Jan 10 | 2012

Expansion of Domain Names Creates a “Dot” Opportunity

This week marks a big moment in the history of the international Internet domain name system.  ICANN (short for Internet Corporation for Assigned Names and Numbers), the organization that oversees the global domain name system, will start accepting applications for the creation of new “generic top-level” domain names, or “gTLDs.” gTLDs are the identifiers that appear to the right of the dot in a domain address – such as “.com” or “.edu” – that help keep order to the domain name system.  The portion to the left of the dot is known as the “second-level” domain.  The existing gTLDs are run by designated entities tasked with overseeing all “second-level” domain name registrations such as those that you and I register through GoDaddy, Network Solutions or other comparable domain name registrars.

In just two days, interested parties will be able to apply to create custom gTLDs and oversee the registration of domain names in those new extensions.  In some instances the new gTLDs will be generic words such as “.books,” and in other instances they will be recognizable trademarks such as “.nike.”  In the case of trademarks, the applicant will need to document its legal entitlement to that trademark.  The application process for registering a new extension is lengthy and complicated, and the application fee is $185,000.

For those able to invest the capital and willing to take the plunge, exciting possibilities exist.  For trademark owners, the ability to control an entire gTLD allows trademark owners to establish the parameters by which someone would be entitled to register a domain name in that extension (such as limiting the registrations to the trademark owner and authorized licensees and resellers).  This quality control measure could also help the public identify whether a site is legitimate.  So, if Apple Computer controls the .apple gTLD and moves its portfolio of websites to the .apple extension, then consumers can assume that any website they encounter under the .apple extension is a legitimate website.  Online community building may also benefit from this new system, because specialized domain extensions could be organized around certain causes or communities, such as .cancer for cancer awareness or .hispanic for those interested in Hispanic culture.

While it is true that the possibilities are limitless, Internet innovation comes at a great cost and uncertainty.  In addition to the hefty application fee, applicants will have to demonstrate that they have sufficient financial resources to keep a new domain registry functioning for at least three years, and they will have to pay an annual maintenance fee of $25,000.  Also, importantly, there is no guarantee that an applicant will be granted its desired extension, and if not, the applicant will only be refunded between 20% – 30% of the application fee.  If two or more parties apply for the same extension, then the extension may be put up for auction, and that could drive up the cost.

Clearly, this opportunity is not for everyone, and it will likely be dominated by those with large pockets.  Because the privatization of domain name extensions is uncharted territory, it remains to be seen how many corporations and brand owners will take their place in line.
Posted by Adam W. Sikich, Esq.