Right here, right now – the changing the face of the internet

Hogan Lovells partner David Taylor explores the likely impact of the introduction of a raft of new high-level internet domain names

This year will probably be remembered as a landmark one in the history of the internet as the Internet Corporation for Assigned Names and Numbers (ICANN) launched an application window of 90 days from 12 January during which any entity may apply for a top-level domain name. You might not be aware of this, but it’s a significant development for us all.  We are looking at an unprecedented shake-up and expansion of the internet’s addressing system. The rationale is that there is a shortage of internet addresses, or domain names, so in a little over a year from now, we will start seeing new versions such as .paris, .london, .berlin, .music, .hotel, .gay and .blog.

While the aim is to enhance diversity, choice, competition and innovation, it has important ramifications for law enforcement and consumers as it may well create a multitude of new opportunities for scammers.  It will inevitably also cause a considerable burden on business and brand owners across the UK and further afield.  As such it will require a significant shift in the strategies of protecting brands on the internet. It will likely mean that any business with a presence on the internet – getting on to be pretty much every brand – will need to increase its budget in order to continue to protect their brand.

If a company has only a single brand then the cost may not be significant. However, if there are 1,000 new domain names and a company seeks to defensively register its one brand in half of those, at between £100 and £200 per registration, that is between £50,000 and £100,000. And that would not include potential costs spent in disputes against cybersquatters. Large corporations could find themselves with figures far in excess of that. Fox Entertainment Group estimated additional costs of $12m at a United States Congressional Hearing in May 2010. It is debatable whether this is an excessive estimate or not, but the fact remains that large companies will need to assign significant resources and money to something that arguably has no positive purpose for them. Many have claimed that it is akin to extortion; the concern for others is the fact that such increased costs may ultimately be passed on to consumers.

ICANN’s expansion process has involved considerable debate among global stakeholders from the business community, governments, civil society, registrars and registries largely via eight versions of the so-called applicant guidebook, each one subject to comments from anyone as part of a multi-stakeholder process. Over the course of the last three years in particular, brand owners and representative associations have sought substantial rights protection mechanisms to be included commencing with the creation of a special Implementation Recommendation Team (IRT) by ICANN in March 2009 to propose and develop solutions to the issue of trademark protection in the upcoming domain names.Despite the specific rights protection mechanisms put in place, at the end of last year we saw certain parties unhappy with the outcome of this multistakeholder process seeking to bypass ICANN by taking unilateral action via the US Government in an attempt to delay or even derail the process.  This has been unsuccessful to date and most brand owners are now seeking to deal with the problem.

Having looked at the threats to business and brand owners, one has to acknowledge that the process clearly does provide opportunities for innovation. Potential benefits to the internet include opening the field to users across the globe that hitherto have not been properly served via the ability to create domain names in non-Latin, non-English characters, for instance.  Indeed, some brand owners are seizing the opportunity itself and we will be seeing brands applying for new domain names themselves.  Many are in the offing, and while most keep such plans highly confidential, some have come out and announced their plans, including Canon, Hitachi and Unicef.

So it is not all doom and gloom.  But before you think of rushing out to secure one for yourself, do bear in mind that the application fee alone is $185,000.