Renew your domain name!

For the past few years, many companies have been downsizing their domain name portfolios in the belief that the domain name speculation market had cooled. There has not been, however, a corresponding decrease in domain disputes. Last year saw a 20% increase in the number of domain name cases filed with the World Intellectual Property Organization.

The domain name market has been reinvigorated due to the development of new and abundant revenue sources for cybersquatters, and large corporations backed by venture capital are getting in on the act. Companies must now re-examine their domain name portfolio strategies in light of this novel environment.

Drop catching

Today's cybersquatters focus intently on "drop catching" – being the first to register domain names that are released back into the pool of available domain names when registrants fail to pay the renewal fees.

When those domain names correspond to trademarks, danger lurks. There are several companies who facilitate this by allowing domain "investors" to back order desirable domains years before they expire. Once a domain name drops from registered status, the domain is awarded to whomever has back-ordered it (if there is only one) or auctioned off to the highest bidder. This process assures that almost every domain name that was once registered will be picked up by an investor if it is allowed to expire. However, the danger does not stop there. Domain monetization

This new breed of investors in Internet domain names is reaping fantastic profits by virtue of two web trends: direct navigation and pay-per-click advertising. Articles published in The Wall Street Journal, Business 2.0, and Maclean's within the past few months discussed the revision of the business model used by domain name buyers. Rather than passively holding a registration in the hopes of receiving a lucrative offer for the name sometime in the future, domain registrants sow their digital fields with ads, thereby ensuring a daily harvest for the here and now.

The value of a particular domain name often is a function of the amount of type-in traffic it receives, i.e., the number of Internet users who bypass a search engine by entering the term directly in the URL field of their browser.

For example, those interested in opening a checking account might type "checkingaccount.com" into their web browser. Today, the user is very likely to be served up a "portal" site. The site contains "sponsored results" that are advertisement links for which the advertiser has agreed to pay a fixed amount each time the ads are clicked on by an Internet user. To compel viewers to click through portals expeditiously, the sites are made purposefully ugly.

"Sponsored results" can be a random selection of advertisements, but increasingly, they specifically target the users most likely to key in the domain name. The speculators hope to build off the traffic that the prior registrant had established under the domain name. This targeting of content and ads dramatically increases the chance that an Internet user will click on the ads.

Although the revenue from each click is often only a few cents, or a fraction of a cent, the aggregate profit from thousands of these portal sites can be substantial. Yun Ye, a legendary pioneer of pay-per-click exploitation, amassed a portfolio of 100,000 domain names that earned him around $19 million per year before he sold it for $164 million in 2004.

"Dictionary" words

While the hosts of portal sites claim to target generic, dictionary terms in building their domain portfolios, the vast majority of trademarks are also words that can be found in the di tionary. This means that the many domains registered by investors will be capable of some kind of trademark meaning.

While some domain investors may have a solid "generic use" defense, there are many who register domain names in bad faith, i.e., with the intent to wrongly profit from the goodwill associated with its trademark meaning. When the owner of a domain name that is both a trademark and a dictionary word has registered the name in bad faith, this is often evident from the fact that the particular combination of registered "dictionary terms" has no meaning other than as a trademark.

The investor's bad faith can also be evident from the types of advertisements and other content appearing at the monetized site: these sites will often display prominently— or even exclusively—pictures, substantive content and advertisements relating to the specific goods and services to which the trademark is applied. These advertisements are often for the trademark owner's competitors.

Conclusion

Many domain registrations are lost when the prior registrant accidently fails to pay the renewal fee, or when registrants deliberately allow seemingly superfluous registrations to lapse, such as domains embodying common misspellings of their trademark.

In addition to proactively registering at-risk domain names, trademark owners need to take active measures to guard the domain names that they already control. If they do not, someone else will register them and will likely use them to trade off the goodwill of the trademark and advertise goods and services competitive to the trademark owners' business.

Highlights:

• Many companies mistakenly believe they are out of the woods as far as cybersquatting is concerned.

• In actuality, domain name registration is becoming big business, and disputes are on the rise.

• Drop catching is no longer a mere cottage industry.

• Direct navigation and pay-per-click advertising have revolutionized the way domainers do business.

• If a company is not vigilantly protecting its brand on the Internet, others are likely exploiting it.


The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.