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ICANN to crack down on UDRP “cyberflight”

Kevin Murphy, August 2, 2013, Domain Registrars

ICANN has moved closer to cracking down on cybersquatters who try to flip their domains when they discover they’ve been hit with a UDRP complaint.

Under recommendations approved by the GNSO Council yesterday, registrars would be bound by a much stricter set of UDRP-related domain locking rules in future.

So-called “cyberflight” — where squatters transfer their domains to a new registrar or registrants — appears to be a relatively infrequent problem, but when it does happen it causes big headaches for UDRP providers and trademark owners.

A survey of UDRP providers carried out as part of the GNSO’s policy development process discovered that the vast majority of registrars already lock domains hit by UDRP.

The problem is, they said, that locking practices are not uniform. Some registrars take well over a week to lock domains, and what the “lock” entails differs by registrar.

The recommendations of the GNSO’s Final Report on the Locking of a Domain Name Subject to UDRP Proceedings Policy Development Process, adopted by the Council yesterday, seek to standardize the process.

After being told about a complaint against one of its domains, the registrar in future would have a maximum of two business days to put a lock — preventing any changes in registrant or registrar — in place.

The lock would remain until the UDRP was resolved, but there would be various safeguards in place to enable complainants and respondents to settle their differences outside of the UDRP.

The lock would not prevent registrars or proxy/privacy services revealing the true identity of the registrant — that wouldn’t count as a change of registrant.

To prevent registrants abusing the two-day window to sell their domains or switch registrars, they would not be told about the existence of the UDRP until the domain had been locked.

The UDRP rules currently require the complainant to send a copy of their complaint to the domain owner at the same time it is filed with the UDRP provider.

But the GNSO has now recommended getting rid of this rule, stating: “as a best practice, complainants need not inform respondents that a complaint has been filed to avoid cyberflight.”

The registrant would be informed later by the UDRP provider instead.

Registrars would be prohibited from tipping off the registrant until the lock was in place.

The July 2013 recommendations (pdf) came out of a working group that was formed in April 2012, in response to policy ideas floated in 2011.

The GNSO’s resolution calls for ICANN staff to work with members of the working group on an implementation plan, which would eventually be put to the ICANN board for approval.

Once through the board, the new policy would become binding on all ICANN-accredited registrars.

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New gTLD revenue projections revealed in leaked Famous Four presentation

Kevin Murphy, August 1, 2013, Domain Registries

Famous Four Media expects to make an average of almost $30 million revenue in year one from each of the new gTLDs it secures.

That’s according to a PowerPoint presentation (pdf), written for potential investors, that was provided by an anonymous source (I suspect not a fan of the company) to DI this week.

According to the presentation, “potential year 1 revenues for an average Registry” could amount to $28.4 million, the vast majority of which would come from sunrise, landrush and premium domain sales.

The presentation, dated June 2013, was prepared by Domain Venture Partners, the immediate parent of the 60 shell companies that Famous Four is using to apply for its 60 gTLDs.

The company was unable to provide an executive to discuss this story until August 14.

But according to the PowerPoint, the Domain Venture Partners II fund is an investment vehicle set up to “bridge the gap” in Famous Four’s funding requirements:

Domain Venture Partners II shall provide a unique structured regulated investment opportunity to participate in the new gTLD programme to provide secured fixed annual returns along with additional venture type returns at a time in the process where most of the major risks have been removed.

DVP is looking to raise up to $400 million, having raised £48.3 million ($73.2 million) in 2011 via the Domain Venture Partners I fund, it says. The current round opened in March and is expected to close in November.

Famous Four has applied for 60 gTLDs — mostly highly sought-after strings such as .poker, .music, .shop, .search and .buy — 10 of which were initially uncontested.

According to the presentation, landrush period auctions would account for about a third of year-one revenue in each gTLD: $9.7 million. That’s based on selling 45,697 domains for an average price of $213.34.

Revenue from trademark owners is the second-largest chunk. An average sunrise period could raise $6.9 million, assuming 39,679 domains at an average of $173.5 each, according to the PowerPoint.

Sales of regular domains during the first first year of general availability could raise $4.1 million, based on 225,759 registrations at $18.47 apiece, the presentation says.

Here’s the full slide, one of 33 in the deck:

Domain Venture Partners II presentation

The presentation says that the projections are “based on historical data points established by the existing operational gTLD Registries”, adding:

The figures are averages and therefore would represent projections for a standard gTLD Registry. Potential year 1 revenues for specific Registries may be below or above this average.

Some of the numbers strike me as optimistic. While the likes of .asia and .mobi may have seen these registration volumes due to the novelty and scarcity of new gTLD namespaces, my feeling is that those days are over.

The new gTLD program is likely to see scores of overlapping sunrise and landrush periods; it’s difficult to see registries benefiting from the same focus and excitement as their predecessors.

There’s a limited amount of domainer capital to spread around landrush sales and trademark owners are likely to be much more selective about where they defensively register their brands in a world of 1,300 gTLDs.

That said, Famous Four has applied for some of the nicest strings in the round so I may be wrong.

An appendix to the presentation discussing the first DVP funding round says that while Famous Four hopes to sign contracts for 30 new gTLDs, it has only secured 32% of the money it is looking for.

Securing investment appears to have been tough due in part to the complexity of the ICANN process and investors’ lack of familiarity with it, which looks like risk. It also says:

The costs associated with applications in the new gTLD have increased, the financial strength of most applicants has been reduced and the knowledge barrier to entry is too high to interest large standard venture investors.

Famous Four’s business model is based around consolidation and keeping costs down, according to the pitch. For the most part, this is due to the economies of scale of running a large number of TLDs.

With Neustar as its back-end provider, Famous Four says it has found the “lowest fees in the industry”.

But the model also involves keeping tax to a minimum. Famous Four is based in Gibraltar, where it says it will pay no tax on domain sales:

FFM is operating in a fiscal environment that has multiple advantages over others in the industry. Domain names sales are treated as royalty income which is currently zero rated in Gibraltar. This would result in an instant bottom line gain.

There’s a strong suggestion in the presentation that DVPII is not limiting its ambitions to the new gTLDs it has applied for.

It also seems to discuss acquiring other applicants and ccTLD rights, then bringing them into the Famous Four fold, but the plan was not completely clear to me and executives were unavailable for clarification.

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DotMusic loses LRO, and four other cases rejected

Kevin Murphy, July 31, 2013, Domain Policy

Constantine Roussos has lost his first Legal Rights Objection over the flagship .music gTLD.

The case, DotMusic v Charleston Road Registry (pdf) was actually thrown out on a technicality — DotMusic didn’t present any evidence to show that it was the owner of the trademarks in question.

But the WIPO panelist handling the case made it pretty clear that DotMusic wouldn’t have won on the merits anyway.

If any applicant can be said to have built a brand around a proposed generic-term gTLD, it’s Roussos. DotMusic has been promoting .music on social media an in the music industry for years.

The company also owns the string “music” in a number of second-tier TLDs such as .co, .biz and .fm.

It’s not a bogus, last-minute attempt to game the system, like the .home cases — filed using Roussos-acquired trademarks — that have been thrown out repeatedly over the last couple of weeks.

The panelist addressed this directly:

On the one hand, the Panel recognizes that there has been a real investment by the Objector and associated parties in the trademark registrations, domain name registrations, sponsorship and branding to create consumer recognition and goodwill entitled to protection. On the other hand, there is a circularity in the Objector’s position in that the rights upon which the Objector relies to defeat the application are to a certain extent conditional on the defeat of the Applicant and the Objector’s success in obtaining the <.music> gTLD string.

In other words, Catch-22.

The panelist decided that .music is generic, that Google’s proposed use of it is generic, and that obtaining a trademark on a gTLD should not be a legit way to exclude rival applicants for that gTLD.

One objective of the Objector has been to obtain precisely the type of competitive advantage (in this case in the application process for the <.music> gTLD string) that the doctrine of generic names is designed to prevent. However, as the Applicant proposes to use the <.music> gTLD string in a generic sense it is immune from this challenge.

On that basis, the LRO would have failed, had DotMusic managed to demonstrate standing to object in the first place.

Unfortunately, DotMusic didn’t present any evidence that it actually owned the trademarks in question, which were applied for by Roussos and assigned to his company CGR E-Commerce.

The objection failed on that basis.

Defender Security, which obtained trademarks on “.home” from Roussos, ran into the same problems proving ownership of the trademarks in its LROs on the .home gTLD.

Four other LROs were decided this week:

.mail (United States Postal Service v. GMO Registry)

The case (pdf) turned on whether USPS owns a trademark that exactly matches the applied-for string (it doesn’t) and whether the word “mail” should be considered generic (it is) rather than a source identifier (it isn’t).

It’s pretty much the same logic applied in the two previous .mail LROs.

.food (Scripps Networks Interactive v. Dot Food, LLC)

This is the first of two competitive LROs filed by Scripps — which runs TV stations including the Food Network — against its .food applicant rivals to be decided.

Scripps has a bunch of trademarks containing the word “food”, including a November 2011 registration in the US for “Food” alone, covering entertainment services.

The WIPO panelist found (pdf) that the trademark was legit, but decided that it was not enough to prevent Dot Food using the matching string as a gTLD.

The fact that rights protection mechanisms exist in the new gTLD program was key:

to the extent that registration and use of a particular second-level domain within the <.food> gTLD actually creates a likelihood of confusion, then Objector will have remedies available to it, including the established Uniform Domain Name Dispute Resolution Policy, the forthcoming Uniform Rapid Suspension System and relevant laws. The fact that such disputes at the second level may arise is inherent in ICANN’s new gTLD program and is not in the circumstances of this case sufficient to uphold the present legal rights objection.

Objector’s rights in the FOOD mark do not confer upon it the exclusive right to use of the word “food” in all circumstances, particularly where, as here, Applicant intends to use the <.food> gTLD in connection with the food industry. Such intended use of the word would appear to be only for its dictionary meaning and not because of Objector’s trademark rights.

.vip (i-Registry v. Charleston Road Registry)

It’s the second objection by .vip applicant to get thrown out. In this case the respondent was Google.

Like the first time, the WIPO panelist found that the i-Registry trademark had been obtained for the purposes of the new gTLD program and that Google’s use of it in its generic sense would not infringe its rights.

.cam (AC Webconnecting Holding v. Dot Agency)

The second and final LRO decision (pdf) in the .cam contention set.

AC Webconnecting, an operator of webcam-based porn sites, lost again on the grounds that it applied for its trademark just a month before ICANN opened up the new gTLD application window in January last year.

The company didn’t have time to, and produced no evidence to suggest that, it had used the trademark and built up goodwill around “.cam” in the normal course of business.

In other words, front-running doesn’t pay.

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Two banks go down after forgetting to renew domains

Kevin Murphy, July 31, 2013, Domain Tech

Two UK banks suffered downtime over the weekend after apparently failing to renew their domain name registrations.

Clydesdale Bank and Yorkshire Bank, which offer online banking services at cbonline.co.uk and ybonline.co.uk respectively, both blamed a “systems update” for the downtime.

But some customers reported seeing a registrar’s renewal page when they attempted to access the sites, and others are reportedly still seeing difficulties consistent with DNS propagation delays.

Both domain names have expiry dates of July 26, according to Whois records.

Thankfully, the banks, both of which are owned by National Australia Bank, managed to retain control of their domains. If they’d fallen into third party hands things could have been a lot worse.

Combined, the banks have revenue of a couple of billion pounds.

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Donuts details second private gTLD auction list

Kevin Murphy, July 31, 2013, Domain Services

Donuts has committed 68 of its new gTLD applications to a set of private auctions due to commence August 13.

It’s the second round of auctions conducted by Innovative Auctions, which last month settled six contention sets for an average of $1.5 million per TLD.

Here’s the full list of Donuts’ strings:

.apartments .hot .art .jewelry .auction .law .audio .lawyer .baseball .legal .beauty .life .blog .living .boats .loans .broadway .memorial .broker .online .cafe .phone .casa .pizza .chat .place .church .plus .city .property .construction .rent .data .run .deals .salon .direct .school .discount .search .dog .show .expert .site .fish .soccer .football .storage .forum .store .furniture .studio .fyi .style .garden .team .global .theater .gratis .trading .group .website .guide .wedding .help .world .hosting .yoga

It’s very similar to the list of 63 strings that Donuts committed to the first round of auctions, which was under-subscribed by its rivals.

The additions since then are: .broker, .casa, .data, .deals, .dog,. expert, .lawyer, .life, .loans, .place, .property, .rent, studio, .website, .world and .yoga.

This list does not include the six gTLDs that were settled in the first round, for obvious reasons, but the following strings have also been removed: .forsale, .juegos, .marketing, .media, .sale.

Some of those appear to have been removed because Donuts has already won the contention set due to withdrawals.

The list still includes many in which Donuts is in a contention set with Uniregistry, which has previously said it would not participate in private auctions due to legal concerns.

Innovative said recently that over 100 applications had been committed to the August 13 auction.

It had previously said that the over 40 strings being applied for by applicants that had participated in the first auction had also been committed.

The deadline for committing to the auction is August 5.

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