Commodifying Words and Letters in the .Com Space

Words (and by extension their constituent letters) are as free to utter and use as is the air sustaining life. No one owns them. There is no toll fee to be paid to dictionary makers who curate them. There are, however, two carve-outs from this public domain, namely words and letters businesses use as designations of origin for their marketplace presence, protected by trademark law; and words and letters arranged expressively by authors, protected by copyright law. The rights accruing to persons under these carve-outs—trademark more ancient than copyright (circa 1610)—have their roots in statutory and common law.

Another carve-out of more recent origin has emerged based on contract rather than legislation relating to the registration of domain names. The first to register words and letters as domain names essentially owns and controls them for the duration of their registrations, which could be unending with renewals. It will be recalled that when the Internet Corporation for Assigned Names and Numbers (ICANN) implemented the Uniform Domain Name Dispute Resolution Policy (UDRP) at the end of 1999 there were approximately 7 million domain names. Today there are over 340 million domain names; 142.7 million of which are country code domains, approximately 127 million are in the dot com space and New TLDs account for approximately 26 million. The precise current counts can be found on the Verisign website; counts from 1998 to 2009 can be found at http://www.zooknic.com/Domains/counts.html.

The question is, who is acquiring all of these domain names and for what purpose? There are two principal groups of registrants of domain names, namely commercial businesses (including mark owners) and domain name investors. Businesses acquire domain names to create or maintain a presence on the Internet corresponding to their presence in the actual marketplace. In the main they register the domain names they need.

In contrast, domain investors (as distinguished from cybersquatters) from the nascent years and thereafter steadily expanding their business models have been active in vacuuming up every word in general and specialized dictionaries as well as registering strings of arbitrary characters that could also be acronyms. What they have done and the reason for doing it (and continue doing particularly in the dot com space) is summarized in Steve Forbes’ 2007 press release (an age ago, but no less relevant), namely that the Internet had created a new market analogous to the market in real property: “Internet traffic and domains [he said] are the prime real estate of the 21st century. This market has matured, and individuals, brands, investors and organizations who do not grasp their importance or value are missing out on numerous levels.”

This means (as investors see it) that domain names are not just addresses in cyberspace; they are “prime” properties. As the numbers of registered domain names held by domain investors have increased, the free pool of available words for new and emerging businesses has decreased. Put another way, there has been a steady diminution of the public domain of words and letters for use in the dot com space that corresponds in reverse to the increase in the number of registered domain names. This is not just anecdotal exaggeration.

The situation I’m describing for the dot com pace is made explicit in Verisign v. against XYZ.com, 15-2526, pg. 9 (4th Cir. February 8, 2017). The evidence in that case indicated that “99% of all registrar searches today result in a ‘domain taken’ page.” The Court noted further that “Verisign’s own data shows that out of approximately two billion requests it receives each month to register a .com name, fewer than three million – less than one percent – actually are registered.”

The mass acquisition of domain names (again, I’m referring in particular to the dot com space) has resulted in commodifying words and letters (in essence locking them up) for the purpose holding or using them for profit; in essence transforming them into merchandise. This is reflected in the booming market for domain names by auction and direct sales from “supermarkets” holding hundreds of thousands of domain names. The impact of this commodification is particularly felt by new and emerging businesses seeking corresponding domain names in the dot com space for the marks they wish to be known by. Where once words and letters were freely available from the word hoard of centuries they are now locked up.

While the non-statutory diminution of the public domain is an extraordinary development acquiring domain names speculatively or holding them for monetizing or merchandising is not unlawful. This is a core principle of the UDRP; and no less so under the statutory regime of the ACPA as long as there is no evidence of capitalizing on the mark. Businesses whose market presence postdate the registration of domain names that by happenstance correspond to their prospective or newly minted marks have no superior rights (and no actionable claim) unless the domain names are transferred to successor registrants who unwittingly use them in bad faith. I’ll return to this in a moment. Whereas as original registrants are protected; successors can be exposed.

The observable experience is that domain investors (as original registrants) are careful to use their assets in such a manner that no inference of bad faith registration can be drawn from their use or non-use. They succeed in retaining their registrations, for example, by using the domain names for their semantic (that is, their conventional meanings) rather than their trademark value or holding them for resale without offense to the test articulated in Telstra Corporation Limited v. Nuclear Marshmallows, D2000-0003 (WIPO February 18, 2000).

Clearly, emerging businesses have to adjust to the new reality of words and letters locked up by investors. It is particularly difficult for owners whose marks postdate registrations of corresponding domain names because they have no remedy under either the UDRP or (in the U.S.) the ACPA. Notwithstanding this, mark owners rashly continue to file complaints that are invariably dismissed mostly with sanctions of reverse domain name hijacking. In their disappointment and threaded into their arguments for bad faith, they have described the prices for domain names variously as “unreasonable,” “excessive,” “disproportionate,” “exorbitant,” and even “outrageous.” See my earlier comments, “Timing is all: Cybesquatting or Mark Owner Overreaching?” It may very well be true, but it’s irrelevant.

In the past two or three months, there have been several UDRP complaints of this type. The latest example of mark owners tilting against windmills is the acronym “DCAC”—Denny Cherry & Associates Consulting, LLC v. Azeras LLC, FA1702001718995 (Forum April 16, 2017)—and the word string “myspectrumnews”—Charter Communications, Inc., Charter Communications Holding Company, LLC and Charter Communications Operating LLC v. Perfect Privacy, LLC / Sheri K Corwin, D2017-0040 (WIPO April 19, 2017). First use in commerce for both Complainants postdated the registrations of the domain names. Of note is that the Respondents in these cases are the original registrants; had they been successor registrants postdating the trademarks the facts would have favored Complainants.

Whether intended or not (although it seems more likely that it was), ICANN’s opening up of new spaces on the Internet (the equivalent in real estate terms of opening up vacant land) by expanding the number of generic top level domains has relieved (to some extent) the situation for new and emergent businesses. The same words and letters unavailable for use in the dot com space are available for use in other spaces. This may not be a happy situation since dot com continues to be the most desirable space but nevertheless this is the market reality.

A fair question may be whether owners of marks postdating the original domain name registrations can ever claim rights to words and letters locked up by the original investors? Yes, as against successors. This is so because in the interim between original acquisition and today the facts have shifted in mark owners’ favor. What were lawful registrations before corresponding marks now infringe third-party rights. As later investors acquire portfolios from early investors there will undoubtedly be a percentage of domain names composed of words, letters, and phrases that will have become challengeable by mark owners with subsequently acquired statutory rights in those terms. If a “supermarket” is holding domain names as successor from earlier investors that have become identical or confusingly similar to trademarks it may very well be in breach of its Representations and Warranties under Paragraph 2 of the Policy. This happens in particular to later investors who have acquired portfolios of domain names from early investors without examining each one for possible infringement of third-party rights.