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Implications of ICANN’s New TLD Disqualification Policies and Cybersquatting 3-Strike Law

ICANN’s proposed final applicant guidebook unraveled some new policies that would disqualify applicants from the new TLD program. ICANN states that if you lose 3 UDRP cases, you will be disqualified from being a major shareholder, partner, officer, director of a new top-level domain registry:

Applicants with confirmed convictions of the types listed in (a) - (k) below will be automatically disqualified from the program.

Circumstances where ICANN may deny an otherwise qualified application include, but are not limited to instances where the applicant, or any individual named in the application, partner, officer, director, or manager, or any person or entity owning (or beneficially owning) fifteen percent or more of the applicant:

a. within the past ten years, has been convicted of a felony, or of a misdemeanor related to financial or corporate governance activities, or has been judged by a court to have committed fraud or breach of fiduciary duty, or has been the subject of a judicial determination that ICANN deemed as the substantive equivalent of any of these;

b. within the past ten years, has been disciplined by any government or industry regulatory body for conduct involving dishonesty or misuse of the funds of others;

c. within the past ten years has been convicted of any willful tax-related fraud or willful evasion of tax liabilities;

d. within the past ten years has been convicted of perjury, forswearing, failing to cooperate with a law enforcement investigation, or making false statements to a law enforcement agency or representative;

e. has ever been convicted of any crime involving the use of a weapon, force, or the threat of force;

f. has ever been convicted of any violent or sexual offense victimizing children, the elderly, or individuals with disabilities;

g. has been convicted of aiding, abetting, facilitating, enabling, conspiring to commit, or failing to report any of the listed crimes within the respective time frames specified above;

h. has entered a guilty plea as part of a plea agreement or has a court case in any jurisdiction with a disposition of Adjudicated Guilty or Adjudication Withheld (or regional equivalents) for any of the listed crimes within the respective time frames listed above;

j. fails to provide ICANN with the identifying information necessary to confirm identity at the time of application or to resolve questions of identity during the background screening process;

k. has been involved in of a pattern of decisions indicating that the applicant or individual named in the application was engaged in cybersquatting as defined in the UDRP, ACPA, or other equivalent legislation. Three or more such decisions with one occurring in the last four years will generally be considered to constitute a pattern.

Has ICANN opened a new can of worms with the 3-strike rule? I was hoping the 3-strike rule would be implemented by ISPs to be used against music pirates before ICANN would adopt a similar rule for new TLD applicants. Furthermore, their disqualification policies seem quite interesting and could backfire against the corporations that want stricter trademark policies.

George Kirikos uncovered some dirt concerning big corporations that commented on the STI report. Under the new disqualification polices would ICANN allow them to own their own TLD? Companies included:

(1) Telstra—fined $101,200 for harassing Australians on the Do Not Call register

(2) Costco—fined $75,000 for not closing Hawaii cesspools

(3) Publix—fined $500,000 for violating child labor laws

(4) Yahoo—fined for unwillingness to cooperate in a cyber-criminal investigation

(5) Time Warner—fined $300 million to settle securities-fraud charges

(6) Coca-Cola—anti-monopoly fine of $68 million in Mexico

(7) UBS—fined $780 million in tax evasion scandal

(8) Nordstrom—fined for failing to report that apparel contained drawstrings (that might post a strangulation hazard to children)

(9) Disney (member of Coalition for Online Accountability)—fined for violating children’s TV advertising rules

(10) Unilever (member of AIM—European Brands Association)—fined for price-fixing in Germany

Should Google, Yahoo or Microsoft be allowed to apply for new TLDs? Those 3 companies have been notorious for allowing click-fraud to exist in their pay-per-click businesses and were the main beneficiaries. Furthermore, they allow competitors to bid on trademarked terms and sell their own products. How is that not a violation? The European Court of Justice (ECJ) recently ruled that Google was not liable for trademark infringement when an advertiser purchases a keyword based on a competitor’s trademark to trigger a search ad as long as it removes infringing ads promptly when notified by brand owners. The reality is that Google is piggybacking both copyright and trademarks to generate billions. Philip S Corwin could not say it better in his excellent post:

“Sell a trademark as a keyword for directed search or online auctions and make $billions. But use a trademark in a domain name for direct search and lose the domain, or worse.”

Anthony Mitchell blasts decisions made using UDRP claiming that the premise that UDRP losses equate to cybersquatting is as ludicrous as the UDRP process itself. Mitchel warns that UDRP cases are often brought by predatory parties seeking to game the system and thereby obtain something without paying for it.

He continues:

“Failure to appeal one of the many erroneous UDRP decisions can stem from a calculated decision that the cost of an appeal is not economical, compared to the market value of the domain being taken. If losing parties had known that a ‘three strikes’ rule would be retroactively applied to exclude them, in the future, from the right to apply for a TLD, then their actions in UDRP disputes would, in many cases, have been decidedly different. The use of UDRP scores to retroactively deny certain parties from equal protection and equal access to new TLDs is unconstitutional. It magnifies flaws inherent in the UDRP system itself, which is need of fundamental reform. If UDRP losses are to be used in this biased and punitive manner, for which they were never intended, then the original UDRP cases should be allowed to be reprocessed, at the discretion of the losing party, with new fees collected and new, original notifications of intent to bring a UDRP case and new UDRP filings required from parties bringing UDRP disputes. My recommendation would be to stop this vengeful foolishness about three strikes. The winners of UDRP cases received what they wanted. That should be enough. The losers of UDRP cases received lessons that should make them more sensitive to how the domain-name system is administered and regulated. In the cases of the registrars named above, I would argue that losing a UDRP case makes them better qualified to administer a TLD than a party that has never lost a UDRP dispute—or even participated in one.”

I have first hand personal experience from online arbitration, the only case of cybersquatting I was accused for that was all the way back in 2003/2004. It involved the highly scrutinized trademark term “Ugg”, which was widely considered a generic term in Australia for sheepskin boots. Everything changed about the “Ugg” when an American company Deckers decided to buy the company in Australia and then began suing every company that called sheepskin boots “Uggs” or challenged them in the search results.

In 2003, I was one of the few super-affiliates on the Internet. Signed up to Commission Junction, I decided to focus on selling sheepskin boots on the web on behalf of Ugg Australia. In 2003, most publishers allowed their affiliates to sell their shoes using their trademark term in their URL or domain as well as bid for their keyword terms in the form of paid sponsored search results. Fast forward to today, most publishers do not allow affiliates to include their name in a URL or domain name or allow them to use their search terms for pay per click campaigns.

My expertise was achieving high organic search results and my goal was obvious: to sell as many Uggs as possible by spreading the word through targeted Ugg-related websites. I disclosed to Ugg Australia that the domains I would use would include Uggs.net and I was accepted into their program and given an 8% commission. It was at that time that a new company called Zappos came about, with a great 365-day guarantee and free shipping offer. Furthermore, I was offered 15% commission and bonuses to join their program. That is what I did. I had 5 Ugg websites and all of them dominated the search results and even outranked the official Ugg Australia website. The results were making a quarter of a million dollars a month selling exclusively Ugg boots on those sites. What followed was Ugg Holdings starting an arbitration case against me for trademark infringement demanding the domains to be transferred to them, despite building their brand and generating millions of dollars of sales for their product.

Ugg Holdings began a UDRP-type case against me and I confronted their legal team. They responded by saying that whatever the case, they will still make their money regardless if I was generating so much brand equity and sales for them. Their stock price increased 413% during that year as well. I certainly felt they were using loopholes in the ICANN arbitration system to profit from all the equity I have built. The loophole they found in the case was that despite I was selling their product, I was using their name in bad faith because in my links area I had 50 sponsored links in every category imaginable and two of them where linked to a page that had an affiliate link to the Hustler Hollywood store (which they claimed was pornographic, even though it sold apparel) and Windows Casino (which sold casino software). There was no content, just affiliate links from publishers I was an affiliate for.

I confronted their top attorney with the following points:

1) Ugg was considered a generic term and that they were using US trademark law to abuse business owners that have been selling the Ugg product as generic product for decades
2) Ugg Australia was misleading the public since their shoes were made in China. They were not made in Australia as their trademark confusingly contends
2) They already knew I had the Ugg domains since I was accepted into their own affiliate program and disclosed the Uggs domain website URLs
3) I generated revenues for them through their own affiliate program and was paid by them
4) I generated significant revenues for them and helped expand their brand reach through Zappos affiliate partnership and search engine rankings
5) They wanted the domains because I selected Zappos as a partner (15% commission was better than 8%) and outranked them in the search results
6) Just because a store sells Uggs, it does not mean it can not sell other competitors products, such as Hustler apparel
7) Affiliate links under a links section to other products does not constitute bad faith or ruin the UGG brand

What followed was a settlement between myself and Ugg Holdings, giving them the domain names with the agreement that they would not change the nameservers for 6 months to allow me to transition the domains to other domains that did not include the Ugg word in the URL. Given the settlement, I did not post a response to the Arbitration Forum. However, in the records, the UDRP-type arbitration court found me guilty, despite the settlement and all the highly contended issues revolving the validity of the Ugg trademark.

Ugg Holdings even went so far as to sue international footwear retailer Steve Madden for trademark infringement. Australians had launched a campaign against the American company to get the name back from the Americans that hijacked it. Bruce and Bronwyn McDougall, owners of Uggs-N-Rugs, were one of the companies that were sued as well. UDRP arbitration found them guilty as well. However, in 2005 the Western Australia-based manufacturer, started legal action against Ugg Holdings. Their action was successful against Deckers, the parent company of Ugg Holdings. Ugg Holdings Ugg Holdings lost another case from 2004 that was resolved in 2010 with Luda Production Pty.

BBC News also reported the case which involved ICANN disputes on the validity of UGG:

Tony Mortel, whose family have been making sheepskin boots since 1958, is one of dozens of companies banned from selling on the internet. “If it’s got a U and a G in it, they’re [Ugg Holdings are] after it,” he snorts. According to some reports, the firm even leaned on the publishers of the Macquarie dictionary, standard-setters for Australian English, to reflect Deckers’ trademark in its definition of Ugg. Mr Mortel claims to have lost some 300,000 Australian dollars (£126,000; US$238,000) as a result of the embargo, and says the Australian sheepskin trade is out of pocket to the tune of A$20m.

No one is absolutely straight on how the boots were invented—surfers, farmers and World War I pilots are all possible culprits—but all agree there has been a tradition of making boots and calling them Uggs since the first half of the 20th century. They were so familiar a feature of Australian life, the argument goes, that no one thought to trademark the name. “‘Ugg’ is a generic term like ‘trainers’ or ‘sneakers’,” says Sharryn Jackson, a member of the Australian parliament who has taken up the case of bootmakers in her constituency. “It defies belief that an Australian icon would be trademarked in the US.”

MPs have raised the issue, and Ms Jackson says she is trying to put together a lobby group of businesses to force the federal government to take note. Mr Mortel, meanwhile, has formed the Australian Sheepskin Association, whose campaign—under the rallying cry “Save our Aussie icon”—hopes to attract 50,000 supporters. Mr Mortel has already failed to win an appeal before the tribunal of ICANN, the body that rules on internet domain names. But he is pressing on with action aimed at Deckers’ original trademark rights. “I am convinced that we will get this trademark canceled,” he insists.

The battle still continues to the day. Since 2004, Australia Sheepskin Association has been campaigning against Ugg Holdings in a campaign named “

Save our Aussie Icon


This is a classic example how lawyers can use the ICANN arbitration system to claim domain names without any court of law verifying their validity, and using trademarks as a tool to abuse due process and piggyback other people’s work. The premise that UDRP losses equate to cybersquatting is a gray area. UDRP cases such as mine are often brought by predatory parties that seek to game the system and thereby obtain something valuable without paying a cent for it. My search rankings across 5 websites for the most popular shoe of 2004 on the web were worth millions of dollars. Ugg Holdings knew that. As far as ICANN is concerned I am a one time cybersquatter, despite being an affiliate of the very brand that used the system to capitalize on all my work. While it bears no effect on my application since 1 strike out of 3 is acceptable, I do have my reservations on the whole UDRP process since it can be gamed as well.

Under the new policies adopted by ICANN, Nike can not apply for .shoes because of their history on abusing child-labor laws. Google click fraud, Yahoo click fraud and Microsoft have made payouts to publishers concerning click-fraud allegations for their pay-per click practices. Microsoft also was found guilty of other illegal practices and anti-trust.

Now that registrars are given the green light to become registrars, will the large registrar companies such as GoDaddy, Demand Media and others be able to apply given their track history? If the ICANN disqualification policies are adopted by ICANN then there will not be a Fortune 1000 company (including family-friendly Disney) that would qualify as an applicant because all have been found guilty of an illegal act. As a result, I certainly would expect the Trademark community to go against the new disqualification policies adopted by ICANN. I would find that quite ironic.

It will be interesting to see how the whole new TLD process pans out. I am not sure how much resources ICANN will spend on researching applicants, companies or their affiliates. It does seem like a huge task to undertake. If Nike applies for .shoes, could child labor protection entities raise a red flag and force ICANN to disqualify Nike? Furthermore, would ICANN disqualify Nike’s application for a .nike brand TLD under the same grounds? One thing is for certain. ICANN just opened a new can of worms. While terrorist applicants might feel better about their chances of applying for a new TLD, other potential applicants will be sweating the final applicant guidebook out and looking to find loopholes to game the system once again.

By Constantine Roussos, Founder of DotMusic

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Nice rant except .. Suresh Ramasubramanian  –  Nov 16, 2010 4:10 AM

You are a bit broad in that categorization of various civil sanctions as felonies. And the key word is “convicted”, rather than “settled”

When it comes to disqualifications of applicants, Constantine Roussos  –  Nov 16, 2010 6:03 AM

When it comes to disqualifications of applicants, ICANN is pretty broad (as outlined in sections a - k). Constantine Roussos .music

The references in my article in regards Constantine Roussos  –  Nov 16, 2010 6:09 AM

The references in my article in regards to comments by George Kirikos and Anthony Mitchell can be found at the ICANN site and TheDomains.com (Kudos to Michael Berkens for an excellent post as well):

George Kirikos: http://forum.icann.org/lists/sti-report-2009/msg00048.html

Anthony Mitchell: http://www.thedomains.com/2010/11/14/why-shouldnt-godaddy-barred-from-applying-for-a-new-gtld-under-the-guidebook-based-on-standard-tactics/

Constantine Roussos

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