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Anti-Cybersquatting Lessons from IP Strategy

The post reconsiders a cooperative solution to cybersquatting that I proposed in 2007. I also draw on examples of success and failure of legal actions to protect intellectual property (IP) licensing.

Cybersquatting has gone unabated with the new gTLDs despite the introduction of new protection instruments such as the Trademark Cleaning House (TMCH) database and the availability of Uniform Rapid Suspension (URS) services, as well as declarations by registries of their intentions to block unauthorized registrations.

Two distinct classes of solutions have been proposed. Some are based on artificial intelligence (AI) algorithms, others involve the cooperative domain name mechanism that I proposed in 2007 (see Ref 1 and Ref 2).

The best candidates for developing the former are the major search engines because they have the data, necessary algorithms, and capabilities. Unfortunately they don’t appear interested. One reason may be that the problem is not easy to solve; like the people behind spam email, infringers can play a long game of hide-and-seek with enforcers. Another may be that the search engines don’t actually suffer because of infringement; the violating websites are indexed, but they don’t impair search quality because they don’t appear at the top of search results. And let’s remember that search engines aren’t the only way to get to a site. As long as URLs can be typed in and site links clicked, the search engines can’t solve the problem by themselves.

Putting algorithms aside, we have the second proposed solution class can be modified slightly in the light from the original 2007 version to incorporate the introductions of new gTLDs. Under the legacy gTLDs, trademark holders came in late to the domain name game and thus, had to either resort to litigation or acquire domain names infringing on their trademarks. Now, however, owners of the new gTLDs can buy a portfolio of what would potentially be candidates for cybersquatting and typo domains before giving infringers the chance to get to register them. Brand owners can then decide whether to lease these domains. The latter solution is feasible since possible infringers have not yet had the chance to register them, i.e., brand owner now become proactive in leasing instead of being reactive to violations, as with legacy gTLDs. Nevertheless, under both scenarios brand owners need a domain-name valuation service that is based on statistical models to determine which domain names are worth protecting based on a cost-benefit analysis. If leasing can generate profits greater than the registration cost, then the domain should be registered and leased.

IP Licensing

Below I describe a few licensing examples from IP management and demonstrate that domain name leasing is very similar to IP licensing. I also point out examples of successful use of such IP measures, as well as point out the potential pain that relying on a pure adversarial approach can cause.

Procter & Gamble (P&G) caused a problem for itself by being too possessive with a product breakthrough. In 2000 it patented Crest Whitestrips, which offered consumers a new and very inexpensive way to whiten their teeth. (An adhesive material guaranteed the whiting agent would stay on a long while.) The success of the strip helped P&G’s other mouth care products. Meanwhile, competitors found the patent almost impossible to invent around.

They reacted by introducing ineffective products at a low price. This led to predictable price wars from which the industry never recovered. Had P&G licensed the product, destructive competition could have been avoided, to the benefit of both P&G and Colgate.

By contrast, Monsanto managed to capitalize on competitors’ marketing abilities and increase the duration of its IP rights by licensing its patents. It authorized several hundred seed companies to develop and sell seeds using Monsanto technology. The company’s chief rivals—DuPont, Bayer, Syngenta, and BASF—can use modified genes of their own to contribute to Monsanto modified genes, producing seeds that combine features like resistance to insects and drought.

When Apple first introduced the iPhone, it sought to prevent independent software developers from creating independent applications for the phone. However, it later opted for a compromise solution: Independent developers get the phone’s technical specs, but the apps they develop need a green light from Apple before being released.

Domain Name Leasing

There are a number of advantages to leasing. In today’s world, the global approach is a business imperative. Leasing can provide a way into new markets, be used as a venue for entry and expansion into new markets. Moreover, global companies need to be in harmony with local preferences. For example, one reason for eBay’s loss to Alibaba was eBay’s “one model fits globally” approach, with its disregard for local tastes and online shopping habits. Only following Alibaba’s business model would not have been enough for eBay to maintain its market share in China. Another advantage of leasing is that lessees can bring with them new ideas that increase sales. They may innovate web design or boost sales of branded products by integrating offerings with complementary products. Too often managers and the legal department assume that the best way to protect an IP is taking legal action. Value creation need not be a zero-sum game. In fact, domain leasing, as a means to share the IP, can be more value creating. Nevertheless, strategic managers must be savvy enough in domain name valuation and legal issues not to be blindsided by the legal department or advisers. Thus, domain management should be integrated with the overall business model design and corporate strategy. The company should also bring marketing and branding into the strategy umbrella instead of operating in functional silos.

As with IP licensing, domain name leasing can also be a viable strategy when a company does not have a strong brand protection. Leasing would reduce the chances of other companies challenging the lessor’s brand name.

Brand owners should keep in mind that the non-trademark or non—brand domain owners can go to court too. They can challenge the validity of the incumbent’s rights—in the U.S., a generic drug manufacturer, for example, can use the so called “paragraph IV” ANDA certification procedure—or claim that the trademark has become generic and can be used by anyone. It’s also possible that a name has a more globally recognized association than just its company, which was ICANN’s argument for turning down Amazon.com’s application for .Amazon.

As noted in the earlier pieces, a new intermediary can emerge to manage the leasing process. Such an entity would act similar to existing IP brokers.

By Alex Tajirian, CEO at DomainMart

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