Blog: trademarks

The ICANN Board met on September 24-25 2010 in Trondheim, Norway, to consider and act on the impediments still in the way of the new gTLD program. They passed a number of resolutions that provide very clear indications of how things are going.

The short version is that the news is good for new gTLDs. ICANN is nailing down the final outstanding issues and the timetable is clearer than ever.

Predictions

1. The Board will make the new gTLD program happen by March 2011.
2. The official announcement will be at the ICANN meeting in March in San Francisco.
3. The final Applicant Guidebook will be published before the San Francisco meeting, which means that we’ll know a lot even before the official announcement.

The Board is determined to make gTLDs happen soon

On a number of contentious issues, the Board resolutions gave some finality. In general, they stuck with what they had already decided. Some highlights:

• Fees: fees will remain the same at $185,000 per application. No price breaks for anyone.
• Root Scaling: ICANN estimates that they can add 1000 new gTLDs to the root per year. Of course, they can take many more applications than that, but this is the number they think they can safely introduce into the wild. Most estimates put the number of new gTLD applications at 500 or under.
• Trademarks: trademarks will need to have “substantive review.” As with most things trademarkian, this is a little complicated, but in practice it means that you can’t just go register a trademark and then use it to challenge registrations: you must also have used it in trade.
• Morality and Public Order: On this issue, where the Government Advisory Committee (GAC) essentially vetoed the previous procedure, the Board was less than clear. A working group (which I participated in) came up with some recommendations, and the Board said that they would use “recommendations that are not inconsistent with the existing process.” So we don’t know exactly what this will look like. Unless you’re planning to inflame social hatred, however, your application is unlikely to be affected no matter what the outcome.
• Vertical Integration: The Board noted that the working group tasked with sorting this out (which I also participated in) could reach no consensus, and that they (the Board) would make a decision.
• San Francisco: the next ICANN meeting after December in Cartagena will be March in San Francisco. This is the big news that makes the timeline clear.

To give a sense of the Board’s determination, here’s an excerpt from ICANN’s post-retreat bulletin:

The detailed Board discussion was guided by recent community input and provided direction in the implementation of trademark protections, the new registry agreement terms, measures to mitigate malicious conduct, and ensuring root zone stability. The resolutions indicate that many important issues have been addressed, including trademark protection, morality and public order, and vertical integration.

Chairman Peter Dengate Thrush indicated that “The board made considerable progress on the remaining issues and has asked staff to prepare additional working papers and a modified applicant guidebook for public review prior to the upcoming ICANN meeting in Cartagena in December 2010. The meeting results represent a key milestone after years of work by the ICANN community as we prepare for community discussion and debate in Cartagena.”

Reviewing the Board direction, President and CEO Rod Beckstrom stated, “ICANN is prepared to implement this important new offering to increase consumer choice and to promote competition.”

The official kick-off will be at ICANN San Francisco in March 2011

The March meeting will take place in the front yard of the tech industry, which in general pays little attention to the domain name world. This time, they will be watching, and therefore this is a perfect place for ICANN leaders to cover themselves in glory and boast of their achievement in finally getting gTLDs going. It doesn’t require much of a crystal ball to predict that this is where and when the new gTLD program will get its final blessing.

Applicants will have plenty of information before March

It seems that the plan is to publish a version of the Applicant Guidebook before Cartagena, take comments, then release a final version sometime after the December ICANN meeting in Cartagena, Colombia. Since this will be the final guidebook, it should include all the information pertinent to an application, including the dates of the application window. The San Francisco meeting is likely to be a coronation, not an election. To the extent possible, everything will already have been decided, and everything will be choreographed. Which means we’ll probably hear about stuff well in advance.

Summary

We all know better than to say “sure thing” when it comes to ICANN, right? Right…

Still, the momentum is palpable and the timeline is clearer than it has ever been. The main risk factor is new obstructionism by GAC, fueled by lobbying by trademark owners, who continue to claim that the program will be too expensive for them. But it looks as if the ship is edging into the destination harbor at last.

ICANN’s 38th get-together, in Brussels, may become known as the meeting where the dust finally began to settle. Long-standing issues were settled, compromises were reached, no-one complained too much about the latest version of the Applicant Guidebook, and the Board stood by its project plan dates, even scheduling a Board retreat to solve remaining issues. Finally, there were no surprise “gotcha!” delays that gTLD applicants have been used to seeing at ICANN meeting. With one possible exception…

September Board Retreat – Good News

ICANN’s Board of Directors is going to take a special retreat, tentatively scheduled for September 2010, to try to sort out the remaining gTLD issues. This was publicly announced by Chairman Peter Dengate-Thrush and much discussed during the Brussels meeting. It is likely that the Board will hammer out some solutions on issues where opposing camps are insisting on their advantages and refusing to compromise.

The Board seems to be taking their task seriously, putting enormous pressure on various working groups (see my notes on the vertical integration working group, below) to produce proposals prior to their retreat. Applicants should be pleased with the vigor with which the Board has decided to address the remaining logjams.

.XXX Decision – Good News

The Board’s decision to green-light .XXX means new gTLD applicants can breathe a sigh of relief. The approval means that the new gTLDs program will not be threatened by .XXX-inspired court interference in the gTLD process. ICM Registry, .XXX’s sponsor, would almost certainly have sued ICANN if the decision had gone differently, and very likely they would have asked for an injunction to stop the introduction of new gTLDs — and they might have been successful. The ICANN Board decision to go ahead with .XXX, however heavily hedged with caveats, removes this threat. That’s good news for gTLD applicants.

Most of the press I’ve seen makes it seem as if .XXX is a done deal, and will be inserted into the root in short order. Unfortunately for the 162,000 reported pre-registration applications for .XXX, we are very far from that. One of the more intelligent analyses of the Board’s resolution is theTom Hymes story at AVN. To their credit, ICM’s blog has a thorough and fact-filled rundown of the remaining obstacles. My own assessment of .XXX isn’t very positive, but it is a good sign that ICANN is letting itself be compelled to following its own rules.

Intellectual Property Issues – Good News

Trademark advocates at ICANN will tell you that they are the reasonable ones, that the people who are unalterably opposed to new gTLDs don’t even show up at ICANN meetings. That may be, but members of ICANN’s intellectual property constituency have hardly been pushovers. Therefore it was a pleasure to witness hardline opponents to new gTLDs, including sharp critics from the BBC, Nestle, and the American Red Cross talk constructively about how they could benefit from them at a panel called “Brand Management in the Age of New gTLDs.”

For instance, Charlotte Walters of Orange (the phone company) had this to say:

I think we’re all about building and driving brand value, in which case if you have an asset that could become a mark of value and a mark of quality so that consumers would come to recognize that something that is dot Orange is genuine and that there is no risk of phishing or any other malicious acts underneath it, then that would be the ideal position that we are all aiming to get to. The question is, how long does it take you to get there.

In the meantime, I think that defensive registrations, which we’re all used to doing, is going to be an ongoing factor….

So on a longer-term view, yes, it — there is a lot of potential value. And from a marketing perspective, there’s a lot of potential value. But it will take a long time, I think, to educate internally and externally as to how to get there.

The intellectual property people fought hard for their position and achieved enormous gains, and now there is a sense that they should take their winnings quietly, which they seem to be doing. There are now several RPMs (rights protection mechanisms) in the Applicant Guidebook, including measures to shut down entire registries if they were found to be knowingly and systematically violating IP rights. The GAC (Government Advisory Committee) is no longer worrying that the sky will fall without more IP protections, and the Board opines quite openly that they see consensus in this area. Strident denunciations will continue, but at the meeting there was overwhelming agreement that we are finally past this hurdle.

Vertical Integration – Good News

The good news — and it is good news — is that the Vertical Integration Policy Development Process (VI PDP) is not going to delay new gTLDs. That doesn’t mean the results won’t affect new gTLDs, but it’s not going to slow things down.

Vertical Integration is another way of saying cross-ownership or control, and in this case the question is whether (and to what extent) a registry can own or control a registrar, or vice-versa. The Working Group (which I participate in) has a wide variety of entrenched positions, ranging from protectionist limitations on cross-ownership to a registrar-pleasing complete lack of barriers. The arguments are arcane, and because the limitations concern a future marketplace that no-one can really grasp, the proceedings are an anxious pandemonium of fears and doubts. But the Board has insisted on getting some kind of report in time for its retreat, and so the Working Group is likely to produce a very thin document that representing whatever consensus the group can achieve. The Board doesn’t want to decide this question on its own, but if it must, it will.

You can access the Working Group’s online resource page, or for a long slog you can read the Working Group’s email archives. A few weeks ago, I took the trouble to articulate the Minds + Machines position, which remains the same.

MOPO – Theoretical Knot with a Real-World Solution

MOPO, also called MAPO, stands for “Morality and Public Order,” which is the last big sticking point. Most did not consider it that big of an issue until this Brussels meeting, when the GAC first declared that ICANN’s whole approach to ferreting out immorality (having jurists decide if a TLD is immoral) was not acceptable and must be changed. They subsequently declared it was not their job to suggest anything in its place. Predictably, ICANN board members and staffers were annoyed, but must realize that ultimately they have to produce something that the GAC can live with. Watching the meetings, I didn’t sense that the GAC was using this as an issue to slow down new gTLDs; on the contrary, they seemed not to want to be seen as the reason for delay.

On the one hand, the GAC is right: the morality and public order module is a mess, bulked up with portentous phrases but basically passing the buck to some highly paid lawyers. On the other hand, the module fails precisely because it’s impossible to determine what’s immoral or not on a global basis — this is a circle that will not be squared. The debate is reminiscent of the struggles of the U.S. courts to define pornography, and the solution that was reached — local community standards — will serve here too.

A practical fix is needed, even if it doesn’t address the underlying (insoluble) problem. My guess is that, despite its overtones of censorship, ICANN will have to set up some kind of morality panel in judgment of names, and people it with diverse enough stakeholders to deflect claims of conspiracy. And the vast majority of TLDs will pass without a whisper of dissent. This panel will be just another objection chokepoint, joining the Independent Objector, the Geographic Names Panel, Community Objection and other procedures as a gateway that gTLD applications will have to pass through. Meanwhile, out in the real world, local jurisdictions may block some gTLDs locally if they find them offensive — just as they now block certain second-level domain names in .com.

Although MOPO is the most concerning of the remaining obstacles to opening the new gTLD process, and does have a chance of slowing down the process, there are a lot of committed people working on a solution. The real difficulty will be to shoehorn the practical solution into a theoretical framework that’s consistent with the principles everyone is keen to display.

The Bottom Line

The final shape of the applicant guidebook is becoming clear. With the possible exception of the MOPO issue, solutions to the remaining problems are visible in outline and in many cases in great detail. There are several efforts underway, including the Board retreat and various hurry-up working groups, to get the new gTLD program to the finish line. There’s always a chance that the timing will slip, but I would say not by much — we’re sticking to our timeline: most indications are that ICANN’s next meeting, in early December 2010 in Cartagena, Colombia, will finally produce a starting date for new gTLDs.

Until today’s announcement by Canon, no large brand had broken the “thin brand line” by revealing their plan to apply for their own new top-level domain. Now with Canon’s announcement, other major companies have been challenged to either announce their TLD plans or else state that they plan to forgo the chance to brand themselves at the top level of the domain name space.

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.

A PDF version of this survey and analysis, with full data tables, is available as a downloadable PDF here.

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.

Summary – A quantitative analysis of UDRP data for all open gTLDs concludes that the introduction of new gTLDs will result in approximately 316 new cases of cybersquatting, and that the resultant cost to trademark holders, overall, will be $870,000 per year – less than less than $.10 for each trademark registered worldwide, or about $.44 per trademark registered in the United States. The data show that cybersquatting correlates to registration volume across all open gTLDs, not to the number of gTLDs, but is more prevalent in .com.

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.

The following is a quantitative analysis of the ICANN public comment for the New gTLD Program – Draft Expressions of Interest/Pre-Registrations Model. The full text of comments can be found on ICANN’s site.

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.

TechCrunch reports that its brand has been taken as a Twitter name, and that there is a landrush going on to get these names, which are already trading for money. The problem is so bad that a name brokerage, Tweexchange, has sprung up to get to facilitate sales. Twitter has posted a policy outlawing the sale of names, but a quick review of this policy reveals that it’s as as toothless as a newborn baby, and is clearly more observed in the breach than otherwise.

Trademark owners might want to take note of a worrying trend — valuable names that fall outside the DNS, outside any of the recommendations made by ICANN’s IRT (Implementation Recommendation Team), outside the UDRP (Uniform Dispute Resolution Policy), and outside of any recourse except for the creaky, expensive, and slow-moving protections of national trademark laws. Twitter’s policy offers none of the protections of ICANN’s current system, let alone the expanded protections foreseen by the IRT recommendations.

Twitter should be looking hard at a new .TWITTER top-level domain, so that it doesn’t have to come up with its own dispute policy. Whatever that policy ends up being, it is sure to engender numerous lawsuits and the headaches and expense that come with them.

Trademark owners, for their part, would be far better off encouraging Twitter to apply for the top-level domain .TWITTER, so that naming disputes could handled by the umbrella policies that are already built into ICANN, instead of the reactive, seat-of-the-pants policies that will emerge from private companies.

By opposing new top-level domains, and thereby encouraging the palpable demand for new names to leak out of the DNS system and into private namespaces, trademark owners are inviting a world of woe upon themselves. Instead of one uniform policy, they are about to find themselves reacting to multiple policies in multiple namespaces governed by recalcitrant companies whose commercial imperatives are completely opposed to what trademark holders see as their legal responsibilities.

Next up — Facebook. After that, who knows? There will be more.

Minds + Machines has been selected to provide registry services by Bayern Connect GmbH, which is pursuing the .BAYERN top-level domain name for Bavaria. We are delighted to be chosen by this very strong applicant.

The press release from Bayern Connect quotes CEO Caspar von Veltheim:

“We need a strong and stable technical infrastructure to take our place among existing top-level domains,” said von Veltheim. “We are therefore using the Espresso platform, which powers over a dozen country-code top-level domains, is used by ICANN worldwide to demonstrate security best practices, and can deliver domain names for Bavarians at a fraction of the cost of other solutions.”

Bayern Connect’s choice of Minds + Machines to provide registry services is a natural evolution of our increasingly close relationship with CEO Caspar von Veltheim, who has also agreed to serve as Director of Minds + Machines Germany. In addition to the technical expertise provided by Minds + Machines, Bayern Connect has secured funding from Top Level Domain Holdings, Minds + Machines’ parent company.

Bayern Connect has already presented its project to the Bavarian State Government, and has the support of major Bavarian businesses and institutions, as well as important cultural figures. Prince Leopold von Bayern, a long-time advocate for the preservation of Bavarian traditions, is serving as Senior Advisor. “With .BAYERN, Bayern Connect will give Bavaria a home on the virtual Internet,” said the Prince.

Responding to concerns from intellectual property owners, Bayern Connect is being advised by Dr. Andreas Schulz, a prominent intellectual property attorney. “Trademark owners are entitled to a fair and transparent system by which the domain names are allocated. I will help Bayern Connect develop policies that will assure this,” said Dr. Schulz.

As a Bavarian business, Bayern Connect will donate a substantial portion of the annual registration revenues to Bavarian charities and cultural organizations. “Bavarians will make .BAYERN succeed, and therefore we will give back to Bavaria,” said von Veltheim. Bayern Connect GmbH is based in Munich.

UPDATE Oct. 7, 2009 — It has been brought to my attention that there is an inaccuracy in one of the quotes from Caspar von Veltheim in the blog post above. ICANN does not and has not used Espresso to demonstrate security practices. In fact, ICANN itself doesn’t demonstrate anything. Instead, they work with a company called DeltaRisk, which used an older version of the CoCCA registry software (upon which Espresso and Espresso CC are based) for the demonstrations.

The World Intellectual Property Organization (WIPO) asserted on Monday that new gTLDs from ICANN would unleash a global crime wave. This dire warning was bolstered by an astonishing statistic: a whopping eight per cent (8%) increase in UDRP complaints from 2007 to 2008!

But WIPO’s press release tells only a very little of the truth. Astonishingly, the UDRP system actually works pretty well. Judging by the data, it is not only effective in policing cybersquatting, it also discourages new cybersquatting. In fact, compared with the growth of domain names, cybersquatting allegations have actually decreased every single year since the UDRP was implemented.

Let’s compare WIPO’s claim that the sky is falling with the actual data, helpfully provided by WIPO itself.

WIPO shouts Record Number of Cybersquatting Cases in 2008, and calls the introduction of new gTLDs a “genuine concern for trademark holders.”

WIPO’s press release was picked up by many in the echo chamber, and various reporters and pundits, being deeply steeped in all matters relating to domain names, contributed to the total body of knowledge by opining that maybe ICANN was being a bit hasty with this new gTLD thing.

This predictable naivete from the press is why people bother to issue press releases in the first place, and I can’t fault WIPO for using tools so readily at hand.

But what do WIPO’s own statistics actually show? When examined as a function of registered domains, they show that (alleged) cybersquatting is getting to be LESS of a problem, not more. The rate of growth in UDRP filings consistently lags behind domain name registrations, and as a percentage of names registered, UDRP filings have gone down in every year since ICANN’s inception.

Here’s a little data sheet, a combination of WIPO’s stats compared to gTLD stats (.com, .net, .org, .info, .biz). This data compares all WIPO’s UDRP filings, including ccTLDs (13% of their filings last year), compared to just a subset of gTLDs — .com, .net, .org, .biz. I did it this way simply because the data exists in a easily-retrievable form. An apples-to-apples comparison would show an even greater decline in UDRP cases in relation to domain names registered.

Examining this data, WIPO could have have trumpeted several alternative headlines, with perfect adherence to fact. In fact, comparing UDRP filings to actual domain name data is far more useful than looking at UDRP filings in a vacuum, as the WIPO press release did.

Alternate Headline #1: Cybersquatting Cases Continue Decline

WIPO could have pointed out that as a percentage of total domain names registered, UDRP filings show a constant decrease. Remember, WIPO stats include ccTLD filings, while the domain name totals I’m using are just a subset of gTLDs. So the decrease is in fact much greater than this chart shows:

One two-hundredths of one per cent? One UDRP for every 200,000 domain names registered? This is what is sending WIPO into fear-mongering mode? The quest for perfection has been held as admirable since the Knights of the Round Table and the Imitation of Christ, but aren’t we being a bit picky?

Alternate Headline #2: Cybersquatting Trends Show Constant Decline

Instead of whipping up fear among easily-confused bloggers and journalists, WIPO could have noted that the growth rate of UDRP filings is down compared to the domain names, as they have been in every single year since the UDRP was instituted.

Compared to the rate of growth among the total number of registered gTLDs, cybersquatting cases are in constant decline. Of course UDRP filings go up as the total number of domain names grows, but they don’t grow as fast as the domain names do. A more penetrating look at these numbers would also ask why the UDRP cases are growing. Is because there is more cybersquatting? Or is it because WIPO has been successful with its public relations, thereby increasing filings? Or have complainants just become more litigious?

Alternate Headline #3: WIPO Records Smallest UDRP Increase Since 2004

Even when separated from domain name numbers, UDRP filings are trending downward. The rate of growth in UDRPs has been declining precipitously since 2006, and the 2008 numbers are the lowest since 2004.

Abuse of intellectual property rights is real, and cybersquatting definitely occurs on a regular basis. On the other side, some argue that much abuse has been perpetrated against the fair-use rights of the public by trademark holders who litigate to prevent common use of everyday speech. Wherever the abuse occurs, those affected should have mechanisms to protect themselves. The UDRP is one such mechanism, and it has worked well despite gaming on both sides.

As we try to promote the expansion of the Internet, it would help if institutions with respected names, such as WIPO, would not twist statistics to score rhetorical points. Susceptible bloggers will just regurgitate it.

The reason for the latest delay to ICANN’s plan to introduce new TLDs — and the reason it’s been 10 years in coming — is the fact that domain names and trademarks don’t work together that well.

Now a plan to protect trademark holders (Powerpoint 2004, 1.2MB) across all gTLDs for about $150/yr (final price not yet set) might solve the complaint of trademark holders that they are being held for ransom by the introduction of new extensions. As an example, Xerox would pay about $150/yr to protect its brand “xerox” no matter how many gTLDs were introduced in the new ICANN round. This paltry cost takes away the largest objection from trademark holders.

On March 2 at the 4 pm session called “New TLDs and Branding,” Bart Lieben of the Belgian law firm Laga presented a plan to make trademark protection in new gTLDs workable. The plan is based on the over 50,000 validated trademark records that Bart has collected in doing the .EU, .ME, and five other Sunrise periods.

The trademark database, which would be continually re-verified, and to which new records would be added on an ongoing basis, would include information on 37 attributes such as trademark class, date, jurisdiction. Registries could implement their own policies (such as whitelisting, blacklisting, blocking, etc.) using the records, and registrars, who would also have access, would be able to submit error-free Sunrise apps. Currently, according to Bart, the average error rate of submissions from trademark holders is in excess of 50% and has reached as high as 80%, which has added substantially to the cost of new TLD Sunrise periods.

The response from those in the room, which included well-known trademark attorneys and TLD-denying consultants, was an excellent indication that the plan was sound. One criticized the process, saying that it should have gone through various ICANN working groups. Another criticized Bart’s affiliated company Deloitte as untrustworthy. No-one criticized the substance of the plan.

I think we may have a winner.