

Comments or Corrections

We may well have made an inadvertent error in our analysis. Please send corrections or comments by leaving a comment here or by sending an email to minds@mindsandmachines.com.