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Domain tasting makes WIPO sick

Speculative registration a threat to brand owners

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The fairness of the domain name system is being undermined by a new practice that turns domain names into commodities for speculative gain, according to the World Intellectual Property Organisation (WIPO), which oversees many domain name disputes.

The number of domain name disputes resolved by WIPO last year rose by 25 per cent to 1,823, the largest number of cases handled since 2000 when WIPO had its first full year of dispute resolution. WIPO heard one case in 1999 and 1,857 cases in 2000.

The body believes, though, that a controversial practice known as "domain name tasting" poses a threat to legitimate brand owners who cannot keep pace.

Domain tasting involves the registration of domains and cancellation of them within five days. Registrants of .com, .net, .org, .biz, .info and .pro names are entitled to a full refund when they delete a domain within that period.

The system, known as the "Add Grace Period", was intended to allow registrants to correct spelling mistakes but speculators took advantage. They wrote software to automate the technique. When a name is found that attracts traffic and generates ad revenue, the domain taster typically keeps the name. If no money is made, the refund means there is no loss.

When conducted on a massive scale, the amount of money generated can become significant. A five cent "restocking" fee, deducted from refunds, has been suggested as a means of controlling the practice.

A variant of domain tasting is known as 'domain kiting', where the registrant returns a name just before the five-day period expires and re-registers it again as soon as it becomes available, allowing for long-term ownership without cost.

"Recent developments in the domain name registration system have fostered practices which threaten the interests of trademark owners and cause consumer confusion," said Francis Gurry, WIPO deputy director general, who oversees WIPO's dispute resolution work. "Practices such as 'domain name tasting' risk turning the domain name system into a mostly speculative market."

"Domain names used to be primarily specific identifiers of businesses and other internet users, but many names nowadays are mere commodities for speculative gain," said Gurry. "The rate at which domain names change hands and the difficulty to track such mass automated registrations challenge trademark owners in their pursuit of cybersquatters."

WIPO recognised that there is now an opportunity for profit in the mass registration of domain names. "Such registrations are often anonymously undertaken on a serial basis without particular attention to third-party intellectual property rights," said a WIPO statement. "Traditionally, cybersquatting involved the registration of domain names by individuals seeking to sell the 'squatted' domain name. Nowadays, 'domainers' derive income from the large-scale automated registration of domain names. They acquire domain name portfolios, buy and sell domain names, and park domain names, claiming a significant share of the well over 100 million domain names that are now registered."

The WIPO Uniform Domain Name Dispute Resolution Policy (UDRP) can be stretched to accommodate such new developments, the WIPO statement said.

"With regard to bulk buyers of domain names using automated registration processes, a WIPO panel decision issued in February 2006 found that failure to conduct prior checks for third-party rights in certain circumstances would represent 'wilful blindness', representing bad faith under the UDRP," it said. "This is an example of how the application of the UDRP decision criteria must accommodate changing circumstances and new developments."

Learn more: We are running free breakfast seminars next month in Leeds, Birmingham, Manchester, Edinburgh, London or Glasgow on protecting your name on the net. See OUT-LAW Breakfast Seminars, Spring 2007.

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Related links

A critical view of WIPO's statement by Dailydomainer.com
Observations on domain kiting by Bob Parsons, CEO of registrar GoDaddy
Public Interest Registry's proposal to control domain tasting (PDF)
Add Grace Period rules

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