Industry News

News > May 2007


Domain Tasting, Kiting And Spying

International organisations need to try and ensure tasting, kiting and spying are prevented relating to domain names says a representatives from the US telecommunications and trademark industries.

They claim these new activities are dramatically altering online commerce and impacting legitimate businesses, and that the United States Federal Trade Commission (FTC), World Intellectual Property Organization (WIPO) and the Internet Corporation for Assigned Names and Numbers (ICANN) should take action.

The US Anti-Cybersquatting Consumer Protection Act (ACPA) had many loopholes giving actual trends in the secondary market for Domain Names, declared Sarah Deutsch, vice president and associate general counsel for Verizon, and Marilyn Cade, former AT&T lobbyist and consultant on Internet and technology issues.

"That law is ripe for updating, We would propose that Congress hold hearings on a number of ways to create deterrents for domain name tasters."

Tasting of domain names and a growing secondary market of Internet addresses has been discussed several times at special ICANN workshops, the private body with a technical oversight of the Internet domain name system (DNS). Tasting a domain means using an added grace period established by ICANN which allows the return of domain names for a five-day period without payment to registry (such as domain-name wholesalers).

The add grace rule over time resulted in increase in intentional registrations of domains for five days to taste market value without financial risk but it was originally passed to allow registrar companies to send back unintentionally registered domain names. Domains registered for tasting are now in the millions and exceed even registered domains, explained Deutsch and Cade.

Some domainers (individuals who accumulate and deal with Internet domain names) elaborate on the scheme to automatically register, drop and reregister domains (kiting).

This business model is heavily criticised for domain name business by telecommunications companies and trademark owners. In early years, speculators and cybersquatters combined names of merging companies Cade said "now you are getting spinning combinations a logical person would not be able to come up with. We also see auctioning in the .eu and .mobi zones." WIPO in a recent report also pointed to the problems from tasting and other practices.

Deutsch warned against domain spying which would result in domains being checked for registration and gone a minute later because of squatters intercepting the traffic from customers to the registrarsí domain registration pages in legal or illegal ways.

In domain tasting, Deutsch reported 1,400 names mimicking Verizon hidden in a domain-portfolio of one domainer company alone. New cybersquatters are well-organised and well-funded, said Deutsch, "These are not people in their basement." Verizon recently brought cases against varios tasting companies, including iREIT, (a company funded by Perot Investment and Maveron, founded by the chairman of the Starbucks coffee chain, Howard Schultz).

Prosecution of the trademark violations is difficult, according to Deutsch and Cade, the volatility of the registrations, the hiding of the actors behind piles of shell companies, and the fooling of so-called Whois database which would help identify a trademark infringer. "Very few people are aware of it. We are almost in a stealth scenario."

Whois data provides information about contacting Domain Name. ICANN just reported in its regular Whois Data Accuracy Program Report 34,000 unique reports on wrong Whois data entries, (not an excessive number, according to the organisation as 80 million domain names were registered).

Cade also said, There are four things ICANN can do, she said: "ICANN alone is not the total answer to the problem. Close the five-day add-grace period, strengthen Whois accuracy, add an anti-warehousing rule to their Registrar Accreditation Agreement, (deterring registrars from storing large numbers of domains themselves), and to make registrars accountable for their licensees. Greater power should be given to the FTC to prosecute deceptive acts. Some of the activities might even be criminal.".

Deutsch recommended an FTC hearing and US congressional hearing to analyse possible deceptive practices and to prepare for update on Anti-Cybersquatting Protection Act.

At an international level, Deutsch recommends WIPO raise awareness and consider possible harmonisation of penalties in a treaty against cybersquatting and also proposed discussions at European Union level.

WIPO is preparing for an event on tasting, kiting and other secondary market activities to be held at the end of 2007, states WIPO Deputy Director General Francis Gurry.

"Now that the UDRP [ICANNís domain dispute system] is in place, I think we could consider a treaty. I would have given a very different answer five years ago, because then a treaty would have been an inadequate response to cybersquatting. But now we can look at the evidence and experience we got and think about the possibility of the treaty."

The UDRP, (the Uniform Domain Name Dispute Resolution Policy), allows trademark owners to gain fast-track dispute resolution with WIPO, (the biggest dispute settlement provider). In a potential treaty, Gurry said firstly there had to be discussions among interested member states, and also find more out on the problem before pursuing a treaty or simply making a modification to the UDRP.

WIPO could raise awareness of the IP community in the negative effects, and bring it before ICANN to ask for them to take some responsibility. "We are told it is a big problem and we see evidence in the cases and inquiries we get..what is harmful and what is normal practice."

Overregulation may damage the speed in penetrating societies and should be avoided, Gurry said, adding a caution against quickly asking for criminal measures. "Nobody wants to over-regulate the Internet but I am not convinced that there is a benefit to society from tasting practices, and so might be able to be considered for changes."

It is difficult to conjure up statistics on possible damage caused by tasting or kiting, "the numbers would be staggering. I think there are billions of dollars lost," she added, taking together everything including diverted revenue streams for advertisements based on brand attractiveness to lost customers ending up with competition.

John Berryhill is a patent attorney practicing in Philadelphia who is well-versed in representing domain registrants and trademark claimants in WIPO UDRP proceedings. He drew a different conclusion and viewed criticism of tasters with scepticism. Measuring loss in advertising is hard he said and instead of looking only at the domain name tasters, he recommended looking at which browser software vendors and search engine providers have been implemented.

"If I canít spell the name of a site I am trying to reach, and I type the wrong thing into the address bar, then one of three things will happen. Either I am a very sophisticated user who doesnít have the default [Microsoft] Explorer browser and do not use search plug-ins, in which case I get an error message; or I am a normal user and my browserís default search takes over and I get search results, including paid ads, from MSN, Yahoo, Google, AOL, or whatever default search to which my browser falls over. The third option is that the domain name was registered by someone who connected the domain name with search results - a taster who had parked the domain, for example. From a usersí point of view the second and third results are the same.

Now, if those search results lead back to an advertiser who owns the correct spelling of the domain name, the argument is that the advertiser loses money by paying referral fees for that traffic. Of course, the advertiser could itself own and manage all of those domain names, in which case the advertiser would lose money by having to pay for registration and management of the domain names.

It would certainly benefit the large search companies, since they would get the revenue from non-existent domain searches directly, instead of having to share the revenue with domain tasters."

He mentioned if he were a Google shareholder, that he would certainly want to eliminate domain tasting. Berryhillís own interpretation of trademark owners not enforcing rights against browser vendors and the search companies stated: "Letís face it, the entire economy of domain tasting is driven by the revenue paid out by Yahoo and Google for advertising systems."

A legal claim against a taster, but not the big search engine company, may be more financially valuable than the domain name. "There have been lawsuits filed on the basis of tasted domain names which were discarded before the end of the five-day period. What that means is that the domain names did not receive any traffic or make any money at all. The ACPA [the US anti-cybersquatting law] permits a damage request by the [trademark] owner of up to $100,000 per domain name. So the proposition is that I can obtain tens of thousands of dollars from a domain taster on the basis of a domain name that didnít make them five cents, and wouldnít make me five cents either." said Berryhill.