Last updated: June 21, 2011 2:31 am

Internet suffix scramble looms for companies

Businesses are facing a dilemma over how to protect their trademarks after the body governing internet names voted on Monday to allow the creation of thousands of web suffixes to run alongside .com and .net.

For a starting price of about $500,000, the Internet Corporation for Assigned Names and Numbers will allow companies and community groups to create customised domain names – such as .canon for the camera maker or .london for the English capital. So-called “generic” domains, putting common words after the “dot” in addresses, will extend the system further.

The actual cost for popular domain names contested by several parties, however, is likely to multiply, with lawyers predicting that the new addresses will trigger big legal battles.

Companies are also concerned the move will spur increased “cybersquatting”, where trademark names are snapped up by internet opportunists. Few are convinced by claims that the new system will create valuable ways for companies to brand themselves online.

“This is a classic example of a solution without a problem,” Ken Hittel, vice-president of the corporate internet department at New York Life Insurance Company, said. “This is essentially a protection racket run by Icann on behalf of its true constituents, the registrars and registries”, who will profit from the expansion of the internet addressing system he said.

“It is going to make it much more difficult for companies that are already having challenges defending their trademarks online,” said Chris Cylke, director of congressional and public affairs at the US Chamber of Commerce.

There are just 22 generic top-level domain names that are tightly controlled by a handful of companies – the best known of which is .com. There are also 255 country domains, such as .uk and .de. But now any group with a creditable business plan and enough money can create its own top-level domain.

It is the biggest shake-up of the internet naming system since .com was created 26 years ago. It is argued that the change will give companies more flexibility on how to build their brands online and could allow communities to create an internet hub. Goodwill Zwelithini, the King of Zululand, for example, is interested in acquiring .zulu for his people.

“For those companies that have been locked out of a good .com name, it could be a good option for their online branding,” said Stuart Durham, European sales director at Melbourne IT DBS, a digital branding company that is advising about 150 companies on the new domain name system.

Apple, for example, does not own iPad.com, and it could cost thousands of dollars to acquire the name. A recent survey showed that companies were willing to pay upwards of $5,000 to acquire good .com names.

Under the new domain name system, Apple could create .apple, and then use it for all its branded products such as ipad.apple, iphone.apple and mac.apple.

Opponents, however, argue that consumers are likely to be confused by the new system while companies will find it much harder to keep control of their brand names online.

An earlier, limited extension of the addressing system to introduce domains such as .travel and .tv has produced few benefits, said Michael Menis, head of web and interactive advertising at InterContinental Hotels.

Icann expects between 500 and 1,000 groups to apply for customised domain names when the process opens in January. A number of companies, including Hitachi and Canon, have already said they are interested in a domain, and Melbourne IT DBS says it expects about a third of the companies it has advised to apply.

Icann will charge $185,000 simply to apply for a top-level domain. Running the computer systems for a new domain could cost between $25,000 and $75,000 a year and Icann will charge domain owners $25,000 a year.

“It is easily $500,000 just to get started,” said Antony Van Couvering, chief operating officer of Top Level Domain Holdings, which plans to bid for several new domains.

Costs could rise much higher for those groups that want a popular name. If both the UK telecoms brand and the California county wanted .orange, for example, ownership would go to highest bidder at auction.

“The sky is the limit on what companies could pay. We are going to see some high drama here,” said Mr Van Couvering.

Mei-Lan Stark, chief intellectual property lawyer for News Corp’s Fox Entertainment Group, estimated in congressional testimony last month that the changes could cost Fox $12m. To protect its brands, Fox would be forced to register 300-400 different names in each of the 400 new generic top-level domains that could be created, she said.

However, staying out of the domain race could be even more costly, said Chris McLeod, trademark lawyer at Squire Sanders Hammonds. If companies do not apply for a domain, their trademarks could fall into the hands of cybersquatters, who might use the name for their own means.

Icann has procedures to allow companies to recover trademarks but it can be a long and costly process.

“Court proceedings ... can rack up to easily three of four times that $500,000 cost of applying for a top-level domain,” said Mr McLeod. “Whether they jump in or not, trademark owners are going to get a financial and administrative headache.”

Internet domains

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