Every Internet address includes a suffix such as .com, .ca, or .org. These suffixes are known as top-level domains. Currently, top-level domains appear exclusively in Roman characters and are limited to 21 existing generic top-level domains (gTLDs) and approximately 250 country-code domains. In June 2008, the Internet Corporation for Assigned Names and Numbers (ICANN) adopted a community-developed policy which could result in an explosion of new gTLDs. The new policy will enable companies and groups to submit applications to create their own gTLD, using any word or phrase of 3 to 63 characters in length. Thus, companies can obtain gTLDs based on their own company name or trade-mark (e.g., .brand name). The new policy will also allow applicants to apply for gTLDs in non-Roman characters such as Chinese, Arabic and Cyrillic script. Applicants who successfully obtain a gTLD will be responsible for its administration, including potentially acting as a domain name registrar for any second level domains using the newly created gTLD.

Not only will this expansion of gTLDs widen the scope of the Internet and transform the familiar structure of the Internet address, but ICANN hopes that it will also open up a substantial amount of space on the Internet and allow for more competition, choice and flexibility. Additionally, ICANN believes that the new policy could encourage innovation in new on-line technologies.

While this new policy has the potential to create vast opportunities and drastically alter how individuals, corporations and industry groups operate over the Internet, franchisors and trade-mark owners should be aware of the implications that new gTLDs will have on brand and trade-mark protection.

The Application Process

ICANN has prepared a Draft Applicant Guidebook which provides a detailed overview of the application process (the Guidebook). Generally, an applicant must submit a completed application and a $185,000 (U.S.) application fee. All completed applications are made public for objections and comments. Third parties may object to a proposal by filing the appropriate documentation and fees, and objections may be raised under any of the listed grounds. ICANN has proposed that the dispute resolution and adjudication process be administered by internationally recognized dispute resolution providers such as the International Chamber of Commerce and the International Centre for Dispute Resolution.

ICANN will evaluate the application to determine (among other things) whether the proposed gTLD already exists or whether it would lead to confusion. An applicant must demonstrate that it has the technical, organizational and financial capacity to administer the gTLD. If ICANN determines that more than one applicant has applied for the same gTLD, the Guidebook proposes a few different methods for resolving this problem, including performing a comparative analysis of the applications and/or auctioning the gTLD among the applicants.

The Guidebook was submitted for review and public comments were being received until January 7, 2009; ICANN received over 300 comments from participants in 24 countries broadly relating to brand and trade-mark protection, financial considerations and other general comments. A detailed review of the comments is expected to be released this month. Once the Guidebook is finalized, the application process will be opened to the public.

Marketing Opportunities

The ability to create new gTLDs will present unique marketing and advertising opportunities. For example, franchisors will be able to obtain gTLDs for their company name or trade-marks and then can create and issue individualized domain names for their franchisees. In addition, the ability to obtain domain names using non-Roman characters will allow companies to tailor their marketing strategies to appeal to local consumers in jurisdictions that do not use Roman characters (i.e., China, Russia and Japan).

Implications for Trade-mark Protection

While the expansion of gTLDs will create extensive opportunities, it may also increase the burden on rights holders trying to protect their trade-marks. This increased burden may not be the result of new challenges per se (many trade-mark owners already register their trade-marks as multiple domain names in the existing gTLDs and country code domains); rather, it may be the product of having to allocate exponentially more resources to protect one’s trade-mark rights (i.e., 500 instead of 21 gTLDs).

Under the proposed application process, trade-marks will not be automatically reserved for their trade-mark owners. Rights holders will have to consider how best to protect their property rights – namely, whether to apply for new gTLDs representing their trade-marks and/or obtain domain names representing their trade-marks in any new gTLDs that are created. The high cost of securing and maintaining new gTLDs, as well as securing and maintaining domains names within each gTLD, makes this approach quite daunting. Alternatively or conjunctively, individuals, companies and organizations will also need to consider whether to monitor for and then object to new applications that may infringe upon their legal rights. However rights holders respond, it is clear that, after the application process opens, the cost of protecting one’s intellectual property rights will be dramatically more expensive and time-consuming.

Instances of cyber squatting, confusion and fraud may also significantly increase due to the introduction of new gTLDs. Although the cost of doing so is prohibitive, there is legitimate concern that opportunists may attempt to acquire desirable domain names with a view to re-selling them for profit. Furthermore, consumers may be increasingly confused by the plethora of newly created domain names, thus making it more difficult to distinguish genuine websites from fraudulent ones.

In the months leading up to the opening of the application process, intellectual property rights holders will want to consider how to best protect their rights and take advantage of the new business opportunities afforded by new gTLDs.