New generic top level domains —an opportunity or a threat to brand owners operating in China?

By Jannik Skou Partner at Thomsen Trampedach,[Internet & Domain]

Next year brand owners will need to decide if they want to protect and promote their brands by registering new domain names under one of the more than hundreds of new open domain name extensions such as .shop, .eco, .car, .software, .hotel, .ski, .med, .art or in extensions in non- Latin scripts such as “.公司” (Company in Chinese) or “.新闻” (News in Chinese). Like it or not, the structure of the domain name space as we know it today is about to change.

With a special focus on the Chinese market this article will analyze the potential risks and benefits for brand owners in regards to the launch of hundreds of new generic top level domains (gTLDs). The author will address how brand owners can object to potentially infringing or damaging new domain extensions before they are approved and how they can protect their IP and leverage on the new online marketing possibilities, once the myriad of new TLDs are launched.

I. Why is ICANN implementing such a dramatic change?

1. Why are all these new domain name extension being launched?

Since May 2008, the Internet Corporation for Assigned Names and Numbers (ICANN) has been working towards expanding the domain name space by adding thousands of new generic top level domains. Today there are a mere 22 “generic” top level domains such as “.com,” .net,” “.org,” and the latest one “.xxx” (for adult entertainment) and about 280 country code top level domains such as “.cn” for China, “.jp” for Japan, and “.hk” for Hong Kong. In parallel with the global growth of the amount of Internet users as well as the services and information available on the Internet, the growth in the number of domain name registrations of gTLDs, in particular .com, .net, and .org, has led to a situation where it is difficult to find available domain names under the existing TLDs. The registration of more than 103 million .com domain names has fostered the success of a large after market. It is estimated that, on average, purchasing a .com domain name costs USD 2,500, which is more than 100 times the price of a new registration. Since it is extremely difficult to launch a new product name and find the corresponding .com domain name available, most often one has to buy .com domain names from prior registrants.

It is ICANN’s hope that the introduction of up to 1,000 new gTLDs per year will increase customer choice, enhance competition in the domain name market, and foster innovation, while supporting the growth and accessibility to the Internet in emerging markets. Thus, within the next year brand owners will be confronted with a new domain name landscape containing more than 1,000 gTLDs in both Latin and other scripts, including Chinese.

1.        Why is this relevant if the new gTLDs will not be launched until 2013?

The application process for new gTLDs was closed on May 30th, 2012. ICANN received an astonishing number of 1930 applications. Over the next 7-18 months ICANN will evaluate the applications and if there are no objections, the new gTLDs will be launched starting the second half of 2013 at a pace of three new gTLD per day.

It is important that brand owners start analyzing the new gTLD applications immediately because the objection period, during which it is possible to object to an application (see “Objections” section below) has already opened and will close as early as January 13th, 2013. The deadline for filing a public comment, which may influence the evaluators, closes on September 26th, 2012.

I.                    What kind of new domain name extensions will be launched?

Many applicants have applied for the same strings, such as “.app” (13 applicants), “.home” and “.inc” (each with 11 applicants), “.shop,” “.web,” “.love,” “.now,” “.news,” and “.med” also have duplicate applications. In total 751 applicants have applied for 230 strings that are in conflict with other applications. These so-called “contention sets” (for instance all 4 applicants for “.med” are in “one contention set”) will have to be settled amongst the competing applicants or ultimately be resolved through an auction.

Thus it can be expected that the nonprofit organization ICANN will be able to donate substantial funds to charity. It is expected that applicants in some cases are willing to pay millions of U.S. dollars to win a gTLD, which grants them exclusive rights to sell second level domain names in that TLD for at least ten years.

The new gTLD applications are divided into four categories:

Brand gTLDs

917

Open gTLDs

72

Geo gTLDs

79

Community gTLDs

62

Grand Total

1930

 

1. “Brand gTLDs” (917 applications) are TLD applications from large corporations (the application fee was USD $185,000 and operating costs are estimated to amount to at least 150,000 USD per year) such as Citic Group applying for “.citic” and “.中 信 (CITIC in Chinese), Aigo applying for “.aigo,” and Volkswagen applying for “.volkswagen” and “.大众汽车” (Volkswagen in Chinese), etc. Some brands have also applied for generic terms such as Richemont applying for “.watches” and “.手表” (watches in Chinese), Wal-Mart and Safeway both applying for “.grocery”, Goodyear and Bridgestone both applying for “.tires” etc.

Initially these “Brand gTLDs” will all be for the exclusive use of the applicant (and its “affiliated” parties), so that Richemont, if granted “.watches” as the sole eligible registrant, can register domain names such as “luxury.watches,” “Shanghai.watches,” or “buy.watches,” and Citic Group can register “secure.citic.” To those applicants the brand TLDs will give them an exclusive name space, where they are the only qualified registrants. So we may—most likely within a few years—see a shift from “brand.com” to “anything.brand” or in some cases “brand.industry.” As there can be no cybersquatting under a Brand TLD (there is only one qualified registrant, namely the brand itself) these brand TLDs have the potential to be regarded by consumers as a “safe harbor” online with no risks of fraud.

Notably, Google has applied for as many as 101 new gTLDs including not only “.google,” and “.谷歌” (Google in Chinese), but also such generic TLDs as “.search,” “.music,” “.movie,” “.inc,” and “.love,” whereas Amazon has applied for 76 gTLDs including “.book,” “.食品” (Food in Traditional Chinese), “.kids,” “.now” and also for “.search.”

2. “Open TLDs” (872 applications) are TLDs where anybody—individuals or businesses—regardless of nationality are allowed to register domain names. These “open TLDs” are applied for by two different groups of applicants:

i. Existing registry operators Verisign operating .com and .net have applied for transliterations of .com and .net in various scripts such as “.点看” (“dot COM” in Chinese) and “.大拿” (“dot NET” in Chinese) but also in Cyrillic, Thai, Arab etc. CNNIC, the Chinese Authority operating the country code TLD “.cn” have applied for “.公司” and for “.网络” (“Network” in Chinese)

ii. “Domain Name Investors” A large number of well-funded, so-called, domain name investors have applied for a large number of gTLDs with the ambition to profit from selling domain names to individuals and businesses across the globe.

One entity has applied for more than 300 gTLDs and others have applied for 50-100 gTLDs, and yet others have only applied for one or a few gTLDs, such as “.game,” “.shop,” and “.商店” (“Shop” in Chinese) and “.web.”

3. “Geo TLDs” (79 applications) are regional top level domains such as “.Africa,” “.London” or “.广州” (“Guangzhou” in Chinese) and “.深圳” (“Shenzhen” in Brand gTLDs 917 Open gTLDs 72 Geo gTLDs 79 Community gTLDs 62 Grand Total 1930 chinese). The applicants are either regional authorities, who wish to promote local content under their own Geo TLD, or private entities, endorsed by local authorities, who wish to operate a Geo TLD. Typically these TLDs will require some sort of evidence of “local presence” from the registrant, in order to make sure that only relevant websites addressing the regional area will be found under the specific Geo TLD. However, some of these Geo TLDs will be based purely on first-come-firstserved principles.

4. “Community TLDs” (62 applications) are TLDs servicing a specific, delineated community.

Examples of “community TLDs” are “.bank”—only for certified banks, “.hotel”—only for registrants related to the Hotel industry, or “.政务” (“government and government affairs” in chinese) only for public authorities. Some of these gTLDs will thoroughly validate each applicant before allowing registrants to register domain names in their TLDs, whereas others will simply ask the registrant to accept the general terms online, and in principle only make random checks of whether each registrant belongs to the defined community.

II.                 Which new gTLDs will be launched in China and in Chinese scripts?

Out of the 1930 gTLD applications 73 are in Chinese Scripts. In addition to these 73 applications in Chinese script (including Chinese brand names for Google, Wal- Mart, Nokia, L'Oréal, Philips, GE, and Bridgestone), 32 Brands from greater China (including Taiwan and Hong Kong) such as Acer, Baidu, Sina, Unicom, and Sohu have applied for their brands and product names in Latin script.

In total, 121 applications are thus either in Chinese Scripts or applied for by Chinese brands. Of those 121 applications there are five Geo TLD applications for Shenzhen, Guangzhou, Guangdong, Foshon, and Taipei (Latin Script) and three community based applications (for “governments,” “public interest” and for .kids—in Latin script). 63 are for brands either in Chinese or Latin script and 49 are open TLDs, where anybody will be able to register domain names. Of these 49 TLDs, 32 will be launched in Chinese script.

These are

gTLD

English Meaning

公司

Business (Chinese .com equivalent)

慈善

Charity

Company.

点看

dotCOM

點看

dotCOM

大拿

dotNET

娱乐

Entertainment

Game(s)

八卦

Gossip

Group

健康

Healthy

I love you

信息

Info

商城

Mall

Mobile

网址

Netaddress

network (Chinese .NET equivalent)

News

线

Online

机构

Org

机构体制

Org (Organization / Institution)

招聘

Recruitment

Restaurant

商店

shop

shopping

Trademark

vogue, fashion

网店

webshop

中文网

website

网站

website

网址

website

世界

world, globe, universe (or similar)

As you can see there are many similar new gTLDs in the pipeline. As an example CNNIC applying for “.公司” and Verisign applying for “.点看” will be in competition for new domain name registrations in their respective Chinese versions of “.com.” To brand owners wishing to either protect or promote their brand names in the new gTLDs this situation is bound to lead to confusion and to more costs, in case they decide to register their brand names as domain names across all relevant new extensions.

So where today a brand owner operating in China would have a decent protection of their brands online by registering their names under “.com,” “.cn,” “.com.cn,” and maybe also under the new country code “.中 国” (“.China”), by the end of 2013 the same brand owner might have to register their brand names under dozens of new gTLDs both in Latin and Chinese scripts.

III.               What are the opportunities for brand owners to take advantage of the introduction of new gTLDs?

As much as the vast majority of those brand owners that have participated in the public debate about the new gTLDs program have been highlighting the lack of need and the risk of an increase in cybersquatting, online fraud and therefore potentially a need for additional costs for brand owners, brand owners may also benefit from the introduction of the new gTLDs. The new open TLDs in Chinese script may enable brand owners to register attractive domain names targeting the Chinese market. Names that are otherwise registered to someone else under the current 22 gTLDs and 280 ccTLDs will become available under the new gTLDs. This even includes trademarks, where multiple trademark owners (having TMs in different classes, regions) may have wished for the same “.com” domain name. So, obviously there are interesting promotional opportunities for brand owners looking for an attractive campaign domain name or for brand owners who wish to express their local presence and promote regionally and culturally tailored content under the new Geo or community or industry specific open TLDs.

1. Pre-registration opportunities— promotion and protection

(1) Sunrise Registrations

Each new gTLD registry will have to launch their TLD offering a pre-registration phase (“sunrise”) granting trademark and other verified IP right holders an opportunity to register their names prior to the general launch. (Typically for a premium fee) In order to qualify for a sunrise registration, the trademark owner has to register their trademark in the “Trademark Clearing House,” which is a new service for TLD operators and trademark owners. By filing your trademark (the fee is expect to 150 USD plus a smaller yearly retainer fee) in the Trademark Clearing House once, the trademark owner qualifies for sunrise registration in all new open and geographical TLDs and will not have to deliver evidence of IP rights to each individual new gTLD registry.

Most open new gTLD registries also plan to auction off “premium” names, which will provide an opportunity for brand owners to buy attractive generic domain names prior to the general launch.

To those brand owners who wi l l know how to gain leverage on these new opportunities, the new gTLDs may be a chance to gain promotional advantages in a crowded online market place. For example, an industry specific TLDs, such as “.bank” could use restricted eligibility requirements and enhanced security measurements to create a TLD that consumers consider more trustworthy than a “.com” domain.

It will require skill, “deep pockets,” and some luck to predict which names and gTLDs will attract consumers. How the big search engines like Google, Baidu, Yahoo, and Bing will index websites using the new gTLDs is unclear. The search engines themselves are applicants for one or more gTLDs. Whether this will have any impact on how they score new gTLDs in their search algorithms remains to be seen.

It is impossible to create an exact budget for the registration of domain names under the new gTLDs because ICANN will not publish the financial portions of the new gTLD applications. It is possible that the sunrise registrations will be charged with a fee of approximately USD 250 and that most TLDs will be offered at a price of around USD 20-40 per year once they are launched.

(2) Trademark Claims Service

If one does not want to register its brands across all the new gTLDs (which only very few brands will eventually do), filing your trademark in the Trademark Clearing House gives you another advantage, which is the new “Trademark Claims Service.” During the first 60 days of the general launch of each new gTLD, registrants who apply for the registration of a domain name which is identical to a mark that is already registered in the Trademark Clearing House will be notified of potential infringements. This notification will not prevent the registrant from registering for the name, but it will at least inform the registrant who would otherwise maybe not have the resources and knowledge to perform a trademark search to do this independently. If the registrant decides to complete the domain name registration, the trademark claims service will then generate an email notification to the trademark owner informing them of the registration of an identical trademark. The trademark owner can then decide whether to take legal action against the registrant.

2. Right protection mechanisms; URS and UDRP and PDDRP

ICANN is planning to introduce a mandatory Uniform Rapid Suspension System (URS) as a faster and less expensive alter native to the Unifor m Dispute Resolution Policy (UDRP) currently in place for gTLDs and a number of ccTLDs.

China is offering an arbitration service for .cn domain disputes through either www.cietac.org or www.hkiac.org. The intent is to eliminate “clear cut” cases of cybersquatting in the new gTLDs via a fast online process which should take a few weeks. Trademark owners that have filed their trademark in the central trademark clearing house will be able to refer to their clearing house file number and will not need to submit trademark certificate evidence to the arbitration center. The definition of abuse and infringement will be the same as that used by the UDRP (identical or visually similar name, no legal rights, bad faith, violating the rights of the complainant). The remedy would be a “freeze” of the domain name until expiry date rather than a transfer of the domain name to the complainant.

The URS is, however, facing a number of obstacles. Firstly, the fee for a URS case was intended to be as low as USD 300 (which is about one fourth of the current fees for a UDRP). Unfortunately, ICANN has not been able to find a service provider that can offer this service at such a low price. Secondly there is a risk that brand owners do not dare to use this option because if they lose their own TLD in case they lose three URS cases. So it remains a challenge for ICANN to find a fast solution to the URS obstacles.

Another new right protection mechanism is the Post Delegation Dispute Resolution Policy (PDDRP), which is a new (court alternative) instrument for trademark owners to file an objection against the registry operator directly, rather than going after each infringing registrant itself. The complainant would have to provide evidence that the registry operator in a systematic way has encouraged to, or itself directly supported violation of third party rights. After a series of warnings eventually the penalty would be that ICANN could terminate the gTLD agreement with the registry operator and transfer the operation of the new gTLD to another operator.

IV.               How can one object against a new gTLD application before the new gTLD is launched?

1.       Public comments:

Until September 26th, 2012 (this period may or may not be extended)

Anyone can file a public comment related to any of the new gTLD applications.

A public comment in itself does not have any impact on the outcome of the evaluation of an application. ICANN has hired a number of industry experts, such as Ernst and Young and KPMG to validate the technical and financial capabilities of the applicants. However, it is an easy way to influence the evaluators and potentially enter into a dialogue with the applicant or other parties concerned about a certain new gTLDs.

2.       Limited public interest objection:

Until January 13th, 2013 (this period may or may not be extended)

Anyone—however, subject to a “quick look” —may file a “Limited Public Interest Objection.” The International Chamber of Commerce will handle these objections.

The objector has to demonstrate that the applied-for gTLD is contrary to generally accepted legal norms of morality and public order that are recognized under principles of international law. This instrument is designed for early conclusion of frivolous and/or abusive new gTLDs.

3.       Community objection

Until January 13th, 2013 (this period may or may not be extended)

Only established institutions associated with a clearly delineated community can object at the International Chamber of Commerce against a community based gTLD application. The complainant has to provide evidence that there is substantial opposition to the gTLD application from a significant portion of the community to which the gTLD string may be explicitly or implicitly targeted.

4.       String confusion objection

Only existing gTLD operators or new gTLD applicants can file a string confusion objection at International Centre for Dispute Resolution if they believe that a TLD application is confusingly similar to their own TLD or a TLD they have applied for.

5.       Legal rights objection

Until January 13th, 2013 (this period may or may not be extended)

Any trademark or other rights holder can file a Legal Rights Objection. The objector has to provide evidence that the use of the applied-for gTLD string is likely to violate the legal rights of the objector.

An independent panel appointed by WIPO will determine the case. The fees for a legal rights objection are 10,000—23,000 USD depending on the number of required panelists.

6.       Contact your governmental representative at ICANN

Until January 13th, 2013 (this period will most likely be extended to at least April 2013)

A trademark owner may also seek to contact their local government representative at the Governmental Advisory Committee (GAC) at ICANN. An individual member state representative of the GAC may file an “Early Warning” against a specific TLD. An Early warning has no impact on the application other than it “warns” the applicant that the GAC representative will seek to recommend the GAC reach a consensus to formulate a “GAC Advice” to the Board of ICANN that they should not approve a given TLD application. If the GAC reaches a consensus this will de facto lead to a veto against a TLD application, which the ICANN Board must accept.

 

If you want to apply for your own “.brand” or “.industry” or “.product” TLD, you will have to be very patient. Although ICANN had originally planned to launch a new application period every 12 months, the next application period is not likely to open within the next 3-5 years. The GAC has required a thorough analysis of the effects of this round of new gTLDs in order to assess to what degree the new gTLDs have in fact increased consumer choice, fostered innovation and supported geographical diversity, before a new application round will be accepted. And this exercise is likely to take years.

V.                 What should brand owners then do at this point in time?

Current brand owners should invest time analyzing any new gTLD applications that potentially threaten their interests and identify those TLDs that could offer you promotional opportunities.

In case a potentially harmful TLD is identified, it is recommended that you should explore if your industry organization and your government representative will assist you in entering a dialogue with the applicant or potentially in supporting you in filing an objection.

VI.               How should you prepare for the new gTLDs once they go live?

The take away message is to start analyzing how the new gTLDs will affect your business. With thousands of new domain extensions currently online, brand and domain name strategies will be challenged. Old strategies based on defensive registrations across all gTLDs will simply not be possible next year. It is therefore very likely a better option to promote your brand names and trademarks in a limited number of TLDs and instead invest in a monitoring tool (prices are typically 500-2000 USD per brand per year) covering all existing new top level domains.

So, like it or not, the thousands of new “.公 司, ” “.移动, ” and “.商店” as well as the new .car, .bank, and .beer TLDs will create new opportunities but also new challenges to brand owners operating in China.

 

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