Some domainers, having forgone parking revenue to avoid any claims of trademark violation, have then found themselves thrown into legal trouble with trademark claimants because of actions taken by a third party (ISPs and PC manufacturers). In addition to the resulting direct legal cost, the possibility of action by a third party heightens uncertainty and steals management’s attention away from its real job.

The troubles for the domain name owner start when a surfer who enters in the browser an inactive domain name is redirected to a Web page with advertising instead of getting a page that says there is an input error. The redirect page is controlled by either an ISP or the browser, a fact many of you have experienced. Sometimes this page includes an ad of a trademark name holder, who then claims that the domain name is an infringement on their intellectual property because it seems to be associated with the trademark, despite the fact the domain is inactive. The trademark claimant grabs the opportunity to coerce the owner into surrendering the domain name-the “gotcha!” effect. On the other hand, by keeping the domain name inactive, which is legal and not necessarily a trademark infringement, a domain name owner can still incur legal bills and the already mentioned costs of distraction and uncertainty.

The problem stems from our lack of clear legal definitions of online network trademark infringements. Network members have an incentive to free ride because of this trademark vacuum. Moreover, entities that are directly or indirectly related to this problem lack incentives to remedy the problem. And incentives schemes, such as bilateral arrangements, are not necessarily a cost-effective way to win cooperation.

My recent paper outlines the incentives for all parties involved to find a solution. As arm’s-length incentives are weak, I explore direct cooperative agreements that will overcome the free rider problem, and I propose a solution motivated by corporate social responsibility.