Beware of Internet squatters and domainers

December 7, 2009
| By Pete Daly |
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Brand owners beware: Domain names in non-Latin script are coming to the Internet, which means cybersquatters and domainers will probably rush to register domain names that your company may need for doing business in China, Korean, Japan, India, Pakistan and Middle Eastern countries.

According to the intellectual property department at the Barnes & Thornburg law firm, the Internet Corporation for Assigned Names and Numbers in mid-November started accepting requests from representatives of countries and territories around the world for new Internet extensions that represent their country name and are made up of non-Latin characters.

Up to now, domain names have been limited to the characters of the Latin alphabet — the 26 letters "A to Z" — numbers 0 to 9, and hyphens.

Rod Beckstrom, CEO of the ICANN, said more than half the users of the Internet do not use a Latin-based script as their native language, but have been forced to learn how to type Web names in Latin characters. The addition of non-Latin domain names, including the country code top level domains, or CCTLDs, is expected to be very popular with them.

David Wong, an intellectual property expert with Barnes & Thornburg, said the new system will allow countries and territories to operate CCTLDs in their own script, such as Arabic, Chinese or Hindi. Once the requests for internationalized domain names, or IDNs, are evaluated and approved, Internet extensions are expected to come online in many countries during 2010. Already, the Chinese government's China Internet Network Information Center has indicated that it will apply for the top-level Chinese domain name “.zhongguo” written in Pinyin, which translates to “.china.” Similarly, Egypt has said it will open the world's first Arabic language Internet domain, “.misr” written in the Arabic alphabet, which translates to “.egypt.”

Wong said the new flood of top level domain names will likely be of great concern to brand owners doing business in countries with languages that do not use the Latin alphabet. While the future popularity of the new IDNs is uncertain, the names will provide yet another opportunity for cyber squatters to seek profit by holding domain names ransom to brand owners or simply providing competing products and services.

Many major brand owners also own a large number of domain names, up to 90 percent of which are simply defensive in nature — obtained just to prevent others from trading on the strong reputation of their brands.

Wong said it is unknown whether or not trademark owners will be given any preferential treatment or first registration rights to any of the IDNs. The decision will be determined by each country or territory, since the registration policies will be established and governed by each respective country or territory.

“The new IDNs are fertile ground for cyber squatters," said Wong. "Brand owners that have, or intend to have, an international presence should consider proactively registering new relevant IDNs before a cyber squatter or domainer" beats them to it.

Wong told the Business Journal in late November that he had just been contacted by a successful two-year-old company that has one of the most-visited sites on the Internet. The company began checking to see if there were foreign country domain names still available that correspond to their brand, "and they are finding these are already taken by what I think are clearly cyber squatters or domainers," he said.

Wong said the cyber squatter is usually an individual who registered a domain name and now holds on to it without really using it, hoping to sell it to the rightful owner someday.

Domainers are much more of a threat. "They register thousands of domains," he said, typically using a computer program to find unregistered domain names that might resemble a recognized brand. Then they set up "pay-per-click" Web sites that contain lists of links to other sites, often competitors. Those competitors are paying advertising fees to Google and other search engines, and pay a fee based on the number of times someone clinks on their link. A domainer who gets people to his site gets a share of that advertising fee from the search engine company, if one of the listed links is clicked on.

Misspell "meijer" in www.meijer.com in various ways and eventually — perhaps immediately — a domainer site will open, enticing you with all those links to other Web sites.

"There are domainers out there that literally hold thousands and thousands of domain names," said Wong.

"The problem is, it can be very difficult to deal with these squatters or domainers after the fact," said Wong. "There's not a whole lot that we can do to pull that from them, other than to approach them and maybe buy it." And that, he said, "could cost you six figures, easily."

As long as the squatter or domainer is not offering competing products or services, it probably would not be judged an infringement on a trademark in a court battle, he said.

Even then, some domainers are located in offshore countries where getting at them legally is more difficult and expensive, he added.

Wong said he advised clients to be proactive and try to register domain names they might be interested in owning in the future, if they have the money available to do so.

"It's very inexpensive to grab them on the front end," spending $10 to $30 a year to maintain the domain name "and sit on it," said Wong.

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