www. brand: ICANN Approves Dramatic Expansion of Domain Name Space

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1 August 29, 2011 If you have any questions regarding the matters discussed in this memorandum, please contact the following attorneys or call your regular Skadden contact. Bruce Goldner New York Stuart D. Levi New York James S. Talbot New York * * * This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws. www. brand: ICANN Approves Dramatic Expansion of Domain Name Space Key Considerations and Next Steps for Applicants and Brand Owners On June 20, 2011, the Internet Corporation for Assigned Names and Numbers (ICANN), the organization responsible for coordinating the global domain name system, approved a plan to dramatically increase the number of available top-level domains (TLDs). This change could dramatically change the way companies brand themselves on the Internet by allowing companies to use their brand name as the top-level domain instead of the ubiquitous dot-com. The new plan therefore presents unique opportunities and a new set of challenges for companies exploiting and protecting their marks in the online environment. Background Generic top-level domains (gtlds) are the common-place strings at the end of domain names (such as.com,.net,.info and.tel) and, because they are embedded in the very architecture of the domain name system, they are subject to close control by ICANN. In fact, ICANN has allowed companies to propose new gtlds only once before, in That process gave rise to the gtlds.info,.biz,.name and.pro, as well as a handful of limited-purpose sponsored top level domains (stlds) such as.aero,.coop and.museum. In 2003, ICANN opened a second round of applications that was limited to proposals for new stlds, the result of which was six new stlds, including.tel,.mobi and.jobs. In both of those rounds, ICANN rejected many more applications than it accepted (indeed, in 2000, ICANN received over 40 applications and approved only seven TLDs). 1 ICANN has not approved any new gtlds since that 2000 round and has not approved any new stlds since However, in June ICANN announced that it will authorize up to 1000 new gtlds. Many expect that several hundred of these new gtlds will be secured by brandowners seeking to establish brand identity in what is expected to be a rapidly expanding domain name space. Owning a brand-specific gtld could provide a number of key benefits, such as new options for security and authentication (e.g., by limiting certain types of transactions to those coming from a specific gtld), and could help control counterfeiting (e.g., by limiting online sales to sites that are listed under a branded gtld). New gtlds also could pave the way for new and innovative uses of the Internet. For brand owners, however, a flood of new gtlds will present new challenges for protecting their brands online. These owners will have to decide whether or not to register their own marks as gtlds and will have to monitor the application process to make sure other entities do not attempt to register their marks as well as the hundreds of new gtlds that are approved to prevent misuse of their marks. Four Times Square, New York, NY Telephone: Skadden represented successful applicants in both rounds: Afilias in its bid for.info in 2000 and Telnic in its bid for.tel in 2004.

2 2 Community-Based TLDs As part of the new application round, ICANN also will be permitting so-called community-based gtlds that would be limited for use by a clearly delineated community (e.g., a TLD dedicated to a specific language or culture that is not otherwise represented in the domain name space). Community-based gtlds will be able to establish their own domain name registration and use policies, rather than be bound by ICANN s generally applicable policies. However, such policies must be tailored in ways that provide benefits for the community. Community-based gtlds also would enjoy preferential treatment during the application stage over another applicant for the same string that does not represent a community. To apply for community-based gtlds, applicants must submit a written endorsement from a body representing the corresponding community. This endorsement must be specific to the applicant and the applied-for gtld string, so those considering applying for community-based gtlds should closely align themselves with key organizations. The ICANN Applicant Guidebook suggests that these bodies should be recognized as speaking for their communities and that organizations that have been formed only recently and/or only to bolster the credibility of a particular applicant will not be deemed credible. Information for Applicants ICANN has published a series of Applicant Guidebooks, the latest version of which was posted in late May 2011 (Guidebook). 2 Generally speaking, any legally established corporation, organization or institution can pay ICANN a $185,000 application evaluation fee and apply for any string of three or more characters. 3 Unlike prior rounds, it widely is believed that ICANN will approve any application that: (1) satisfies its detailed technical, operational and financial criteria (described below), (2) does not violate any of the restrictions set by ICANN (also described below) and (3) is not rejected through any of the myriad objection procedures described in the Guidebook. Those that wish to apply for a gtld during this process need to be aware of the ICANN process, the nuances of ICANN s many requirements and the various ways in which their applications may be challenged. Application Requirements As outlined in the Guidebook, applicants will be required to demonstrate that they have the financial and technical resources to launch and operate a top-level domain. Specifically, the applicant will need to provide detailed information on topics including: Financial statements, revenue and cost projections, and information on available funding. Operational details, including what measures the applicant will take to protect geographic names from being registered as domain names and what measures will be in place to protect trademark owners. Technical details such as system architecture, system response times, backup policies and fault escalation processes. 2 In its June 20 decision, the ICANN Board largely endorsed the May 2011 version of the Guidebook, but directed the ICANN staff to make certain changes after further discussions with certain interested parties. 3 This round of applications also will allow, for the first time, applications for gtlds that use certain non-ascii characters such as Cyrillic or Chinese. Under certain circumstances, these internationalized TLDs will have two-character ASCII equivalents that will be subject to a review similar to the one that will apply to applications for traditional ASCII-character gtlds.

3 3 Given the number of items and level of detail required, applicants will likely need to engage accountants and technical service providers for support. A primary source of technical expertise will be existing TLD operators, many of which are actively marketing their services to potential gtld applicants. String Restrictions ICANN has imposed a limited number of restrictions on the types of strings it will approve for new gtlds. These restrictions include: No string can be similar to an existing TLD (including two-letter country code TLDs such as.uk,.ly or.me). 4 The string cannot be one of the strings listed on a special reserve list that will be published by ICANN (this list will include strings such as.local and.www). The string cannot be a country or territory name or certain permutations of country or territory names (e.g.,.islandscanary). The string cannot be a capital city name, sub-national place name (e.g.,.california) or certain types of regional name (e.g.,.africa and.melanesia) without documentation of support or non-objection from relevant governmental or public authorities (unless the gtld will be primarily used for services unrelated to the city or region in question). The string cannot be one of a set of strings related to the Red Cross or the International Olympic Committee. Multiple Applications for the Same String ICANN expects that there will be cases where more than one application is filed for the same string. Regardless of the merits of each application, ICANN can only approve one application for a string, so it has proposed the following string contention resolution procedures to determine which application should prevail: The applicants could agree amongst themselves which application should proceed. Community-based applications will receive certain priority over other applications, which may lead to a resolution. If neither of the above resolves the issue, ICANN will auction the string among the contending applicants. Objections to Applications New gtld applications are subject to review by ICANN and will be published for review by the public. The Guidebook lays out a variety of potential objections that could be filed against any applicant. Valid grounds for objections include: Any existing gtld holder or other applicant may claim that the applied-for string too closely resembles another applied-for or existing TLD. 4 ICANN has developed an elaborate process for identifying similarity, including a specially developed algorithmic scoring system, but the general question is whether the proposed gtld is so similar to another gtld as to have the potential to create user confusion.

4 4 A registered or unregistered trademark holder may claim that the applied-for string would infringe its mark. Anyone may claim that an applied-for string is contrary to general principles of international law for morality and public order that would promote violent lawless action, discrimination, child pornography or sexual abuse of children, or would be contrary to specific principles of international law (as reflected in relevant international instruments of law). Institutions that are clearly affiliated with a particular community may object to any application (not just those for community-based gtlds) on the grounds that the application would be a material detriment to the rights or interests of a significant portion of the community to which the applied-for string may be explicitly or implicitly targeted. ICANN s Governmental Advisory Committee (GAC), a committee composed of representatives of various governmental organizations, may file an objection on the grounds that its members find the string problematic (e.g., due to political sensitivities). The Guidebook lays out specific dispute resolution procedures for each of these types of objections, each of which will be conducted by neutral outside bodies following specific rules and criteria for determining the correct resolution. Strategies for Trademark Owners The application process for new gtlds, as well as the procedures that each new gtld will implement to protect trademark rights, create the potential for abuse if trademark owners are not aware of the risks and proactive in protecting their marks. During the Application Process As noted above, once the gtld applications become public, trademark owners will have an opportunity to object to specific applications on the grounds that the applied-for strings are confusingly similar to their own marks. Trademark owners should therefore closely monitor the gtld application process and be prepared to file such objections. A trademark owner may also object to applications that are confusingly similar to unregistered marks. As a practical matter, however, challenges related to registered trademarks are more likely to be successful than challenges related to unregistered trademarks, as it will be more difficult to demonstrate rights in unregistered marks, and ICANN and the dispute resolution providers may be unwilling to reject applications based on objections relating to these marks. In determining whether an application should be rejected on the grounds of claimed trademark infringement, the dispute resolution provider is directed to take into account a number of factors, including: Whether the applied-for string is identical or similar (including in appearance, sound or meaning) to the objector s mark; Whether the applicant also has rights in the applied-for string and, if so, whether its acquisition and use of those rights has been bona fide; Whether the objector s acquisition and use of rights in the mark has been bona fide; Whether there is public recognition of the string as the mark of the objector, the applicant or a third party; and

5 5 The applicant s intent in applying for the string, including whether the applicant knew of the objector s mark or has a pattern of activity in applying for TLDs or domain names that infringe others marks. If, after review of all of the relevant factors, the dispute resolution provider rules in favor of the objector, the application will be rejected. gtld Launch Protections Once ICANN has approved a set of new gtlds, trademark owners should be aware of the different launch schedules, trademark protection mechanisms and rules for each gtld, so that they are prepared to take the steps that are necessary and appropriate to protect their marks during the launch of each gtld. Each operator will undoubtedly have different methods for allowing trademark holders to protect their rights, some of which will resemble methods used in the past, and some of which will likely be new. At a minimum, ICANN has mandated that all gtld applicants implement the following trademark protection mechanisms when they launch their gtlds: A Sunrise policy, under which trademark owners (including owners of unregistered trademarks under certain circumstances) may register their marks as domain names before the gtld is opened to the public. A Trademark Claims Service, which will provide notice to domain name registrants of rights in particular words, phrases or other marks claimed by trademark holders, and notice to trademark holders of domain name registrations that may infringe those rights. ICANN will also establish a trademark clearinghouse that will, among other functions, act as a central repository for trademark information for use in validating Sunrise registrations and providing information for the Trademark Claims Service. ICANN will publish more information over time on the requirements for the Trademark Clearinghouse, including any fees to register marks in the database. However, ICANN has indicated that the following types of marks will be eligible for the clearinghouse: Nationally or regionally registered word marks; Word marks that have been validated through a judicial proceeding; Word marks that are protected by statute or treaty; and Other marks that constitute intellectual property. With respect to the fourth category, ICANN has not provided much information as to what kinds of marks might qualify but has indicated that it would be for the applicable gtld registry operator and the clearinghouse to determine based on the services the gtld operator chooses to provide. ICANN has specifically indicated that the intellectual property protections will not apply to trademarks that are only the subject of a pending application, that are in an opposition period, or for which the registration was cancelled or invalidated, unless the mark meets one of the other criteria mentioned above. So, for example, a trademark that is subject only to an intent to use application would seem unlikely to qualify for the Trademark Clearinghouse, as it has presumably not been validated through a judicial proceeding and is likely not protected by statute or treaty. In addition to the Sunrise period and the Trademark Claims Service, gtld applicants will be free to develop their own trademark protection mechanisms, so trademark owners should closely monitor

6 6 the various proposals. Since each gtld will likely have different launch dates, eligibility requirements and challenge periods, trademark owners will need to work diligently to protect their brands across the various new gtlds. Dispute Resolution Mechanisms ICANN has required gtld applicants to implement three separate dispute resolution procedures for protecting trademark rights: Uniform Domain Name Dispute Resolution Policy: All new gtld operators will have to implement the Uniform Domain Name Dispute Resolution Policy (UDRP), ICANN s current policy for resolving certain types of trademark disputes related to domain names. Uniform Rapid Suspension: New gtld operators will also have to implement a new Uniform Rapid Suspension (URS) procedure, which is similar to the UDRP but provides faster and less expensive resolution of clear-cut cases of infringement and bad-faith registration. Trademark Post-Delegation Dispute Resolution Policy: Finally, trademark holders may file complaints against the gtld operator itself using the new Trademark Post- Delegation Dispute Resolution Policy (Trademark PDDRP) on the grounds that the registry s manner of operation or use of the gtld infringes one or more of the complainant s marks. Trademark PDDRP complaints may also be filed where a new gtld registry essentially operates the gtld for infringing purposes (i.e., displays a substantial pattern or practice of specific bad-faith intent to profit from selling infringing second-level domains, including domains that are identical or confusingly similar to the complainant s mark(s)). The Trademark PDDRP is unique in that it allows trademark owners to pursue claims against the gtld operator, a first for ICANN. Remedies available under this policy include what would amount to an injunction against the gtld operator (such as compelling it to take additional trademark protection measures) and, in extreme circumstances, termination of the operator s right to operate the gtld itself. Timing ICANN has indicated that it plans to accept applications for new gtlds from January 12 to April 12, Interested parties should bear in mind, however, that ICANN s plans for launching a new gtld application process have been in development for years and have been subject to a number of delays. There have been reports that some parties are threatening to file suit against ICANN seeking to delay the process as additional issues are resolved. ICANN appears determined to move forward, but it may find itself unable to do so on its current timeline. Practice Points Potential Applicants: Although the deadline for filing new gtld applications is many months away, companies and organizations considering filing an application should begin their preparations to do so. The application itself is long and will require a substantial amount of information that will take time to gather. In addition, to the extent that companies and organizations are considering partnering with others to file applications, they should begin working through the terms of these arrangements, including establishing any joint venture or other new corporate structures.

7 7 Potential applicants should also engage technical service providers, accountants, attorneys and other external advisers as soon as possible. Given the limited history of introducing new gtlds, there are relatively few firms with experience in this area, and they are all likely to be inundated with requests very soon. Trademark Owners: As noted above, whether or not trademark owners seek to file a gtld application for their own marks, they should closely monitor the application process to see whether other applications were filed for any strings that potentially infringe their marks and keep abreast of the various trademark protection mechanisms being proposed by new applicants. Given that there will be a tremendous amount of information to process, trademark owners should consider whether to engage external support to help coordinate and manage the information flow. New Registrations: Once the new gtlds are introduced, brand owners will have to carefully consider their strategies for protecting their brands. Not only will they need to assess in which new gtlds they want to register domain names, but they also will need to review the unique registration requirements that apply to each of those gtlds. It would be cost-prohibitive to seek domain names in every gtld, so brand managers will need to carefully weigh the advantages and disadvantages of each. For More Information If you have any questions or require any assistance in connection with the TLD process whether as a potential applicant or a brand owner seeking to protect its interests please contact any of the authors or your regular Skadden contact.