Fraud at Domain Name Auction House

Posted on November 6, 2009 by Dan Kelly

A bomb exploded in the domain name aftermarket world on Wednesday.  A well-known domain name auction house called SnapNames.com announced that one of its (now former) employees had been bidding as a shill in many online domain name auctions run by the company since 2005.  SnapNames has an FAQ page on the matter here. 

It is not difficult to decry the many abuses that have gone on in the domaining industry:  cybersquatting, typosquatting, domain name tasting, domain name kiting, pay-per-click fraud, and now shill bidding (to name a few).  As these abuses tend to make for the juciest news, it is not surprising that some (including trademark attorneys) accuse the whole domain name business (or "industry") of being dirty.  But law, being a generally slow, blunt instrument, has so far caught up with only the first two of the abuses listed above.  What is less widely reported is that, for all of its wild-westness, the DN business has policed itself (e.g. cybersquatting, domain tasting) without resort to government intervention.  This is as it should be. 

Even so, self-policing is also slow to catch up to opportunists, so caveat emptor is the rule of the day in domain name transactions, especially when bidding at an auction, especially an online auction.  I recommend reading any auction site's rules, terms and conditions carefully before engaging in a transaction.  Some of these sites will readily represent both buyer and seller, which is a situation well-known to lawyers and real estate agents as a "conflict of interest."  Caveat emptor, indeed. 

Domaining is a buy low, sell high business.  While it has warts, and while some debate whether the business of domain name reselling is at all "legitimate," I do not think that the answer, or even an answer, to any of its problems is that governments step in to regulate it.  One of the virtues of self-policing (and by this, I mean by such umbrella entities as ICANN) is that the rules and regulations developed tend to be transnational, obviating the need for an international potpourri of laws, regulations, and, ultimately, lawyers.  While it is against my self-interest to admit it, I think this is a good thing.
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Latest gTLD Applicant Guidebook Open for Comment

Posted on October 9, 2009 by Dan Kelly

I assume that most readers have heard that the universe of Internet domain names may be expanding next year.  Instead of being limited to a finite number of relatively mundane top-level domain extensions like ".com" and ".org," ICANN is planning to allow for the registration of any string of characters to the right of the dot.  These plans have been in the works for a while, and just this week, ICANN released the latest version (version 3 for those keeping score at home) of the "Draft Applicant Guidebook."  This version is publicly available here, and ICANN is taking comments on the contents of this draft through November 22, 2009.  Speak now or hold your peace (at least until the next draft comes out).

I have previously observed that the world of Internet domain names bears some semblance to the proverbial "Wild West."  I have also expressed some doubts about the prudence of opening up the gTLD space.  At the risk of being Dr. No, I see a host of potential problems for trademark owners, based principally on current abuses.  Even so, the gTLD roll out process provides at least some opportunity for taking a broader view of the possibilities, both good and bad, and stakeholders should pay attention now and weigh in before it is too late.

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The Ounce of Prevention: Warehousing your own Domain Names

Posted on September 4, 2009 by Dan Kelly

In giving advice in the field of intellectual property, one hackneyed phrase repeatedly crosses my lips:  an ounce of prevention is worth a pound of cure. 

When it comes to protecting a brand or trademark on the Internet, I may start saying, "an ounce of prevention is worth a ton of cure."  A couple of weeks ago, the Corporation Service Company released the results of a study that found, among other things, that brand owners had spent more than $220 million to obtain domain names from third parties through the UDRP dedicated arbitration process.  The study found that if the brand owners had registered the disputed domain names privately (prior to the third party doing so), the costs to obtain the domain names would have been approximately $1.1 million.  An ounce of prevention, indeed.  That is a 200:1 ratio. 

As I noted previously, the going rate for a domain name registration for one year is somewhere around seven to ten dollars (retail, not wholesale).  At the National Arbitration Forum, the cheapest filing fee to initiate an arbitration on a single domain name is $1,300.  Attorney's fees to prepare a UDRP complaint will typically run anywhere from a couple to several thousand dollars.  Given the cost disparity, I think that a brand owner is well advised to sit down and contemplate this question:  "What domain names would I spend several thousand dollars to obtain if a third party came along and started using them to advertise confusingly similar goods or services?"  The domain names that answer that question are the domain names that the company should go out to register proactively.

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