Web 3.0 Free-for-All

What’s that distant buzz you hear? It’s the sound of a swarm coming your way.

In late-2009, the Internet Corporation for Assigned Names and Numbers (ICANN) plans to begin accepting applications for new generic top-level domain names (gTLDs), and granting them by the hundreds. This move will likely usher in a new world on the Web.

Web 3.0 is fast approaching and brand owners should beware. It’s not necessarily designed with you in mind. In fact, hundreds of Internet players and brand owners — including Nike, Hasbro, Viacom, Wells Fargo, Verizon and Molson Coors Brewing — have registered their concerns about the impact of the expansion of the world’s domain name system on their brands and budgets.

Background: In June 2008, ICANN approved a plan to add an indefinite number of new gTLDs to the 21 already in existence (.com, .org, .biz, etc.) and the over 250 country code top-level domain names in the root system. For the first time, applicants will be able to self-select gTLDs, stake out their own private space on the Internet and operate their own gTLD registry. At least 50 applications are rumored to be in the works, including applications for .deloitte, .sport, .car, .nyc, .paris and .berlin. Currently, ICANN estimates that the Internet can handle up to 5,000 of these new names.

Although the first public comment period closed in December 2008, a second public-comment period for application procedures just opened and will run until April 13, 2009. The first application round is currently expected to begin in late 2009.

Some details of the process are undecided. However, ICANN intends to invite any entity from anywhere in the world to apply for a gTLD during a limited application period. The organization currently estimates that it will charge an $185,000 application fee, based on an expected 500 gTLD applications in the first round. Applicants must also guarantee that they have the financial resources to operate a registry for at least three years.

Initially, applications will be assessed in rounds and on a first-come, first-served basis. If you do not apply to register in one of the early rounds, you may lose the chance in later rounds if a similar gTLD has already been taken. Once the first application period closes, a list of the applications will be published and updated as needed.

Opportunities: This new program provides brand owners with an opportunity to control their own “island” on the Internet. New gTLD owners can restrict registration as they wish, thereby preventing cyber-squatting. They also could try to enhance their brands by creating online communities for their customers, partners and licensees.

Challenges: While someone could try to register a gTLD using someone else’s brand, the exorbitant application costs may make this risk much less significant for brand owners than the enormous enforcement cost of policing domain names or making defensive registrations in 50-1,000 new gTLDs. An “objection-based” mechanism will help trademark owners protect their marks from applicants attempting to become registries for similar names.

A New Way of Thinking: The planned proliferation of gTLDs will impact Internet users, businesses and brand owners alike. Predictions of the long-term impact are difficult, but the “swarm” could create such chaos that Internet users increasingly will rely on Internet search engines, instead of domain names, to find the information or products they seek. With an increased reliance on search engines, keyword advertising strategies and search-engine rankings will be of paramount importance.

Brand owners should start planning to protect their brands in the new digital frontier. Questions to consider include:

1. Does the value of your existing domain name in the .com domain reduce the need to register a gTLD, or do you want to control your own domain name space?

2. Would registering a new gTLD for your key brand significantly improve your trademark clearance process in the future, or provide a golden marketing opportunity for your company?

3. Should you change your strategy with regard to defensive domain name registrations? Those interested in applying for a new gTLD who do not have the technical capacity to operate a registry should begin negotiations with back-end service providers soon. Many of these companies are or will be entering into agreements with applicants that may preclude them from working with other applicants.

Jamie N. Nafziger is a partner at Dorsey & Whitney. She can be reached at nafziger.jamie@dorsey.com. Erin Hogan is an associate at Dorsey & Whitney. She can be reached at hogan.erin@dorsey.com.