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ICANN smacks new gTLDs for pre-sunrise auctions

Running a premium domain name auction before you’ve finished your new gTLD sunrise period is Officially Not Cool, according to ICANN’s compliance department.

People who won premium new gTLD domains in auctions that took place before sunrise periods now face the possibility of losing their names to trademark owners.

.CLUB Domains, and probably XYZ.com, operators of .club and .xyz, two of the highest-volume new gTLDs to launch so far, appear to be affected by the ICANN decision.

ICANN told .CLUB that its “winter auction“, which took place in late February, may have violated the rules about allocating or “earmarking” domains to registrants before sunrise takes place.

Meanwhile, NameJet has cancelled the auction for deals.xyz, which “sold” for $8,100 late last year, suggesting that .xyz’s pre-sunrise auction is also considered ultra vires.

ICANN told .CLUB that its auction sales “constitute earmarking” in violation of the rule stating that registries “must not allow a domain name to be allocated or registered prior to the Sunrise period”.

.CLUB had told its auction winners that a sunrise period registration would prevent them from getting the domain they wanted and that they would be refunded if a sunrise registrant emerged.

But ICANN evidently told the registry:

Irrespective of whether “[a]llocation was expressly conditioned upon any Sunrise claim,” or whether any Sunrise claim was made, the pre-selection, pre-registration or pre-designation to third parties, in this case via .Club Domains’ “winter auction,” constitutes improper allocation.

I kinda thought this would happen.

Back in November, when XYZ.com ran its first .xyz auction — about six months before its sunrise even started — CEO Daniel Negari told us he believed it was “comfortably within the rules“.

We said the auction “seems to be operating at the edge of what is permissible under the new gTLD program’s rights protection mechanisms, which state that no domains may be allocated prior to Sunrise.”

I’ve not yet been able to definitively confirm that .xyz is affected by this ICANN decision, but .club definitely is.

.CLUB Domains told its auction winners today that the names they won are now subject to a 60-day period during which they could be obtained by trademark owners.

If no trademark owner claims the name, .CLUB said it will give the auction winner a 10% rebate on their purchase price.

The email states:

We are placing the domain on hold for 60 days, during which time a Trademark Clearinghouse (TMCH) holder will have the opportunity to purchase the domain at Sunrise rates. Although, the domain is not currently in the TMCH, if a trademark holder should file in the TMCH over the next 60 days, the domain will be offered to that registrant. However, if the name is not claimed by filing in the TMCH over the next 60 days, your transaction will move forward as planned.

Although we disagree with ICANN compliance’s position on this matter, the actions we are taking are necessary to ensure that we are not offside with ICANN compliance in any way. We understand that you have been caught in the middle of this issue due to no fault of your own. Given these circumstances, we are offering you two options:

1) Should you decide to complete this transaction, we will issue you a payment of 10% of the purchase price after the transaction closes in 60 days, assuming the name is not registered by a TMCH mark holder because of the delay.

2) At any time during the 60 day period you have the option to rescind the auction bid and not purchasing the domain.

How much are new gTLDs really costing trademark owners? We have some numbers.

If there’s one thing we’ve learned from the last six months of new gTLDs, it’s that predictions about massive levels of defensive registrations were way off the mark.

New gTLDs are not seeing anywhere near the same numbers of sales during sunrise periods as their predecessors.

I have managed to collate some data that I think gives a pretty accurate picture of how many sunrise registrations are being made and therefore how much new gTLDs are costing trademark owners.

About 128 gTLDs have finished their sunrise periods to date, and I have the sunrise sales figures for 101 of them. All of these numbers were provided by the respective registry operator.

The biggest sunrise, per these numbers, was for .clothing, which had 675 registrations. That’s 5.97% of the 11,301 overall names in the .clothing zone file today, over three months after launch.

At the other end of the scale is شبكة. (“.shabaka” or “.web” in Arabic), which sold just five names during its sunrise, the first of the program, which was restricted to Arabic trademarks.

The total number of sunrise sales across across all 101 gTLDs is 14,567, making for an average of 144.2 domains per new gTLD sunrise.

Sunrise currently accounts for 1.87% of all names in these 101 gTLDs, but that’s an artificially high number because some of the gTLDs I have sunrise numbers for are not yet in general availability.

But compare the real numbers to .co, which sold over 11,000 names at sunrise when it launched in summer 2010, or .xxx, which took 80,000 sunrise applications in late 2011.

Trademark owners are not defensively registering with anywhere near the same fervor as they once did.

If that 144.2 average names holds true for all 128 gTLDs that have completed sunrise, we can approximate that 18,461 names have been sold during sunrise periods to date.

I should point out that I’m assuming in these calculations that all sunrise registrations are “defensive” and that brand owners are not defensively registering during general availability.

Neither of those assumptions will be fully true.

Not all sunrise sales are made to genuine brand owners, of course. Some number of generic dictionary domains have been registered by people who obtained trademarks just in order to get the matching domain.

And only a psychic could know whether a GA registration is “defensive” or not at this stage.

But let’s assume that every sunrise reg went to a genuine brand owner. How much have they had to pay for these names?

It’s difficult to calculate a precise dollar value because each registry has a different pricing scheme and sometimes the price of a name can vary even within a specific given TLD.

I looked to the prices listed at 101domain, which has pretty exhaustive coverage of new gTLDs, for a guide.

The average first-year cost for a sunrise registration in the 75 or so new gTLDs currently being sold to trademark owners at 101domain is a little shy of $165.

Assuming that’s a good guide for pricing in sunrise periods that have already closed, we can calculate that 18,461 names at $165 a pop equals $3,046,089 out of the pockets of trademark owners in the first year.

But the sunrise fees are not the only costs, of course. In order to participate in a sunrise you must first register your mark in the Trademark Clearinghouse.

There are 30,251 marks registered in the TMCH, according to the TMCH itself. At $150 a pop — the minimum you can pay for a TMCH registration — that’s $4,537,650 spent on defensive measures.

Add in the cost of the sunrise registrations and a generous $100,000 to cover the cost of the 50 Uniform Rapid Suspension cases that have been filed to date and the total cost to brand owners so far over the first 128 new gTLDs comes to $7,683,739.

Whether this is “a lot” or not probably depends on your perspective.

It’s certainly not the billions of dollars that were being predicted by some as recently as last year.

In September the Better Business Bureau and the Coalition Against Domain Name Abuse speculated that 600 “open” new gTLDs could lead to $10 billion being spent on defensive registrations.

That statement was made in a press release calling for stronger cybersquatting legislation in the US.

But if 101 open gTLDs leads to $3,046,089 being spent, 600 such gTLDs should lead to a total cost of about $18 million, not including the fixed TMCH costs (which probably won’t grow very fast in future).

That’s not the same ballpark, not the same league, not even the same sport.

.rich promises new marketing after pitiful launch

Kevin Murphy, April 17, 2014, Domain Registries

I-Registry’s .rich may have taken the ignominious title of Worst New gTLD Launch Yet, but the company says it’s not in any rush and is planning to start its marketing campaign in about a month.

According to zone files, .rich has 22 registered names, despite the fact that it’s been in general availability for a week. All 22, according to the registry, were registered during its sunrise period.

The price has certainly got a lot to do with that — the registry fee is $1,750 and you can find registrars selling for as much as $2,599 — but the non-existent marketing may have also played a part.

Visiting the I-Registry web site today won’t give you any idea where you can buy the names or any indication that they’re even available.

As I and others have pointed out, the .rich string is a hard sell. Andrew Allemann of Domain Name Wire, with his tongue only a little in his cheek, doesn’t reckon it passes “The Douche Test“.

But I-Registry’s Michael Hauck told DI that the company is planning to launch a revamped nic.rich site, possibly as early as next week, with an all-new “marketing site” to follow about a month later.

“It will communicate the right message around .RICH,” Hauck said of the nic.rich site. “Clients will understand much better what we intend .RICH to be. And of course you will find a list of supporting registrars there, which today amounts to over 40 registrars.”

The marketing site will offer to sell .rich names directly via an ICANN registrar, he said. Email, hosting, privacy and other stuff will be included in the price, he said. He added:

“We will be also offering an affiliate program with a very attractive PPS program for people who are not registrars or resellers to market this domain product and give them all the margin that usually a registrar has,” he said.

“So a guy who is running for example a millionaire’s dating website or is writing about exclusive products and services in his blog is able to work with us and to promote .RICH,” he said.

Given that the registry doesn’t seem to have sold a single domain during its first week of GA, I think it’s going to need as much marketing support as it can get.

How one guy games new gTLD sunrise periods

Kevin Murphy, April 17, 2014, Domain Registries

Wanna buy a SOCIAL brand pen for a dollar? No? How about social.web or cloud.guru or direct.flowers?

pensOne intellectual property lawyer closely associated with a number of new gTLD registries has been using a flimsy online pen-selling business in order to obtain potentially valuable domains during sunrise periods.

Thomas Brackey of Beverley Hills law firm Freund & Brackey has acquired dozens of premium domain names during sunrise periods. He was good enough to share some of the details with DI.

Brackey owns three trademarks on the terms “DIRECT”, “SOCIAL” and “CLOUD”. All three were registered in Switzerland in late 2012, having been applied for in July that year.

All three cover the category “stylos”, or pens.

If you want to buy a CLOUD brand pen, you can do so at pentm.ch, a web site Brackey seems to have thrown up rather quickly using Shopify.

All three marks appear to have been registered via Marcaria.com, which charges $960 for a Swiss trademark registration.

Brackey obtained Trademark Clearinghouse registrations for his three trademarks, which would have cost him at least $150 per mark.

He seems to have used the pentm.ch web site to fulfill the TMCH’s “proof of use” requirement.

With TMCH registrations, he’s able to participate in new gTLD sunrise periods, giving him the first opportunity to register social.tld, cloud.tld and direct.tld for the usual inflated sunrise prices.

The pens themselves, Brackey assures us, are real.

But he makes no attempt to pretend that the pen-selling business was in thriving need of brand protection under the new gTLD program’s brand protection mechanisms.

Brackey told DI:

In the course of preparing new gTLD applications, I came to be pretty familiar with the various policy developments surrounding the creation and implementation of the TMCH.

For the first time mark holders of all stripes, and from every country would be given a pre-emptive right to acquire domain names that had nothing to do with the substance of their brands.

Musing on that, I identified what I believed to be a legitimate opportunity to acquire some domain names in the newTLD landscape. More curious than anything, I decided to put my theory to the test and resolved to try buying some domain names.

I’m not sure what I’m going to do with the domains I’ve purchased. I’ve never been a domain investor before, and not confident I qualify as one now. It’s all a bit of an experiment at this point and is certainly fascinating territory from an IP perspective.

There will no doubt be a number of important international legal developments that arise from the gTLD process — new rules, new policies and new opportunities.

At least two of Brackey’s new gTLD clients — What Box? and Plan Bee, which use Brackey’s law firm as their mailing address — have also registered large numbers of sunrise names using this same method.

He’s even selling Plan Bee’s “CONSTRUCTION” and “BUILD” pens on his web site.

Brackey acknowledged that some people take a “pretty dim view” of what he’s doing.

I’d have to say I’m one of them.

In my view, while Brackey may not be strictly breaking the rules of the new gTLD program, he’s certainly not acting within their spirit.

Members of Intellectual Property Constituency and others fought hard for rights protection mechanisms that would help them protect their or their clients’ pre-existing brands from cybersquatters.

The RPMs were not designed to provide a way for investors to avoid landrush auctions or a mad scramble for nice names on the first days of general availability.

The “proof of use” requirement was added to the rules in order prevent the kind of debacle we saw with the European Union’s .eu launch, where bogus trademarks were used to game EurID’s sunrise period.

But the barrier is tissue-thin, requiring merely a screenshot of a web site to overcome.

Gaming new gTLD sunrise periods may not be cheap — it may not even be profitable — but I have to wonder what kind of reputational impact it will have on new gTLD registries that choose to participate.

If you’re a brand owner, would you be more likely or less likely to trust a new gTLD registry that chooses to participate in sunrise gaming?

dotBest cancels landrush

Kevin Murphy, April 17, 2014, Domain Registries

PeopleBrowsr has decided to cancel the landrush phase for its forthcoming .best new gTLD, citing “very little engagement” from registrants.

The TLD is due to go to sunrise today. Two days after it ends on May 19, it will go directly to general availability.

VP of operations Michael Deparini said in an email:

Many of our registrars have given us feedback that there has been very little engagement with the TLD Landrush Phase. We have decided to cancel Landrush.

We are excited to announce that we will open General Availability (GA) ahead of schedule to commence on May 21 at 16:00:00 GMT (12pm EST).

PeopleBrowsr is also the company behind .ceo, which launched two weeks ago with just 250 names in its first couple of days on the market — about 40% of which belonged to one cybersquatter.

.ceo currently has 798 domains in its zone, making it the fourth-smallest of the 74 new gTLDs that currently appear to be selling names.

Pricey .luxury made $500k already

Kevin Murphy, April 15, 2014, Domain Registries

The new gTLD .luxury seems to have sold more than $500,000 worth of domain names already.

(UPDATE: That’s probably not accurate. I seem to have misread some registrar pricing pages. The sunrise price was actually much lower than $1,000. See comments below.)

Saturday’s zone file for the Luxury Partners-owned TLD popped from 1 domain to 470 domains. Most of the new names appear to have been registered during the sunrise period, which ended early last week.

Given the current retail price of over $1,000, it seems .luxury is already a $500,000 business, at least for 2014. Renewal pricing is around the $700 mark, equating to $329,000 a year just on sunrise registrations.

That’s including the registrar markup, of course. The registry will be making a bit less.

“Luxury” brands such as Cartier and Formula 1 bought multiple domains during sunrise. Some tech firms, such as Facebook and Google, continued their blanket approach to defensives.

With such a high price, one wonders what some of these rights holders are thinking: do they really believe cybersquatters are prepared to drop $700 a year infringing their brands?

Sadly there are already a couple of examples of newbie squatters spending absurd sums on clearly infringing new gTLD domains.

It will be interesting to see whether any of these registrants actually use their domains, or whether they’re mainly defensive registrations. I suspect the latter will be more often the case.

Currently in landrush, .luxury is due to go to general availability in about a month.

No sunrise periods for dot-brands

Kevin Murphy, March 31, 2014, Domain Policy

ICANN has finally signed off on a set of exemptions that would allow dot-brand gTLDs to skip sunrise periods and, probably, work only with hand-picked registrars.

Its board’s New gTLD Program Committee passed a resolution at ICANN 49 last week that would add a new Specification 13 (pdf) to Registry Agreements signed by dot-brands.

The new spec removes the obligation operate a sunrise period, which is unnecessary for a gTLD that will only have a single registrant. It also lets dot-brands opt out of treating all registrars equally.

Dot-brands would still have to integrate with the Trademark Clearinghouse and would still have to operate Trademark Claims periods — if a dot-brand registers a competitor’s name in its own gTLD during the first 90 days post-launch, the competitor will find out about it.

ICANN is also proposing to add another clause to Spec 13 related to registrar exclusivity, but has decided to delay the addition for 45 days while it gets advice from the GNSO on whether it’s consistent with policy.

That clause states that the dot-brand registry may choose to “designate no more than three ICANN accredited registrars at any point in time to serve as the exclusive registrar(s) for the TLD.”

This is to avoid the silly situation where a dot-brand is obliged to integrate with registrars from which it has no intention of buying any domain names.

Spec 13 also provides for a two-year cooling off period after a dot-brand ceases operations, during which ICANN will not delegate the same string to another registry unless there’s a public interest need to do so.

The specification contains lots of language designed to prevent a registry gaming the system to pass off a generic string as a brand.

There doesn’t seem to be a way to pass off a trademark alone, without a business to back it up, as a brand. Neither is there a way to pass off a descriptive generic term as a brand.

The rules seem to allow Apple to have .apple as a dot-brand, because Apple doesn’t sell apples, but would not allow a trousers company to have .trousers as a dot-brand.

Weirdest new gTLD launch yet? .wed launches with a single registrar

Kevin Murphy, March 18, 2014, Domain Registries

The new gTLD .wed went into sunrise yesterday with the strangest pricing model yet and a stringent Registry-Registrar Agreement that seems to have scared off all but one registrar.

Atgron is positioning .wed as a space for marrying couples to celebrate their weddings, but only temporarily.

It seemingly has little interest in domain investors or ongoing customer relationships beyond one or two years.

If you register a second-level .wed domain, you can have it for $150 a year for the first two years, according to the Atgron web site. After that, the price rockets to $30,000 a year.

Registrars, resellers and wedding-oriented businesses are allowed to opt out of the third-year spike on their own .wed names if they join Atgron’s reseller program and sell at least 10 a year.

Unlike Vox Populi, which is actively marketing .sucks domains at $25,000 as a reasonable value proposition, Atgron jacks the price up as a deterrent to registrants holding on to names too long. It says:

.WED domain names are sold to couples for one or two years to celebrate their wedding. The domain names then become available to another couple… Mary and John can have MaryandJohn.WED and then YES the next Mary and John can have MaryandJohn.WED a year or two later and so on and so on.

That alone would be enough to put off most registrars, which value the recurring revenue from ongoing annual renewals, but I gather that the .wed RRA contains even more Draconian requirements.

Incredulous registrars tell me that Atgron wants them to create an entirely new web site to market .wed domains — they’re not allowed to sell the names via their existing storefronts.

The only registrar to bite so far is EnCirca, known historically for promoting obscure gTLDs such as .pro and .travel, which is selling .wed via a new standalone site at encirca.wed.

I also gather that Atgron won’t let registrars opt out of selling its third-level .wed domains, which are expected to go for about $50 a year with no third-year spike.

That didn’t work well for .name — registrars hated its three-level structure, forcing the registry to ultimately go two-level — and I don’t think it’s going to work for .wed either.

Registrars also tell me that Atgron wants to ban them from charging a fee for Whois privacy on .wed domains. They can offer privacy, but only if it’s free to the registrant.

With privacy a relatively high-margin value-add for registrars, it’s hardly surprising that they would balk at having this up-sell taken away from them.

As weird as this all sounds, it is of course an example of the kind of innovative business models that the new gTLD program was designed to create. Mission accomplished on that count.

Another thing the program was designed to create is competition, something Atgron will soon encounter when Minds + Machines arrives with .wedding and eats .wed’s lunch. In my view.

The .wed launch period is also quite unusual.

Atgron is running a landrush period concurrently with its 30-day sunrise period.

Even if you don’t own a trademark, you can apply for a .wed domain today. You’ll get a refund if your name is registered by a trademark owner during sunrise, and names won’t go live until April 20.

The registry has extended the 90-day Trademark Claims period to cover the sunrise period too, so it appears to be in compliance with ICANN rights protection rules on that count.

It’s a 30-day sunrise, so it’s first-come, first served if you’re a trademark owner.

As for sunrise pricing, the third-year spike appears to apply too.

Atgron documentation does say there’s going to be an option to purchase a 10-year trademark block for a one-time fee, but I couldn’t find any way to do this on the EnCirca.wed web site today.

Will .exposed see a big sunrise?

Kevin Murphy, March 11, 2014, Domain Registries

Donuts’ new gTLD .exposed goes into sunrise today, but will it put the fear into trademark owners?

It’s arguably the first “ransom” TLD to go live in the current round and the first since .xxx, which scared mark holders into blocking over 80,000 domains back in late 2011.

Most new gTLD sunrise periods to date — most of which have been focused on vertical niches — have had sunrise registrations measured in tens or hundreds rather than thousands.

But .exposed, I would say, is in the same free speech zone as yet-to-launch .sucks and .gripe, which lend themselves well to having a company, product or personal name at the second level.

Brand protection registrars are encouraging their clients to pay special attention to this type of gTLD.

Will this cause a spike in sunrise sales for Donuts over the next 60 days?

It might be difficult to tell, given that Donuts also offers brand owners a blocking mechanism via the Domain Protected Marks List service, so the domains don’t show up in the zone files.

But DPML blocks can be overturned by others with matching trademarks, so some trademark owners may decide to register the name instead for an overabundance of caution.

TMCH sends out 17,500 Trademark Claims notices in a month

Kevin Murphy, March 3, 2014, Domain Services

Wow.

Just four weeks after the first new gTLDs went into general availability, the Trademark Clearinghouse has already sent out over 17,500 Trademark Claims notices to trademark owners.

A Claims notice is a warning that is generated whenever somebody registers a domain name that exactly matches a trademark listed in the TMCH’s database.

The 17,500 number refers to post-registration notices sent to trademark owners, not pre-registration warnings delivered to would-be registrants.

Considering that there are somewhere in the region of 180,000 domain names in new gTLDs today, 17,500 represents a surprisingly high percentage of the market (high single figures).

Of course, not all of these will be due to cybersquatting attempts.

There are plenty of marks in the TMCH that are acronyms or dictionary words, either because they match a genuine brand or because somebody obtained trademarks on generic terms in order to game sunrise periods.

I’d count those as false positives, personally, but it’s impossible to know without access to TMCH data how many of the 17,500 alerts delivered to date can be accounted for in that way.

There are 26,802 marks in the TMCH, according to the company.