The Changing Domain Name Landscape
The Launch of New gTLDs
Article Date: Thursday, November 03, 2011
Written By: Brian Davis
In June, the Internet Corporation for Assigned Names and Numbers (ICANN), the governing body for the Internet, finalized its long anticipated (and long contested) plans to allow the registration of an unlimited number of new generic top-level domain names (gTLDs). Top level domain names are the characters that appear after the "dot" (i.e., .com, .org, .net, etc.) and they fall into two general categories; generic top level domains and country code domain names (such as .uk and .us). Previously, new gTLDs were launched sporadically on an ad hoc basis. Under the new procedures announced by ICANN, it will accept an unlimited number of applications for new gTLDs from Jan. 12, 2012 through April 12, 2012. These new gTLDs can serve a wide array of communities, including brand owners (.canon), geographic regions (.nc), industries (.bank), causes (.green) or content-specific (.music).
The challenges posed by this process differ significantly from those faced by companies when prior new gTLDs like .biz or .mobi were launched and the primary concern was to reserve the domain names associated with the company's trademarks. First, the applicant for a new gTLD is applying to become a domain name registry in charge of running the registration process for the gTLD rather than applying to own a particular domain name. Essentially, the successful gTLD applicant will be launching a new line of business. Also, as explained in greater detail below, the high application costs and rigorous approval procedures eliminate the cybersquatting concerns that characterize the launch of previous gTLDs. Instead, the primary issues for potential new gTLD applicants are whether the benefits to launching a new gTLD outweigh the costs and whether the applicant has the technological and financial means to run a domain name registry.
The benefits associated with owning a new gTLD will vary depending on the applicant, and owning a gTLD may not be worthwhile for all companies. One of the most frequently noted benefits for registering a ".brand" gTLD are the unique opportunity it would provide the brand owner to allow its customers to have a unique online branded experience. Canon, Hitachi and several other well known companies have already stated their intentions to apply for the gTLD that corresponds to their primary brand (and are already reaping some promotional benefits as a result of this fact being mentioned in all of the articles and news stories relating to the new gTLDs). Also, social media and other companies that exist primarily or solely online may use their gTLD to provide a foundation for their online communities. Some entities may use their gTLD to manage their distribution networks or franchisees. Retail, financial services and other industries that face online threats such as phishing or pharming may use their gTLD to provide a more secure online channel for conducting business. Finally, some may simply see the operation of a new gTLD as a good business opportunity.
An application for a new gTLD will involve considerable time, expense and resources. The application fee alone is $185,000, with additional fees of $50,000-75,000 if the application encounters issues during its review. There are also ongoing ICANN fees of at least $25,000 per year if the gTLD application is successful, and the successful applicant is required to place three years of operating fees in escrow. Additionally, the potential applicant must budget for legal fees associated with the application process, marketing costs and internal expenses such as IT staff to operate the gTLD. It will also be necessary for the applicant to demonstrate that it can handle the technical requirements associated with operating as a gTLD open to its registrants at all times. Considering these additional costs, the estimates of the total expenses associated with applying for and launching a new gTLD to be in the $500,000 to $1 million range.
The application process itself consists of several stages. The application is filed online and includes information such as the purpose of the gTLD, the population served, proposed eligibility rules for registrants, draft policies to protect the intellectual property and other rights of third parties and details regarding the applicant's ability to meet the operational, technical and financial requirements associated with being a domain name registry. ICANN will also conduct a background check on the applicants. After the application window closes in April, 2012, the non-confidential portions of the applications will be posted and there will be a 60 day comment period. At this time, ICANN will also issue "early warnings" to applicants whose applications may require additional government approval (such as applications that purport to represent a city, state or highly regulated industry) and those applicants will have an opportunity to withdraw their applications and receive a partial refund of their filing fees. The application will then undergo its Initial Evaluation by ICANN. Upon the completion of the Initial Evaluation, the application will be subject to a two week Objection Period in which third parties may challenge that application on the grounds that the applicant does not have trademark rights associated with the new gTLD or that it does not have adequate support within the community that the applicant purports to represent with the new gTLD. ICANN may also subject an application to Extended Evaluation at this time if it identifies issues, such as the need for additional governmental approvals.
It is also possible that multiple applicants may apply and receive approval for new gTLDs that are the same or confusingly similar to one another. ICANN will group these applications together in "String Contention" groups. At that point, applications that meet the stringent requirements to be considered a "Community Application" will receive preference but the conflicts will otherwise be resolved through an auction.
Once the application process is complete and the gTLD granted, the applicant will be subject to a 10 year term and annual payments to ICANN that rise above the $25,000 minimum if the total domain name registrations exceed 50,000. ICANN also has the right to replace a domain name registry if it is not complying with its requirements. As such, prospective applicants will have to take a long term approach to evaluating their needs with regard to the new gTLDs.
Clients have several options and considerations with regard to the new gTLDs. The least obtrusive is to simply monitor the process and address any issues that arise if necessary. Such an approach runs the risk of a third party registering its ".brand" gTLD, particularly if the mark is used by multiple legitimate third parties (i.e., DELTA, ACME). There is also the possibility of being excluded from the new gTLD space for an unspecified time until ICANN decides to have another round of applications. Some clients may wish to address the new gTLDs through industry groups rather than through individual companies.
For example, it may be preferable for the banking industry to use .banks to address their online security concerns rather than having each individual bank register its .brand gTLD. At a minimum, businesses should be aware of their (and other) industry groups' positions and activities with regard to the new gTLDs to ensure they approve. For those companies that decide to register a .brand gTLD, they may need to determine which brand to use (i.e., overall company name vs. individual products) or if filing multiple applications is beneficial. They will also need to develop a plan for using the .brand gTLD. Entities that wish to file for generic or geographic terms should determine if they require approval or support from government or other groups. Regardless of the course of action pursued, our clients need to be evaluating their options now, developing a strategy and budgeting accordingly. •
Brian M. Davis is a partner with the VLP Law Group LLP in Charlotte, and focuses his practice on trademark, copyright and general intellectual property matters.
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