Top Level Domain Expansion Update: Brand Owners Air Concerns in Washington

December 13, 2011

Beginning next month, interested parties can apply to register their own brand names or truly generic words such as "bank" as top-level domains ("TLDs" -- the letters to the right of the dot in an internet address). However, many brand owners, consumer advocates, and law enforcement officials criticize this expansion of TLDs as being costly, confusing and rife with new opportunities for cybersquatting, counterfeiting and other types of internet-based crime. A hearing held by the Senate Committee on Commerce, Science, and Transportation on December 8 provided a forum for the Internet Corporation for Assigned Names and Numbers (ICANN) to hear and respond to these worries.

Kurt Pritz, Senior Vice President of Stakeholder Relations for ICANN, spoke on ICANN's behalf and responded to issues raised by other witnesses who appeared at the hearing. One such witness, Angela Williams of the Young Men's Christian Association, spoke on behalf of nonprofit organizations. According to Ms. Williams, nonprofits share deep concern over the prospect of having to pay upwards of a quarter of a million dollars to register and maintain their names simply to prevent them from falling into the hands of third parties. Alternatively, nonprofits are faced with expensive enforcement actions to defend against top level domain cybersquatters.

Nonprofits are not the only entities concerned about the impact of the introduction of the new TLDs. Dan Jaffee, Executive Vice President of Government Relations for the Association of National Advertisers, voiced strong criticism of ICANN, characterizing the program as "fundamentally flawed." Mr. Jaffee also drew the senators' attention to comments of the new TLDs voiced by Federal Trade Commission's Chairman, Jon Leibowitz, who had the day before described the TLD expansion as potentially very harmful and entailing "enormous cost to consumers and businesses and not a lot of benefit." Esther Dyson, the founding Chair of ICANN spoke next, commenting that she previously had defended ICANN against charges of levying taxes on Internet use, but that she has changed her view and opposes the TLD expansion. Her main points were that the new TLDs are unnecessary, will confuse the public, will be very costly for brand owners, and in the final analysis will produce no value to the economy.

When senators asked how many applicants ICANN expects for the new TLDs, Mr. Pritz said ICANN's current estimate is between 500 and 1,000, hedging that this number is still just a guess. He had no definitive answer to senators' questions about why ICANN needed to move forward with the introduction in January given the growing opposition and many questions raised about the expansion. Senators were particularly critical of what they viewed as ICANN's inadequate response to the recommendations of law enforcement officials concerning internet security. Mr. Pritz explained that ICANN had worked with representatives from stakeholder groups - expert IP lawyers, businesses, non-commercial interests, internet service providers, and nonprofits - for nineteen months to develop the program. Mr. Pritz further testified that ICANN believes that it succeeded in arriving at a consensus in support of the TLD expansion. With respect to the nonprofits' point about the high cost of applying, Mr. Pritz revealed that ICANN recently decided to make it possible for "select applicants" to pay only $47,000 rather than the standard $186,000 filing fee to apply. He did not elaborate on the eligibility requirements for the lower fee.

Nearly one hundred associations and more than fifty large companies from around the world have joined forces in a Coalition for Responsible Domain Oversight (CRIDO) to oppose the expansion of TLDs. On November 10, 2011, CRIDO sent a petition to the Secretary of Commerce urging the National Telecommunications and Information Administration to persuade ICANN to postpone the opening of the TLD application window. CRIDO wants ICANN to delay the TLD expansion until its procedures adequately address the fundamental issues of consumer trust and Internet security. Moreover, CRIDO wants ICANN to identify the economic benefits across "diverse economic sectors and stakeholders" and demonstrate that they exceed the cost of expansion to be borne by the world's Internet community. While the Senate hearings signal that Washington hears the voices of those against the plan, Congress lacks direct oversight of ICANN's actions, and ICANN has not committed to delay its announced January 12, 2011 launch date for the TLD application process.

Marshall, Gerstein & Borun will provide an update following the House of Representatives TLD expansion hearing scheduled for this month.

This alert is intended to be informative and should not be interpreted as legal counsel for any specific fact situation. The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel. Readers should not act upon the information presented without consulting professional legal counsel. Pursuant to applicable rules of professional conduct, this communication may constitute Attorney Advertising. © 2011 MARSHALL, GERSTEIN & BORUN LLP, Chicago, Illinois. All rights reserved.