On June 20, 2011, the Internet Corporation for Assigned Names and Numbers (ICANN) approved the implementation of a new generic top-level domain (“gTLD”) program. The program will offer brand owners a unique opportunity to register customized top-level domain names and operate the associated domain name registries.

Applicants for custom gTLDs can select any terms or characters (with some limited restrictions such as three character minimums for most gTLDs), including foreign language characters, to comprise the gTLD.

Once a new gTLD is approved for use, the owner can set up either an open or closed registration system. In an open system, the owner will operate a public registry, registering second-level domains for members of the public at the customized gTLD, as VeriSign does now for the .com gTLD. In a closed system, the owner could use the gTLD as a platform for internal purposes, such as a company intranet, or it could allow registrations of second-level domains to certain authorized groups, such as licensees, authorized dealers and resellers, or franchisees.

Who Can Apply?

According to ICANN, application will be open to “any established public or private organization” that can “demonstrate the operational, technical, and financial capability to run a registry.” These requirements go well beyond being financially solvent and having an IT team in place. For example, applicants must demonstrate the ability to maintain funding for the domain in the event that the Registry Agreement between ICANN and the applicant (which governs TLD ownership) is terminated. This demonstration may take the form of a letter of credit sufficient to maintain operation of the registry for three years or a deposit into escrow of the same amount.

Initial Application Fee and Evaluation Timeline

The initial application fee is expected to be $185,000 (USD) per domain, a sizeable investment for many organizations. Applications are likely to be hundreds of pages long and will take several months to assemble, requiring input from throughout the applicant’s organization.

ICANN estimates that it will take at least nine (9) months for new gTLD applications to be evaluated. Evaluation of contested or complex applications will take approximately twenty (20) months. There are four potential objections that can be raised to an application: (i) a string confusion objection, in which the objector alleges the applied-for TLD is confusingly similar to an existing TLD or another application; (ii) a legal rights objection, in which the objector alleges the applied-for TLD infringes its trademark or other legal rights; (iii) a limited public interest objection, in which the objector alleges that the applied-for TLD is contrary to generally accepted norms of morality and public order; and (iv) a community objection, raised if a substantial portion of the community to which the new TLD will be targeted objects to its registration.

Observers of the rollout of ICANN’s new gTLD program estimate that the real cost of an application and the maintenance and operation of a gTLD registry over an extended period of time could be in the millions of dollars.

Why Should Brand Owners Care?

ICANN’s new gTLD program is likely to result in many new cybersquatting and trademark disputes, as entities compete for ownership of key gTLDs. Brand owners will need to be vigilant in protecting their rights.

An initial three month application period will be open from January 12, 2012 through April 12, 2012. Within two weeks thereafter, ICANN will post portions of applications it considers complete and ready for evaluation. Brand owners should monitor this list of applications for any gTLD string that is confusingly similar to a protectable mark and evaluate the options and procedures for raising an objection.

To address infringement by second-level domain registrants within new gTLDs, ICANN plans to require new registries to establish a Sunrise Period and a Trademark Claims Service. The Sunrise Period will be required to run for the thirty days prior to launch of the gTLD and will allow mark owners to claim their mark prior to the opening of the gTLD registry to the general public. A registry’s Trademark Claims Service will notify mark owners of potentially infringing domain name registrations. To facilitate these services, ICANN plans to establish a Trademark Clearinghouse, which will be a central repository for information related to the rights of mark holders.

New gTLD registries will be required to comply with the existing Uniform Domain Name Dispute Resolution Policy (UDRP) system as well as an expedited process known as the Uniform Rapid Suspension system (URS) which will be used to quickly disable obviously infringing domains.