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We need a tax. You don’t hear that too often. But right now a tax is the weapon needed by the domain name community. We face way too many cyber- and typosquatters. To drive them back, let’s tax parked and unused domain names. Done right—sized properly and phased in—the tax will make it much harder for speculators to turn a profit while they keep domains sitting idle or parked.
The industry, not government, will impose the tax, and the revenues will go to the Internet community at large. Meanwhile, brand-name owners will see lower legal fees, reduced IP damage, and less siphoning of revenue.
Cybersquatting has continued full-strength after the rollout of the new gTLDs. Registries declare their intention to block unauthorized registrations, but the registrations continue. This is despite the advent of new safeguards like the Trademark Clearinghouse (TMCH) database and Uniform Rapid Suspension (URS) services.
Two distinct classes of domain-name related solutions have been proposed. One is based on artificial intelligence algorithms, the other involves a cooperative domain name mechanism that I proposed in 2007 (see Ref 1 and Ref 2). Legal action and buying up of violators’ sites had done more harm than good, so a new approach seemed necessary. (See “Domain Name Lessons from Napster” and “Domain Name Lessons from iTunes”.)
Others have proposed a general solution to IP violations that requires cooperation between all stakeholders. Of course, one reason our industry’s response to cybersquatting has been so muddled is that our major players don’t cooperate. Research has shown that industry-wide cooperation enables IP owners to stabilize and strengthen their copyright protections by bringing their united clout to bear on lobbying government agencies, and launching educational or media campaigns about the value of maintaining their products’ integrity. But my cooperative proposal involved only cybersquatters, on the one hand, and trademark or generic-keyword domain name owners, on the other.
I propose a tax similar to a government land value tax (or site valuation tax), which is a levy on the unimproved value of land only. The concept was popularized by the economist Henry George in 1879 in his best selling work Progress and Poverty. For domain names, the tax would be based on their market values, and levied on parked and undeveloped domain names billed to the registrant. The tax should be high enough to deter parking and encourage development of domain names. Land value taxation is currently implemented throughout Denmark, Russia, Hong Kong, Singapore, and Taiwan. The tax has also been applied regionally in Australia (New South Wales), Mexico (Mexicali), and the United States (Pennsylvania).
Most taxes—on profits, value-added or income—dampen and distort economic activity by changing incentives. For example, property taxes on the value of buildings penalize improvement. Some residential property taxes are based on valuations from more than 20 years ago and thus, diminish the owners’ incentives to develop the land. Most taxes do not just depress economic activity; they also displace it—for example to offshore financial centers. It is a cat-and-mouse game; the faster that tax collectors crack down on loopholes, the more quickly accountants find new ones.
Winston Churchill said scornfully that a landlord “contributes nothing to the process from which his own enrichment is derived.” The same is true of people who buy domain names and leave them parked and undeveloped. If the names gain value anyway, the Internet community should get a share of the added value. The mayor of New York City, Bill de Blasio, hopes that taxing vacant lots by value will help deal with urban blight in the Bronx and elsewhere. We can try a similar solution for our problems.
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How would you define “parked”, and “unimproved”? I have a domain that’s internal-use-only, to the outside world it has nothing but the SOA record. Originally I used a private unregistered domain, but with the gTLD expansion I can’t safely do that so I had to officially register a domain for the purpose. Another domain is email-only, MX records but no A/AAAA/CNAME records. Yet another is what I’d consider parked, it’s not in active use yet but points to a simple descriptive page on Google Sites rather than sitting on the DNS provider’s parking site and has email set up through my servers.
Even my main domain might be subject to argument. I don’t have advertising on it or use it to make money, it’s a personal domain. I’m sure there’s companies out there that’d argue that I haven’t improved it because I haven’t added anything to it that generates measurable value (revenue). What happens if they make an offer for the domain that I reject because I’ve no intention of selling my domain? Is the unimproved value of the domain now equal to their offer and I have to pay a tax based on what the guy who wants my domain sets the bar at? That would put a lot of personal and non-commercial domains at significant risk, at the very least their owners would have to take time to argue for the existence of their domains while probably facing experienced lawyers arguing against them.
Since we can’t define “parked”, we should just raise the price of every domain name to $100/yr and give the extra money to someone like ISOC for global development. Win-win. Yeah, vast numbers of people will decide that their domains are not worth $100 and will abandon them. That is not a bug.
John I get the objective, but we need something that works with the new normal. This suggestion would probably just shift the issue to those with the most cash being able to do it.
I don’t see how any coherent definition can be made of a “used” vs. “unused” or “parked” domain; what about domains used for network infrastructure (what domain names were originally intended for in the first place) but with no websites on them? If there is a website, how “developed” does it have to be to be considered “in use”? It’s a very subjective judgment.
Hi Alex,
While I certainly can’t see either how to define what should be taxed, you do bring up an interesting subject. How to get rid of cybersquatters and typo squatters at the click of a button instead of URS or UDRP? How can we discourage someone from registering others’ rightful domain names?
Christopher
There's also the interesting question of "rightful". Apple might be the rightful owner of the iPhone name, except that in Brazil another company had a prior rightful claim to it. And then there's the historical reason Apple should've known to be more careful, when they nearly lost the name Apple to the company that had owned that name a decade before Apple came into existence. Amusingly, traditional trademark law says that both of them are the rightful owners of the name. And while the McDonald's corporation is usually considered the rightful owner of the McDonald's name, what about the MacDonald clan who were using the name for centuries before the restaurant chain even existed? That kind of thing is why I dislike the URS/UDRP systems. Those systems seem to try to draw a bright line where in fact the matter's a lot more fuzzy (and if the bright line were honestly honored the ruling would go against the more well-known company that's claiming infringement), and seem intentionally designed to favor the company with a bigger marketing and legal budget rather than the one with the best claim (and seem to gloss over entirely the idea that two entities might well have equally valid claims to the name and will just have to learn to live with each other whether they like it or not).
before you push it, you post a $100,000 bond that you forfeit if the registrant actually did have a right to the name. As has been pointed out a zillion times, trademarks do not map to domain names in any way that makes any sense, no matter how desperately the trademark crowd might wish otherwise.
Alex, I respect you, and appreciate that you are seeking to improve our Internet naming system.
That said I think this is far too academic and quite removed from reality. I don’t believe this is the right idea, nor necessarily a good direction to head.
Someone who would hold a domain is subject to renewal fees on it - Therein is the “tax”. And registries have within their contracts the ability to make increases in the wholesale cost of their names over time.
We have a perfectly solid experiment under way in the form of the new gTLD program to help us as an industry identify if a higher cost burden might have any impact on a registrant’s use of a name, or the number of years the name is held before being put to use.
Candidly, it would take 5-10 years of closely monitoring the individual use of the domains within the new TLDs by the respective original or subsequent registrant(s), using a consistent and clearly defined measurement of “parked” or “unused”.
I have to say, I think I t is a slippery slope to begin to parse the definitions of what would qualify as eligible for this “tax” - all I see is the creation of a perpetual cat and mouse game of defining something, domain owners updating to not qualify for this additional cost burden, redefining, re-updating, and as the shampoo bottle says… “Lather, Rinse, Repeat.”
Ultimately whatever this is, it has a very strong strong potential to negatively impact intellectual property owners who hold but don’t use infringing names to protect their brand(s) by increasing an already burdensome (in their view) financial or logistical domain expenses.
I also notice a slight gap in thinking authentically about the business of registries and registrars - they are financially beholden to moving more units. And even ICANN, the regulator as it were, receives a fee per domain, so the idea of a universe of less units - you may have some trouble getting ‘Enry the 8th to look up from the mutton leg he’s devouring and pay attention to the concept.
A $2000 price definitely deters people from registering a name. (They're apparently willing to pay their lawyers far more than $2000 to complain about it, but that's a different topic.)
the objective of reducing "Interjunk" is an important consideration, and you're doing god's work, John.
How about a non-financial "tax" on the initial registration? Renewals can be done on-line, and you can apply for and lock down the name on-line, but for that initial registration the registrar has to mail you a paper form that you return with a physical check and the domain doesn't get lit up until that check clears the bank? One thing I notice about all the legitimate uses is that they're long-term and they're not that spur-of-the-moment. If I know the name's locked down I can use the 2-3 weeks that the paperwork's in transit to prep infrastructure and get servers ready and such, and a 2-3 week difference in when I start the registration process won't make any difference to me. But that delay's an insurmountable problem for someone whose business model is grabbing a name someone else wants and asking them how much they want for it, and requiring somewhere they can actually receive physical mail and a real bank account they can write a check against present major problems for parties who don't want anyone tracking them down seeing as banks are at least moderately careful about being able to pin the account owner down if needed.
Well they said “define parking”. Same thing. Your definition is guaranteed subjective and thus you’re promoting a policy that imposes your opinion on the world.
Let’s say you raise the price of domains to “eliminate junk registrations”, somebody will just start renting out subdomains from their 2LD and you move it all up one zone cut (what? Oh, you’re going to introduce a policy now on how people can delegate their own subdomains to eliminate that?)
The domain name system ship has sailed. If you want to eliminate spam, build a better filter, you aren’t going to get anywhere with domain policy.