June 20, 2011 8:13 pm

Companies braced for domains shake-up

Businesses are braced for a big jump in costs to protect their online trademarks after the body regulating internet domain names paved the way for thousands of new web addresses.

For around $500,000, companies and community groups will be able to create their own, customised internet domain names, such as .apple or .hitachi, rather than using the existing suffixes such as .com and .net.

The actual cost, however, could be a multiple of that amount for popular domain names contested by several parties with lawyers predicting that the new addresses will trigger big legal battles.

Companies are particularly concerned that the expansion of names will lead to increased “cybersquatting”, where trademark names are taken over by internet opportunists.

The decision by the Internet Corporation for Assigned Names and Numbers (Icann), is the biggest shake-up of the internet’s domain name system since the creation of ‘.com’ 26 years ago.

Companies such as Ikea, the Swedish furniture store, and Motorola, the mobile phone company, have expressed concerns about the new name system, saying there would be little benefit but a great deal of increased cost and work for the company.

“We don’t want anyone else to get ‘.ikea’,” said Gabrielle Olsson Skalin, Ikea’s general counsel, at an industry conference in Stockholm this month. “But from a marketing perspective we don’t see benefit – just increased costs and also more work to be done in-house.”

It will cost $185,000 simply to apply for a top-level domain, regardless of success, and companies will need to hire experts to guide them through a complicated application process and to run the top-level domain once it has been awarded. Fees to Icann will be $25,000 a year.

On top of this, companies face legal and consultancy fees along with the cost of running the domain name. This would bring the total cost to about $500,000 if the name is uncontested.

However, the ownership of popular domain names will go to the highest bidder in an auction process, meaning companies could face millions of costs in securing a particular name, said Anthony Van Couvering, chief executive of Top Level Domain Holdings, a company that intends to bid for an run several top level domains.

Alternatively, if companies choose not to take up a domain, they might face higher costs in the future to protect their trademarks from cybersquatters.

“Court proceedings, especially in the US can rack up to easily three of four times that $500,000 cost of applying for a top-level domain,” said Chris McLeod, director of trademarks at Squire Sanders Hammonds, the law firm. “It could be much more expensive and tortuous to litigate a dispute.”

There are already expressions of interest for generic domain names such as .web. At least two groups are looking at bidding for .eco, for example.

The application process will open on January 12, 2012 and Icann is expected to have a list of names applied for by April.

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