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Dot Confusion - ICANN is Planning Hundreds of New gTLDs

19.5.2009
Nick Wood

(IPRinfo 2/2009)


A major change to the domain name system is planned. Hundreds of new registries may be launched. Nick Wood of Com Laude, a specialist registrar working only with trade mark owners, explains what's happening and why there is so much uncertainty.

ICANN, the Internet Corporation for Assigned Names & Numbers, has embarked on a programme of expansion that will see the domain name system grow dramatically with the introduction of hundreds of new generic Top Level Domains (gTLDs) (1).

If ICANN succeeds then in five years time, the 250 country code (CCTLDs) registries of today could be overshadowed by a thousand or more gTLD registries run by entrepreneurs, by cities, by local government organisations, by trade associations and affinity groups. The business of protecting trade marks in the domain name system will change forever as the number of registered domains expands from 170 million to 250 million, maybe many more.

In a First Draft Applicant Guidebook (DAG) published at the end of October 2008 (2), Paul Twomey, President and CEO of ICANN, set out his vision of a domain name system no longer "constrained by only 21 gTLDs". He said, "In a world with 1.5 billion internet users - and growing - diversity, choice and competition are key to continued success".

New domains would bring considerable income
ICANN's cure for this "constraint" is to implement a programme of applications, open to anyone, anywhere in the world with the cash - an application costs $185,000 - and the conviction that they can run a successful registry, including registries that feature only Internationalised Domain Names (IDNs - in non-Ascii characters).

To cope with this change, IP professionals will need new strategies and greater resources. Current best practice in the prosecution and protection of trade marks in the domain name system will no longer be affordable. If ICANN hits its target of attracting the 500 bids in the first round of application, then 12 months later IP specialists could in theory be facing a Sunrise every week.

The fact that no-one outside the ICANN community had called for this expansion of the domain name system did not originally bother ICANN, which in the first Draft Application Guidebook pointed to 18 months of "robust discussion and consultation". Alas, even the most neutral of observers must conclude that consultation amongst registry operators, registrars and the technical companies that support the domain name business is very far from robust.

However, in a Second Draft Applicant Guidebook (3), published on 18 February 2009, ICANN has softened this dogmatic determination to push ahead and create a market. Undoubtedly, the 300 comments submitted by interested parties including IP and industry associations and several governments in response to the First DAG, had an effect. Introducing a 155 page analysis (4) of these comments, Paul Twomey says, "There have been a number of overarching issues raised in the comment process that require further work including Trade Mark Protection, Security & Stability, Malicious
Conduct and Demand/Economic Analysis. It is very important to take the time to resolve these overarching issues. DNS stability, user protection, and trademark rights must not be undermined by the introduction of new gTLDS. As a consequence it is unlikely that the application round will open before December 2009".

This revised date is some six months later than the June 2009 launch date that ICANN originally announced. ICANN's timetable for the new gTLD programme now features the following stages:
* Second DAG published 18 February 2009, with a Second Comment Period open until 13 April 2009
* 3nd DAG to be published at the end of June 2009, in time for the ICANN Sydney Open Meeting
* Further Comment Period on Third DAG
* Launch of four month "Outreach and Communication Programme" to promote the New gTLD Programme to potential applicants
* Publication of "A Request For Proposals for New gTLDs" (the Final Application Guidebook) in December 2009 or Quarter 1 of 2010
* Applications Open for 45 days from date of publication of Guidebook

Two application types: open and Community-based
In the First DAG, ICANN indicated that it would be sub-dividing applications into two main types:
1. Open applications, for example from private sector organisations from domainers to brand owners "for any purpose". We have heard of three bids for Dot MUSIC whilst we know of two trade mark applications filed for "Dot SPORT".
2. Community-based applications which are "Operated for the benefit of a defined community consisting of a restricted population". The designation "Community-based" replaces the term "Sponsored gTLD" that ICANN used to apply to domains like .aero or .museum which were restricted to special interest, professional or affinity groups. It is under the designation Community-based that bids from several cities have already been declared including London, Paris, Berlin, New York and Quebec.

Another interesting example of a closed affinity group which has declared its interests in applying is the American Motorcycle Association which has plans to apply for ".BIKER". All community-based applications must be accompanied by a formal endorsement by an established institution representing the community it has named or a letter of non-objection.

ICANN hopes that many of the applicants will want to operate IDN registries - meaning registries that offer full-registration in scripts other than ASCII such as Arabic, Cyrillic, Simplified Chinese, Hebrew etc.
"to express the whole of a domain in characters that look like their language".

The application process that ICANN has devised is permissive rather than restrictive, reliant upon Third party challengers to file objections rather than staff or advisors to decide who should be allowed to operate a registry. The fastest route from application to delegation of the domain in the world root of the internet is set out in Table One:


The Initial Evaluation will feature three phases:
1. An evaluation of the character string applied for: could it threaten the stability of the internet because, for example, it starts with a hyphen or fails to meet the minimum requirement of three characters? Does it conflict with an existing TLD character string? Does the string clash with a term that is protected by a national government? If so, it will be referred to a Geographical Names Panel of specialist advisors.
2. An evaluation of the financial capabilities of the applicant which must demonstrate its ability to operate a sustainable registry.
3. An evaluation of the Registry Services that the applicant proposes to offer - including the measures to protect IP during the launch.

Currently there are only two questions about the measures to protect IPR that applicants propose implementing, namely:
1. Describe how the proposal will create policies and practices that minimize abusive registrations and other activities that affect the legal rights of others; and:
2. Describe how the proposal will implement safeguards against allowing unqualified registration within their application
Compared to the 20 questions about technical competence that ICANN proposes asking, this is inadequate and likely to change in the third version of the DAG.
To assist the evaluators in deciding if there is String Contention, ICANN has commissioned an algorithm from SWORD which is designed to be an "Open, objective and predictable mechanism for assessing the degree of visual similarity between character strings applied for". Any character string that yields a similarity rating of over 30% is cited. We tried the system (5) and found it wanting as can be seen in the two examples below where Mulberry and Burberry would be cited even though they co-exist as trade marks in the same class of goods and services, while the three-letter term BAT is cited as clashing with nine two letter terms and .net.


The objection filing period for the first round of applications will open for 45 days from the moment ICANN posts the list of complete applications on the internet. There are four grounds for objection:
1. String confusion to avoid contention when similar strings are applied for: to be administered by the International Centre for Dispute Resolution.
2. Existing Legal Rights so IPR are protected: to be administered by WIPO.
3. Morality and Public Order to minimise government or religious interference: to be administered by the International Chamber of Commerce.
4. Community Objection expected from local or national governments, indigenous groups, geographical communities: also to be administered by the ICC.

Interestingly, ICANN has not reserved the right to make a Challenge of Last Resort, for example if a group applies for .ALLAH, .GOD or another term that might excite public concern but not be the subject of a third party challenge. Nor is ICANN proposing any process for resolving Symantic or Content Contention where two parties apply for .VIN and .WINE for example.

If a brand owner finds that an application has been made for a term matching a trade mark, he must pay a non-refundable Objection filing Fee that is likely to be between $1,000 and $5,000 and then pay the administrative costs of the ADR provider. WIPO has stated that it expects Legal rights Objections to cost between $2,000 and $8,000 for a process that sounds similar to what the filing of an on-line UDRP might be like. However, the ICC believes that a Morality Objection could cost as much as $120,000 to process, including in-person hearings.

Some comfort should be derived from the involvement of WIPO in the process. In drafting that surely must have come from WIPO, ICANN defines the grounds for a Legal Rights Objection as being "if the potential use of the TLD applied for by the applicant takes unfair advantage of the distinctive character or the reputation of the objector's trade mark or service mark or unjustifiably impairs its distinctive character or reputation or otherwise creates an impermissable likelihood of confusion".

ICANN has yet to decide whether the losing side in an Objection process should pay though it has said that it is introducing a sliding scale of refunds of up to $140,000.

Should ICANN fail an application during Initial Evaluation, applicants have 15 days to request Extended Evaluation. The Extended Evaluation process features one round of Inquiry and Answer during which a panel of three independent evaluators retained by ICANN will inform applicants of "perceived deficiencies" and give them one opportunity to reply. If the Evaluators fail an applicant on technical grounds, ICANN may appoint a so-called "Registry Services Technical Evaluation Panel" at cost to the applicant of up to $50,000.

If two or more applicants who pass both Initial and Extended Evaluation have applied for the same character string, a "String Contention" procedure will be started which will see the applicants being encouraged to settle the dispute between themselves. If they cannot, ICANN proposes running an auction between the applicants as "a fair and equitable method of selection".

The published application costs are probably high enough to deter infringers: the official ICANN evaluation fee is proposed at $185,000. If successful, applicants will also have to pay ICANN a flat-rate levy of $75,000 per annum in quarterly installments. Refunds of a portion of the Evaluation Fee may be available for applications withdrawn before the evaluation process is complete. These costs exclude the significant sums needed to create and maintain a registry.

There's a great deal at risk. In addition to the $185,000 application fee, applicants must pay ICANN a flat-rate annual levy of $25,000 per annum in quarterly installments and for each registration over a threshold of 25,000 registrations, $0.25 cents per year. They must also show the capital and resources to operate a registry connected to the world root of the internet. For a simple registry serving a closed affinity group with less than 5,000 domains which outsources registry operations to a current ccTLD or gTLD registry provider, this is likely to cost at least $10,000 per month. For a complex registry with over 25,000 domains, this could easily cost $50,000 a month. Then there's the cost of insurances and staff, compliance with ICANN and sales and marketing.

With the new .TEL gTLD registry which launched in December 2008 so far attracting just over 20,000 registrations from across the globe, there's no certainty that running a new gTLD registry will be a route to riches.

ICANN itself stands to gain or lose a great deal from the new gTLD programme. If it attracts 500 applications at $185,000 it will earn $92 million, enough in theory to secure its financial future and even a move away from the USA to Switzerland where it could position itself beside international treaty organisations, out of the reach of US courts. However, if it fails to deliver the programme within the next 12 - 18 months, it will lose face with the community of registrars and registry operators that currently pay for it and be vulnerable to take over by, for example, the International Telephone Union. At the Mexico City Open Meeting on 2 March 2009, CEO Paul Twomey announced that he was standing down at the end of just one three year term of office. He'd been expected to stand for another three years. Whatever spin he puts on his decision, it looks as if the political pressure of pushing through the new gTLD programme has got to him.

New challenges for IP and brand owners
For brand and IP owners, the process brings new challenges and for some, especially corporations born of the internet, new opportunities. The major challenge is clear: how best to impress upon ICANN that affordable pre-launch and post-launch rights protection mechanisms are vital. For every 20 critics of the ICANN process however, there is probably one corporation that is already making plans for an application. Despite the many critical comments filed by trade mark specialists in the formal comment process for the First DAG, it is clear that a number of corporations will be applying in the first round. Who might these be? It is easy to make a case for a .EBAY or a .NOKIA, a .GOOGLE, .AMAZON or .MICROSOFT. It is less clear whether competitors may band together to apply for a .HEALTH, .HOTELS or .HOLIDAYS but it could be that industry insiders will prefer jointly own such gTLDs rather than find themselves buying registrations under these headings from entrepreneurs.

There is a huge amount of money at stake. ICANN has spent $13 million on the process so far and it is a brave or perhaps foolish brand owner who declares that they will never apply for their own gTLD. If ICANN succeeds in the first round, it will surely become a question not of whether to apply but when to apply. As the domain name system inflates into a directory of leading corporations, internet users all over the world will become accustomed to typing brand names straight in the browser. IP professionals may resist this trend, but the marketing maestros with the bigger budgets will see the advantage of moving up from .com to the highest level in the DNS: a branded gTLD.

If you think that you or your clients will never apply, you might like to spend five minutes checking the arguments set out below summarising some of the opportunities and the risks of early application:


10 REASONS TO CONSIDER APPLYING IN First ROUND

1. Your own gTLD demonstrates confidence & vision and may accelerate your brand and its value. An internet address at the Top Level is far better than registration at the "low rent" Second Level.
2. First mover advantage is valuable - and it is vital that you keep pace with your peers; imagine the consequence of "being left behind if your peers apply and you do not?
3. A third party with an equal right to your name in another class of goods & services might take your key term. "Permanent String Preclusion" is a horrible fate.
4. It is a good way of reinforcing your global image, especially if in time you add IDN functionality (scripts in local languages) that impact on local markets.
5. Internet infringement is a plague: with your own gTLD, you create the policies & control who can register. You can build a trusted vault for authentic goods & services and lock out speculators & infringers.
6. Your own gTLD gives you a new channel for marketing and client/customer loyalty: if your customers want to register under your own gTLD you'll have a new sales channel.
7. A gTLD registry will be a valuable internet asset. There are outsource providers who can run it for you. You will shoot up the search engine rankings too.
8. Perhaps you could combine with others in your sector to apply for a gTLD for a generic term that assists everyone in your industry but excludes infringers?
9. No-one knows when the second round of applications will open: ICANN hopes it will be in 12 months but it might be longer. You could be left behind for years, stuck with .com.
10. You'll be in charge of your own registry. Your key brands will be secure and stable. Third party domain registries are not as stable as trade mark registries.

What are the counter arguments which support a more conservative approach?

10 REASONS TO DELAY APPLYING

1. It is not your business to run a registry.
2. Applying is going to be expensive and time consuming: let others pioneer the process. There have been many failed initiatives that have been expected to transform the internet- remember RealNames that shut down in 2002?
3. The investment you have made in securing a portfolio of gTLDs and ccTLDs and creating websites that communicate with your customers wherever they are already gives you a global presence.
4. A new gTLD is not going to stop infringers registering under other TLDs: in fact the process will increase your policing costs. You can't just abandon other registrations.
5. There is no demand from your consumers or customers, your shareholders or staff. It is ICANN, the registry operators and registrars who are pushing the programme.
6. There is a global recession. Early application will take too much time and money. The lead times are too short. The risk and cost of applying will reduce after the First round.
7. What term should you apply for? The main operating company? Which trade mark or brand? The process raises as many branding issues as it resolves.
8. What about liabilities? Suppose the process is delayed by legal challenge or your application faces an Objection? You can learn from the mistakes of others if you delay.
9. There is an Objection Process. You can oppose any application for a character string that matches your brand.
10. How long will it take internet users to understand private-label gTLDs? You've already invested in registration at the Second level in other gTLDs that have proved unpopular with the public. No-one is going to abandon their .com.

A major problem for IP professionals and outsiders to the ICANN family is that ICANN develops policy from the ground-up in an iterative process. If it suggests something in the First DAG - such as the fact that a decision of an ADR panel provider might not be binding on the Board - it may well change it in the Second DAG.

Four "overarching" issues
Such is the weight of public comment that ICANN received following the publication of the First DAG that it decided to publish a red-lined version of the Second DAG (6) showing where changes are contemplated. These changes fall into two broad categories. Firstly, there are what Kurt Pritz, Senior Vice President of ICANN with responsibility for the new gTLD programme calls "Implementation Changes". These include updates on the fee structure and refund policy, the geographical names requirement and the methodology on how string contention will be addressed as well as the role of registrars. The second category features the "Four Overarching Issues" identified by CEO Paul Twomey and referred to earlier, namely:

Scale & Demand:
Has ICANN demonstrated demand for new gTLDs beyond "the family of ICANN"?
Will the impact of the new gTLDs be positive in a time of global economic crisis? Are there registrants out there to buy new gTLDs? Are there ICANN Accredited Registrars to sell them? As requested by the US Government in 2007 and again in its comments on the First DAG, ICANN is now commissioning an Economic Impact Study into the effect of the new gTLDs.

Trade Mark Protection:
Are there implementable practical mechanisms to avoid the need for defensive registrations at both the top level (to prevent anyone else from applying to operate .yourbrand registry) or at the second level where it may be necessary to file protectively time after time in registry after registry?

Some commentators have called upon ICANN to create a central repository of IP rights to make this process affordable. For example, in its comments on the First DAG, MARQUES, the European Association of Trade Mark owners said, "MARQUES supports the idea of an ICANN-sponsored initiative to create and maintain a single online database of validated registered rights which can be used by registry operators and rights owners to make the new gTLD launch process smoother and more cost-effective." Deloitte has started promoting exactly this service, based on its experience of validating c.300,000 applications, containing trade mark data matched to domain name requests used in the .eu, .asia, .mobi and .tel Sunrises.

Security & Stability:
It is an unfortunate coincidence of timing that four major ICANN projects will be reaching a critical point in late 2009 / early 2010, namely the introduction of new IDNs, DNSSEC (an extension to the standard DNS system to improve security) , IPv6 (a new protocol that expands the availability of IP addresses) and new gTLDs. Is it wise for ICANN to introduce so much change in such a short time frame? Will these changes together threaten the stability of the world root of the internet?

Malicious Abuse:
Will a dramatic increase in the number of registries lead to a corresponding increase in malicious behave from on-line counterfeiting to phishing? Certainly the international banking community thinks so.

Although ICANN is taking these four issues very seriously, it does not appear to contemplate cancelling the new gTLD programme or scaling it back. As Paul Twomey says in his introduction to the Second DAG: "ICANN is taking steps to engage interested parties in dialogue on these issues." These discussions, and progressing the work to final version of the Draft Applicant Guidebook, will be undertaken concurrently. From an operational perspective, it is not resource effective or efficient to stop this work while discussion is taking place on the broader range of issues. Nor is it the intent to launch the process without resolving these overarching issues. Rather, it is the intention to continue engagement with the broader community while working out other implementation details of the program".

Whether you work for a trade mark owning corporation, a not for profit organisation or a law firm, you are going to need to develop a strategy for the new gTLD process. This must cover if or when to apply as how to monitor the process, a budget for Objections and a methodology for coping with a succession of Sunrises as registry after registry launches. There's also the chance that one or two people who read this article will find themselves working on a bid. Either way, there's cost and confusion ahead and very little time to influence ICANN.

Nick Wood, LL.M.
Managing Director, Partner
Com Laude


(1) gTLDs are generally three letter domains such as .com, .net or .org that anyone anywhere in the world who meets the registry requirements is free to register
(2) ICANN New gTLD Website:
(3) Second Draft Applicant guidebook:
(4) Analysis of public comment on First DAG:
(5) Try the SWORD algorithm at
(6) Red-lined version of First DAG showing changes that appear in Second DAG:

ICANN (http://www.icann.org)

The Internet Corporation for Assigned Names & Numbers ICANN coordinates top level domains (TLD) across the world since 1998. It is a not-for-profit public-benefit corporation with participants from all over the world.
The President and CEO of ICANN since 2003, Paul Twomey, will not renew his contract after July 1, 2009.
gTLDs are generally three letter domains such as .com, .net or .org. Anyone anywhere in the world who meets the registry requirements is free to register them.
ICANN New gTLD Website:
http://www.icann.org/en/topics/new-gtld-program.htm
DAG - Draft Applicant guidebook; the versions and comments on them are available on the web site of ICANN

This is the full text of the article by Nick Wood "Dot Confusion", which was published in the printed issue of IPRinfo 2/2009 pp. 30-32 in an abridged version.


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