NEWS & INSIGHTS

Introduction

On June 20, 2011, the Board of the Internet Corporation for Assigned Names and Numbers (ICANN), the organization responsible for setting policy for the rules, structure and stability of the Internet, passed a resolution to offer to governments, businesses, and non-profit organizations the ability to operate a generic top-level domain (gTLD). In layman’s terms, anything to the right of the “.” in an Internet address will be open for registration. This means that in addition to familiar TLDs such as .com, .org, and .net, Internet users could see new domain name extensions made of almost any word, in any language. A gTLD applicant will become a Registry Operator, operating part of the Internet’s domain name system.

The first application period will open January 12, 2012 and close April 12, 2012. Successive registration rounds will be offered thereafter. No more than 1000 gTLDs will be delegated in any given year. It is anticipated that the time frame for evaluating and clearing applications for registration will be 9 – 19 months depending upon whether the applicant and the application itself is free of legal, technical or administrative problems, whether objections or conflicts are filed, and/or whether a bidding process is required for identical domain names.

Trademark Clearinghouse

Regardless of whether a government, business or non-profit organization chooses to apply for a new gTLD, it will be important to protect any word trademarks or service marks (hereafter “trademarks”) considered to be core product or service identifiers so that they are not inadvertently, or purposefully, incorporated into a new gTLD by a third party. To curtail this potential, ICANN has established a Trademark Clearinghouse where trademark owners may lodge proof of their rights in certain trademarks. To qualify for Clearinghouse registration, a trademark owner must file the following with a Clearinghouse Service Provider:

• Trademark registration certificate issued by government trademark registry, a court order granting rights to a trademark, or a copy of a statute or treaty that indicates rights in a trademark are protected.
• Proof of current use of trademark in the form of a product label, container, or display; and if a service mark, use of the mark in advertising.
• Affidavit or declaration attesting to the validity of the trademark or service mark.

While “common law” (unregistered) marks are technically not to be included in the Clearinghouse, the rules indicate that as long as the owner of common law rights in a trademark submits a declaration attesting to rights and submits proof of current use in the form of labels, tags, containers, advertising, brochures, screen shots, or other forms of use, the trademark will be considered for inclusion in the Clearinghouse database.

If a trademark is registered in the Clearinghouse, an applicant for a gTLD is notified if its domain name is identical to one in the Clearinghouse and will be given notice of the conflicting right. If the domain applicant nevertheless continues with the application process, the trademark owner will be notified of the domain registration and will have an opportunity to object to the domain name. It will also be important for trademark owners to monitor new applications when they are posted by ICANN before they are registered in order to file a legal rights objection during the application process.

Basics of New Domain Name Regime

New Internet space will be open to private management including:

• open - <.website>, <.internet>, <.online>
• generic - <.bank>, <.sports>, <.shop>
• geographical - <.nyc>, <.berlin>, <.paris>
• branded - <.company name>, <.trademark>

What this could mean for governments, businesses and non-profit organizations:

• Enhanced brand image, building of secure communities for customers and trading partners, improved segmentation, and target effectiveness.
• Registration of key brands as gTLDs = <.brand>
• Control over second level domain pairings = <.socks.brand>
• Create an island on the Internet where customers, partners, and subsidiaries gather in a secure, convenient environment.
• Signals site legitimacy and safety.
• “Stickiness” - intuitive direct navigation, better search engine ranking results, reduction of online ad expenses and customized email (jack@marketing.company).
• Control over content and registrants.
  • Eliminate for-profit domain traders and cybersquatting.
  • Only authorized resellers granted second-level domains.
  • Gray market and counterfeit would occur only outside of the gTLD.

Costs and Administration

Plan ahead to determine whether the cost, administration, and tax consequences merit becoming a registry operator. Public information from entities interested in participating in this process contain estimates that it could cost $1,000,000 to acquire and launch a new Top Level Domain. Based on public information, monetary and administrative considerations include:

• Cost - $185,000 application fee to ICANN.
• String contention and challenge fee cost estimates identified from public sources:
  • $50,000 extended registry services technical review.
  • $1,000 - $8,000 fixed dispute resolution fees depending upon service provider rules (incurred during the application period when one or more parties contest the application).
  • $32,000 - $122,000 panel fees.
  • $300,000 annually to operate the domain exclusive of development costs.
    • Includes $25,000 annual renewal fee which will increase once threshold transaction volume reached.
• Determine whether domain registry should be run in-house or by third party registry service provider. Involve in-house teams including marketing, ecommerce, IT, security, legal, and domain management units backed by executive management.
  • Will require specialized accounting and audit procedures, litigation and registry infrastructure personnel.
  • Third party registry services should be selected based upon history of running registry operations.

The Application Process

According to ICANN’s announcement on June 20, 2011, the first round of applications will begin January 12, 2012 and close April 12, 2012. In the meantime, ICANN will begin distributing information to the general public about rules and resources for establishing a gTLD registry. Information published by ICANN indicates there will be a “Sunrise Period” available for trademark owners to lodge applications for gTLDs that incorporate their trademarks prior to the general public. In addition, the following are the currently anticipated phases of the gTLD application process as published in ICANN materials:

• Technical compliance - $5,000 application fee (credited to the $185,000 filing fee) – this fee enables ICANN to evaluate the application for technical compliance.
• Administrative compliance - $180,000 filing fee. During this phase, an administrative check is run on the application. Estimated time for completion is one month.
• Comprehensive initial evaluation. Estimated time for completion is five months:
  • Background screening is conducted on entity and individuals named as officers in the application.
  • A “string review” is conducted to check on whether the domain string might disrupt Internet stability.
  • An applicant will be evaluated as to its financial ability to support a domain registry.
  • An applicant will be evaluated for its technical ability to support a domain registry.
• Application posted for objection period. A two week window has been established for third party objections. There are four basis for objection:
  • String Confusion Objection – the gTLD is confusingly similar to an existing Top Level Domain or to another applied for gTLD in the same round of applications.
    • An auction process will decide tie-breakers where two or more applicants with equal rights to identical strings must enter a bid phase. Essentially, highest bidder is awarded the gTLD.
  • Legal Rights Objection – infringes the legal rights of the objector. Either registered or unregistered trademark rights are infringed.
  • Limited Public Interest Objection – contrary to generally accepted legal norms and morality, or damage to reputation of a certain group.
  • Community Objection – opposition from a significant portion of a “community” to which the domain would apply.
    • A “community” is a globally recognized institution with formal charter.
• Transition to delegation.
  • Enter into registry agreement with ICANN; nine month finalization deadline.
    • Tests are run on the domain registry for stability, responsiveness, load capacity, latency and network reachability.
• Grant of gTLD. The business of running a registry begins.
  • Management of assignment of domain names and delegation of sub domains and operating name servers.
  • Compliance with ICANN policies.
  • Implementation of “sunrise” periods to accommodate trademark owners.
  • Implement post launch rights protection of domain holders.
  • Engage a “uniform rapid suspension” program for problematic domains.
  • Continual deposit of registry information into escrow to protect registrants.
  • Deliver monthly reports to ICANN.
  • Provide WHOIS service.
  • Establish registrar agreements; non-discriminatory access to registry services.
  • Establish abuse policy system and contact points.
  • Operability certificate filed with ICANN annually alleging continued adherence to rules, proof of financial capability and other requirements.

We expect numerous reports and information to be distributed on the new gTLDs in the coming months. Additional information can be found at www.icann.org. Please contact Charles S. Cotropia at (+1-214-981-3305) or Julia M. Chester at (+1-214-981-3308) for further details.

If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work.

The Intellectual Property Practice of Sidley Austin LLP 

Sidley Austin LLP’s Intellectual Property group lawyers have experience in a wide range of intellectual property areas including, patents, trademarks, copyrights and trade secrets. The group, which includes attorneys with advanced degrees in science and engineering, has successfully tried high profile patent cases involving pharmaceuticals and medical devices for Fortune 500 companies.

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This Sidley update has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers.

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