Saturday, March 31, 2012

Point-Counterpoint: gTLDs Will NOT Become a Haven for Cybersquatters

Since first learning of the new gTLD program, I have been trying to determine a way for cybersquatting a gTLD to make sense. This is of course the first reaction of every commentator (check IPwatchdog’s coverage here for an example). ICANN comes back with mentions of steps to address this, but they generally ring hollow as descriptions of procedural steps that most do not trust the company to fairly or accurately enforce.

My take, from the beginning, has been that cybersquatting will not be a major issue in the new gTLD period.

1. The cost alone is prohibitive

ICANN requires a $185,000 application fee. This alone should deter almost any cybersquatter. Even at the height of the domain name speculation frenzy, I cannot recall transfers going for such high amounts. A cybersquatter would need to know that she could either generate this in sales through further registrations, or generate a lot of ad revenue.

The $185,000, however, is not the full cost. Operation of a gTLD will cost a minimum of $25,000 per year, although ICANN urges potential registrants to expect close to $100,000. For most, it will require a subcontractor to administer the domain. Cybersquatters tend to be opportunistic, looking for possible typos or search engine friendly variants that can be cheaply registered, monetized for a few months, and then cheaply dumped when the rights holder takes action.

2. The objection procedures are adequate

ICANN has developed some objection procedures (see my coverage here) to address potential cybersquatting (or other misuse). The legal rights objection follows basic trademark and UDRP theories for preventing potential cybersquatting dispute. The application period requires a background check into previous domain name registrations for evidence of cybersquatting. The registrations can only be pursued by individuals or companies in good standing.

On their own, these procedures might not be enough. Coupled with the high barriers to entry, I think they will generally prove adequate.

The biggest concerns with the objection procedures are the inherent and existing problems with UDRP proceedings. Reviews of cases have shown evidence of copying and pasting decisions (including in egregious examples the wrong domains!), the inherent bias in that the objector brings the proceeding, and therefore the fee, the inadequacy in number and training of the expert panelists, and the brevity of the proceedings. A company which has invested $185,000 plus could lose their entire application (and fee) over a proceeding where the entire filing needed to be less than 5,000 words or 20 pages.

3. History indicates this will not lead to a dramatic increase in cybersquatting

If nothing else, the gTLD period is highly unlikely to suddenly diverge from the history of adding top level domains and create an explosion of cybersquatting. Top level domains are added from time to time in the regular course of ICANN’s business, and each time there is potential cybersquatting issues. .xxx was recently heralded as the beginning of a long fight for legitimate interests to root out their porn cybersquatters. Instead, most pre-registered their domains and simply redirected them, otherwise the problems seem to mostly be between various companies fighting within the .xxx space. When Tuvalu was granted its own ccTLD of .TV, there was promise of a great new webspace for televisions websites. And yet today, .TV is almost unheard of.

Even if a cybersquatter is able to grab a .brand gTLD, it will still require users to actually type that address into their browser. All signs point to .com continuing as the default. Thus, cybersquatters will be forced to pay for advertising on top of the other fees to make a profit.

Next post, I will do a counter-point with the potential ways a cybersquatter COULD take advantage of a gTLD.

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