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New gTLDs and Their Hidden Costs: Part 2

In my last post I discussed some questions that remain about ICANN’s generic Top-level Domain (gTLD) budget. Today I discuss the rights protections mechanisms as they currently appear.

An economic study commissioned ICANN to analyze the new gTLD process recently concluded that “the biggest likely costs” of approving new gTLDs are “consumer confusion and trademark protection.”

Large businesses have complained about the possibility of defensive registration or applying for new gTLDs only to prevent others from owning domain names associated with a trademark. Advocates of new gTLDs answer that trademark owners are holding up the whole process over a phantom issue. They point to studies showing that trademark owners seldom register for domain names with all available TLDs.

Whether defensive registrations will become widespread or even regarded as commercially necessary is a matter of educated guesswork. What is clear, however, is that past registration patterns do not tell us much about how registration patterns will unfold for new gTLDs. Existing TLDs are unlike new gTLDs in at least two ways. First, domain name registrations are driven by online traffic patterns, and today’s patterns tell us too little about how the introduction of new gTLDs will affect online habits. Second, there is only one .microsoft or .toyota. Ownership of that space is, by nature of the DNS, unique. The uniqueness of that space and its correspondence to the trademark name make a trademark owner’s business need to own it qualitatively different from the need to own multiple iterations of a trademark name like canon.info.

ICANN has responded to these and similar concerns by providing rights protection mechanisms for trademark owners in its Draft Applicant Guidebook, Version 4 (DAG4). The Trademark Clearinghouse is intended to gather in one database the relevant information on marks whose authenticity can be validated and to make that information available for use in resolving trademark disputes over the delegation of new gTLDs. A legal rights objection can be made to a gTLD application during the evaluation process. Depending on the strength of that claim, an application can be rejected. These pre-delegation remedies are supplemented by post-delegation processes. For “slam-dunk” cases of trademark infringement, a mark owner can obtain relief through the draft Uniform Rapid Suspension System. More fact-intensive challenges can be submitted to the Trademark Post-Delegation Dispute Resolution Procedure (PDDRP).

Whether these remedies will discourage cybersquatters and other abusive applicants remains to be seen. Uncertainties surrounding the legal rights objection process and the PDDRP have already given rise to significant chatter about the likelihood of litigation—against ICANN.

Additional concerns are not clearly addressed by DAG4 but would benefit from further discussion.

DAG4’s model applicant intends to operate a gTLD for legitimate purposes and has the technical and financial capacity to operate a TLD without disrupting the DNS. But its point system does not definitively say how ICANN will resolve contests between equally legitimate applicants for linguistically identical strings. Should ICANN delegate .apple to Apple Corporation or the Washington Apple Growers’ Association? The word “apple” captures both of their livelihoods. Legitimacy does not distinguish them, and it would be unfair to label the apple growers cybersquatters simply because they would demand payment to give up valuable cyberspace if they got there first. So what standard decides their dispute?

Other problems left unaddressed by DAG4 will affect charities and churches.

The American Red Cross may have to spend hundreds of thousands of dollars that might have gone to feed and shelter disaster victims, if it wants to be certain of preserving .redcross from use by others. The SO/AC Working Group’s ideas about how to support such organizations deserve serious consideration.

Churches face thorny questions of their own. Deciding who gets .catholic or .islam is difficult because of intra-faith conflicts. But even tougher problems come when an organization like a church wants to keep its name unused. Should the Vatican have to pay to prevent use of .catholic in a way that would tarnish the church’s reputation? Suppose that a pornographer applied for .catholic and that he satisfied all background checks. DAG4 doesn’t necessarily rule him ineligible for ownership of that domain based on the nature of his business alone. Neither the “community standard” or “morality and public order” objections are objective enough to assure an entity in the Vatican’s position of avoiding misuse of its name. DAG4 doesn’t really anticipate the problems posed by an organization whose reputation is associated with a name but that has no trademark rights and no intention of operating a TLD. Out of caution, wealthier churches might decide to buy new gTLDs, only to prevent the misuse of their names and not for any commercial advantage. For them, sitting by while sites like [offensive phrase.catholic] become the fruit of ICANN’s land rush would be too great a cost to bear.

By R. Shawn Gunnarson, Attorney at Law, Kirton & McConkie

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There are other more serious costs and Paul Tattersfield  –  Aug 6, 2010 6:31 PM

There are other more serious costs and implications to allowing corporate / brand gTLDs; because if they are successful they will destroy the world wide level playing field the Internet has created.

A single layer model to the right of the dot can never replicate the complexities of businesses around the world. Whilst initially appearing to offer more freedom for new domains than the existing system it is actually a step backwards and offers less freedom. For example if there is .dell .ibm what about brands like .hp? HP is seriously disadvantaged simply because its brand is 2 letters and 2 letters are reserved for country codes. Also at the moment multiple brands can compete equitably in the second level - “xyzbrand.com” can compete with “xyzbrand.co.uk” “xyzbrand.de” etc. But only one entity can own the “.xyzbrand” gTLD.

If names to right of the dot become perceived to be superior to second level names ICANN will have managed to create a very restrictive and inequitable Super league for a limited number of corporations.

But most importantly a Super league destroys the ability to compete on a level playing field. At the moment to launch some software designed compete to with Microsoft or Sun its $10 + hosting a year then it’s down to skill and innovation.

A super league changes this and medium sized players will have to consider whether it worth spending $185,000 + $25,000 per year with ICANN simply to enjoy the same level of branding and enter the Super league. For startups and smaller players cost of admission to this implicit branding advantage is likely to prove prohibitive.

The potential externalities are unconscionable.

You Mean Some Brands Might Be Stronger Than Others? John Berryhill  –  Aug 7, 2010 1:59 AM

A super league changes this and medium sized players will have to consider whether it worth spending $185,000 + $25,000 per year with ICANN simply to enjoy the same level of branding and enter the Super league. For startups and smaller players cost of admission to this implicit branding advantage is likely to prove prohibitive.
Where have all these brand egalitarians been hiding all these years? Let's leave the internet aside for a moment... I have a couple thousand dollars and a great recipe for a cola flavored soft drink. About how much more money do you suppose I will need in order to get my product onto supermarket shelves or, say, in Wal-Mart? I've heard rumors that some outfit in Atlanta, Georgia has one heck of a head start on me. After we sort out my disadvantage in the cola business, we are going to have a chat about taxi medallions and liquor licenses.

John, I think there is a huge Paul Tattersfield  –  Aug 9, 2010 11:53 AM

John, I think there is a huge difference between trying to assess and redress possible injustices in existing systems and inadvertently creating the potential for much larger and more widespread injustices through a proposed extension to a system which is working so well. Each of those examples you cite are from a myriad of different markets, each with different systems, rules and complexities, yet proponents of the GNSO process for new gTLDs have been adamant that there should be a one size all approach to new gTLDs. Every aspect of new gTLDs is impacted by this one size fits all approach, good and bad alike and it has almost certainly led to many of the delays and divisions we see for their implementation. Different types of TLDs will have markedly different externalities therefore any economic studies and subsequent community discussions are dangerously constrained by this one size fits all approach.

$1.00 to Paul Jothan Frakes  –  Aug 6, 2010 10:35 PM

The potential externalities are unconscionable.

I’ll hand you a crisp $1 US Dollar next I see you for an impressive use of not one, but two 50 cent words in a single, sensationalist closing sentence.  Not only was it clear that people need to fear new TLDs because the moving parts might harm brand, but unconsciounable externalities?  I bow.

Competitive Advantage and New gTLDs R. Shawn Gunnarson  –  Aug 7, 2010 2:01 PM

Paul raises interesting points about the competitive advantage of owning new gTLDs, but I can’t agree because there’s no way to tell how the introduction of new gTLDs will affect brand value or sales or anything else.  We just don’t know..  Consumers may flock to companies that pony up the money for a new gTLD.  But then again they might be confused by the change and not visit the new gTLD for a while.  Or they might continue their current online spending habits, rendering the ownership of new gTLDs commercially meaningless.  Answers will have to wait for information, and information won’t be available for more than a year.

John’s point about the competitive advantages of the brick-and-mortar business world is well taken.  Operating on the Internet doesn’t erase the advantages of capital, name recognition, distribution chains, or product quality.  At the same time, Paul is right to say that many an entrepreneur has found market entry smoother on the Internet because it can reach a global audience more cheaply and readily than any other medium.  If we knew that the move to new gTLDs might sacrifice that advantage for the single inventor or lone entrepreneur, it might be a reason to reconsider or at least modify the rollout of new gTLDs.  But we don’t.

It’s nice to know that Jothan is willing to part with hard-earned cash for the creative use of fifty cent words.  I’ll have to see what I can do to earn a greenback or two myself ....

Shawn, I chose my words carefully-If names Paul Tattersfield  –  Aug 9, 2010 12:39 PM

Shawn, I chose my words carefully- If names to right of the dot become perceived to be superior to second level names ICANN will have managed to create a very restrictive and inequitable Super league for a limited number of corporations. You are right there are no guarantees. There are plenty of reasons why many brand holders should be wary of diving into new gTLDs. For example, many larger corporations have multiple brand lines and $185,000 + $25,000 p.a. doesn’t scale well. However given the profound implications if .brands are successful I don’t think it is acceptable to say we just don’t know. It is very much in the public interest to have Economists look formally look at the costs/benefit analysis for differing degrees of success. - From failure, through mild indifference/coexistence, to a wholesale migration to the right of the dot. And this analysis should be considered before any .brand gTLDs are launched and the proverbial genie is let out of the bottle.

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