By: John H. Rees , Shareholder, Intellectual Property Section Chair , Callister Nebeker & McCullough

December 01, 2015 7:10 am EST
Domain Names

Introduction

In the online business world, trademarks and domain names have become irrevocably interconnected.  Having a web presence is a natural extension of business branding efforts in a bricks and mortar environment.  Although not all businesses benefit significantly from a web presence, it is pretty clear that not having a web presence is damaging to a business.  Having a web presence means having a domain name, and domain names become part of the business’ brand.  Domain names by themselves can carry a message, and they control the ability to direct a consumer, or millions of consumers, to websites that will have a message, for better or for worse.  No business should be started, and no existing business should move to the internet without  first adopting one or more domain names that incorporate the applicable brand of the business.

Brands developed in bricks and mortar environments extend to the internet.  It would make no sense to have one brand in a store, and another brand online, unless there were a strategic purpose in doing so.  Brand owners have traditionally protected their brands offline.  They monitor the use of their brands, and if a competitor started using a trademark confusingly similar to the business owner’s mark, they act.  The business owner would likely send a demand letter, or pursue litigation to stop the infringing behavior, and protect the goodwill associated with the business owner’s brand.  The need for protecting brands should be no different in the online world.  The issues are different, but the need for vigilance and action are the same.

For years, domain names of choice included .com as the extension.  However, with the maturing of the internet, if .com domain names on the internet were vacant lots in a new residential subdivision, the lots would be virtually gone.  The internet was so saturated with .com domain names that it was becoming virtually impossible for internet users to register desired domain names using .com.

Recognizing the problem, the Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit organization responsible for managing internet domain names, made the decision to create more virtual land for more virtual building lot addresses, or opportunities for the adopting of new domain names.  The decision was made to add substantially more top level domain names, thus users to adopt and register domain names that were already taken under .com.  Top level domain names are the part of the domain name to the right of the dot, for example, cnmlaw.com.  The part of the domain name to the left of the dot is the second level domain name, or in this example, cnmlaw.

On January 12, 2012, ICANN opened the window to applications for new generic top level domain names (ngTLDs), similar to .com.  ICANN received 1,930 applications for ngTLDs.  To provide some context to what is involved in submitting an application for a ngTLD, the filing fee alone was $185,000 per ngTLD.  In addition there were potentially hundreds of thousands of dollars of costs associated with preparing the application, and building the infrastructure necessary to operate a registry that would own a ngTLD.  Successful applicants for ngTLDs must operate a registry which manages all of the domain names registered under the successfully applied for ngTLDs.  As of August 21, 2015, 741 ngTLDs had been introduced and made available for new domain names on the internet.  There are another 597 still working their way through the application process.  ICANN has left the door open to more rounds of applications in the future.  Examples of ngTLDs that have launched are .law, .tickets, .jewelry, .cafe, .sucks, .pharmacy, .bank., .samsung, and many others.

Concerns

Trademarks are source identifiers.  In order to develop strong trademarks, brand owners often spend significant amounts of money, and expend significant efforts for consumers to associate specific products and services with their brands.  These trademarks become very valuable, and bring significant goodwill to the brand owner.  As extreme examples, the APPLE and GOOGLE brands are valued at approximately $100 billion each.

The introduction of ngTLDs will make it easier for internet users to adopt and register domain names without having to rely exclusively on .com, or the other more popular top level domains, such as .net, .biz, and .info.  In addition, having ngTLDs could change the way businesses market online.  For example, .sony may become the go to ngTLD for anything Sony.  The introduction of .bank and .pharmacy could lead to greater consumer confidence in using online banking and pharmacy products.

However, this is also a brand owner’s potential nightmare.  Prior to the introduction of the ngTLDs, cybersquatters were active and misusing and abusing trademarks in domain names.  Now that there are hundreds of ngTLDs, under which each could have countless numbers of domain names, the potential for cybersquatting and trademark misuse will grow exponentially.

Here are a few examples of potential risks with ngTLDs:

1.  Pharming, spoofing, and other fraudulent activity

Pharming is the redirection of an individual to an illegitimate website through technical means, or in this case, a domain name.  Even given right data security procedures, it is possible for a domain name registrant to create a website using a cybersquatted domain name, and capture sensitive information from a consumer.  For example, a website could be created that has windows asking for a consumer’s bank or other website user ID and password.  A less sophisticated or distracted consumer may enter the information before recognizing that the website is fraudulent. The obvious conclusion is that the website owner could take the information and use it to access the accounts of consumers who were misled by a typosquatted domain name.

2.  Loss of goodwill

Brand owners spend considerable time and money developing their brands and the associated goodwill.  They need to address any activity that degrades that goodwill and devalues the brand.  For example, a domain name that includes a brand that leads to a parking or landing page may lead consumers to believe that the business is dead.  Domain names that lead to poor quality sites may create a bad first or lasting impression for a consumer.  Domain names and websites can be used to destroy goodwill.  Websites associated with cybersquatted domain names can use trademarks in a way that injures the brand owner.  It is possible that other information and materials could be posted on a website that negatively affects the brand owner’s brand.

3.  Tarnishment

Denigration of goodwill is a problem, but tarnishment is a separate and more destructive problem.  Tarnishment involves websites that are not just poor quality, but also promote products or services, or encourage discussions or views about activities that misuse and tarnish a brand.  For example, one typosquatted domain name directed traffic to a website that displayed provocative images, and discussed gaming and prostitution.  There is no data on how many users or potential customers may have visited the page, and hopefully the consumer would understand that the website is not affiliated with or sponsored by brand owner, but there is the potential for tarnishment of the brand owner’s brands.  Allowing the use of a brand in a domain name that leads to a site inconsistent with the brand is a little like giving someone a street address to a box building, telling them it is a Costco or Target store, and when they walk in, they find gaming tables and the open sale of illegal substances.

4.  Regulatory

Although there may not be much regulatory activity in this arena now, it is critical to be vigilant in watching for new regulatory guidance on how to manage issues with domain names.  This is particularly true in highly regulated industries, such as banking and healthcare.

Continued . . .

domain namesICANNSEOtrademarksngTLDsbrand managementbrand marketingbrand reputation
Editor's Selection

Business Taxes

HRAs Are Back

In 2017, Health Reimbursement Accounts (HRAs) will be available to employers with fewer than 50 full-time-equivalent employees and are tax-free as long as employees also have health insurance.

Intelligent Investing

Become the Landlord of Your Stocks

If you are able to understand the principal concepts of how to become an effective landlord of real estate, then applying the same principles on how to become an effective landlord of your stock portfolio is highly achievable.

Intelligent Investing

The Grand Divorce

How does total domination in a sector of the economy play out for the shareholders of the leading company involved?

Personal Taxes

Caution With S Corporation Losses

The Tax Code allows you to deduct losses to the extent you have money invested in the S. If you try to deduct beyond that threshhold and it isn't your personal money, expect problems with the IRS.

Intelligent Investing

Net Neutrality or Level Playing Field

“Net Neutrality” is a worthy concept in theory, but the loss of its most powerful supporter and bureaucrat will significantly change the landscape of internet access and concentration issues in more traditional media outlets.