The advantage to businesses in registering a custom gTLD

Over the 13 years since its creation in 1998, the Internet Corporation for Assigned Names and Numbers (“ICANN”), the multi-stakeholder organisation responsible for the internet naming system, has gradually increased the number of domain suffixes, or “generic top-level domains” (“gTLDs”), from 7 to its current level of 22.

Most internet users will be familiar with the more popular domains: ‘.com’, ‘.net’, ‘.biz’ and so on. Although there are also more than 250 country specific domains, such as ‘.uk’ and ‘.fr’, the internet naming system has always been heavily prescribed.

2012 is set to see dramatic change. On 20 June 2011, ICANN voted to allow the creation of potentially limitless variations of domain suffixes. From January next year, businesses and organisations will be able to apply for gTLDs containing almost any word in any script or language, enabling the likes of ‘.google’, ‘.tesco’ or ‘.bank’. But will the change result in the proliferation of custom gTLDs?

The advantage to businesses in registering a custom gTLD will be to establish a broad, uniform and unique internet presence. For businesses with a wide range of products, it will enable a much more straightforward means of dividing their portfolio of products and services.

Custom gTLDs will also allow businesses and organisations to combat impersonators and create more secure online environments. For example, were HSBC to register .hsbc, consumers could easily identify genuine emails originating from the .hsbc domain.

Consumers would also be more readily able to determine that a website is genuine: ‘iphone.co.uk’, for example, is not currently registered to Apple, whereas ‘iphone.apple’ would be clearly identifiable as a genuine site. Custom gTLD owners will be responsible for administering their own domains, providing a further level of control.

Such benefits come at a cost. The application fee is US $185,000 (£112,000) and applicants must satisfy stringent technical tests to satisfy ICANN that they have the expertise to run the domain. Ongoing upkeep costs, both in terms of hardware and personnel, will be significant.

Further, applicants must demonstrate a legitimate claim to the gTLD sought and only companies and corporations of “good standing” may apply. If the gTLD sought is trademarked, the applicant will need to demonstrate either ownership or a legitimate claim to the use of the trademark (for example, under licence).

Companies listed on any of the 25 largest exchanges globally will benefit from a presumption of good standing, whilst others will be subject to a vetting procedure. Individuals and sole traders are ineligible to apply, as are “future entities”, including companies to be incorporated under a joint venture.

Together, the prohibitive cost and stringent technical requirements ought to deter any would-be ‘cyber-squatters’, though it is a real possibility that otherwise interested businesses might also be discouraged from applying.

The first round of applications runs from 12 January to 12 April 2012 and requires applicants to complete a 300+ page form, so potential applicants will need to start planning now. The form includes detailed questions covering the claim to the gTLD sought, technical capabilities and financial due diligence.

ICANN estimate that a straightforward application will take approximately 9 months to complete and the first new gTLDs will appear from November 2012. However, all applications will be subject to a publication stage during which any formal objections will trigger a dispute resolution process.

The most common grounds of objection are likely to be based on “string objection”, whereby the custom gTLD sought is considered too similar to a pre-existing gTLD (or one applied for in the same round of applications), and on claims under existing legal rights, whereby the custom gTLD is said to infringe the intellectual property of the objector. If the objector prevails, the application will not proceed further.

There is also the possibility of competing applications (for example, rival legal firms might each apply to register the domain ‘.law’). One method of resolving competing applications will be to hold an auction.

Inevitably, formal objections or rival applications will prolong the application process. ICANN estimate that the most complex applications could take anything up to 20 months to complete. ICANN comment that “in a world with over 1.6 billion internet users … diversity, choice and competition are essential to the continued success and reach of the global network”.

Whether ICANN’s dramatic change to the previously restrictive and limited approach to gTLDs will lead to the proliferation of custom domains remains to be seen. The cost and commitment required from business is significant. However, the benefits both in terms of increased security and clear, unique branding possibilities are clear.

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Alex Hall is a dispute resolution solicitor at Mundays, advising on a broad range of commercial and contractual issues, including in particular intellectual property and technology matters.