‘.brand’ new gTLDs – lessons learned and looking ahead to a second round

As the dust begins to settle on the first round of applications for new generic top-level domains (gTLDs), applicants are taking a long, hard look at what lessons can be learned – especially with regard to ‘.brand’ gTLDs and likely challenges in the second round

The Internet Corporation for Assigned Names and Numbers (ICANN) is a not-for-profit public benefit corporation created in 1998 to assume responsibility for Internet Protocol addresses and the domain name system (DNS). Among other DNS-related matters, ICANN is responsible for introducing new top-level domains (TLDs) into the DNS and overseeing their management.

About 34%, or 664, of these new gTLD applications were for ‘.brand’ gTLDs – gTLDs corresponding to a trademark, brand or company name (eg, ‘.cartier’ ‘.marriott’ and ‘.samsung’). However, many ‘.brand’ applications were later withdrawn (eg, ‘.cadillac’, ‘.garnier’ and ‘.hilton’). Although ICANN did not classify ‘.brand’ gTLDs any differently from other gTLDs as part of the application process – whereas separate classifications were created for geographic gTLDs (eg, ‘.berlin’ and ‘.london’), community TLDs (eg, ‘.gay’ and ‘.thai’) and IDNs (eg, ‘.大拿’ and ‘.कॉम’)– ‘.brand’ gTLDs will operate differently from other new gTLDs and have negotiated (or are in the process of negotiating) distinctive treatment by ICANN in several regards as a result.In 2011 ICANN embarked on a programme to add a potentially unlimited number of new generic TLDs (gTLDs – as opposed to country-code TLDs (ccTLDs)) to the 23 already in existence (eg, ‘.com’, ‘.org’, ‘.net’, ‘.biz’ and ‘.info’). The goals of the new gTLD programme include enhancing competition and consumer choice, and enabling the benefits of innovation via the introduction of new gTLDs, including both new ASCII (English alphabet) and internationalised domain name (IDN) gTLDs (ie, gTLDs in non-English alphabet scripts, such as Arabic or Cyrillic). The application window ran from January 12 2012 to May 30 2012 and ICANN received 1,930 applications for about 1,400 unique new gTLDs. Ultimately, over 1,000 new gTLDs are likely to go live within the first few years of the new gTLD programme.

This article examines the ‘.brand’ experience through the first round of new gTLDs and highlights a number of lessons that have been learned. It then looks ahead to a second round of new gTLDs and suggests possible areas for improvement in the programme and other considerations for possible future ‘.brand’ applicants.

‘.brand’ applicants in first round of new gTLDs

Why apply for a ‘.brand’ gTLD?

There are a number of compelling reasons for companies to acquire their own ‘.brand’ gTLD. Using the gTLD, a rights holder can create shorter, more memorable domain names, including more direct and easily navigable diversified webpages for targeted audiences or content. For example, instead of directing users to ‘walmart.com’ and then navigating to a search page for store locations, Walmart could implement ‘stores.walmart’ or even more targeted location pages by state or city, such as ‘illinois.walmart’ or ‘chicago.walmart’. This kind of use can help the rights holder to intensify brand awareness and improve user experience with its internet resources.

In addition, a ‘.brand’ gTLD provides a host of new creative opportunities for marketing at the intersection of the brand name and functional online resources, as well as sponsorship and partnership opportunities. For example, cross-promotion through a ‘nascar.walmart’ domain promotes both brands and provides a functional online resource for further information and promotion and a platform for further customised marketing opportunities (eg, ‘contest.nascar.walmart’).

Finally – and perhaps most importantly – a dedicated, brand-controlled ‘.brand’ gTLD significantly increases security and improves consumer protection in the online marketplace, further improving brand goodwill and consumer trust. For example, by migrating all Walmart internet resources to the ‘.walmart’ gTLD, along with appropriate public outreach and information, consumers will know to trust websites in this gTLD as being part of the official, authorised and secure Walmart online space, while any other online resources purporting to be affiliated with Walmart can be easily identified as illegitimate. This will also facilitate streamlined trademark enforcement and anti-cybersquatting measures, insofar as all non-‘.walmart’ domain names and uses of the ‘.walmart’ trademark will be prima facie infringing or otherwise abusive.

In short, ownership of a ‘.brand’ gTLD and the concomitant inventory of second-level domains provides opportunities for flexible and creative use and increased online security for the brand.

34%

Percentage of new gTLD applications that were for ‘.brands’

 

Application process basics

The new gTLD application process (for ‘.brand’ and all other new gTLDs alike) began with the submission of a new gTLD application during the designated application window, along with the necessary fees ($185,000 per application), to ICANN. The new gTLD application was outlined in the new gTLD Applicant Guidebook and consisted of 50 questions (some including multiple parts) requesting information including:

  • applicant contact information;
  • the names of officers and directors of the applicant (assuming that the applicant was a corporation or similar organisation);
  • the applied-for gTLD string;
  • a description of the mission and purpose of the gTLD;
  • a description of the proposed registry services;
  • technical and operational questions (touching on registration data, abuse prevention and mitigation, rights protection and security); and
  • financial questions to ensure that the applicant had sufficient resources to fund the gTLD registry.

A completed new gTLD application could easily span the equivalent of hundreds of pages.

Once the application was completed and submitted, ICANN performed an administrative completeness check to ensure that all mandatory questions had been answered, all required supporting documentation had been provided in the proper format and the evaluation fees had been received. Once the application window had closed, ICANN published all complete applications and launched a consultation period, during which members of the public could comment on the applications. In parallel with this, government representatives could notify applicants of potential issues under national law or national sensitivities relating to the applied-for string (a governmental advisory committee early warning).

After completing the administrative completeness checks, and while the consultation period was still ongoing, ICANN began the initial evaluation phase. During this phase, ICANN reviewed the applied-for string to ensure that it was unlikely to cause security or stability problems in the DNS, including issues caused by similarity to existing TLDs or reserved names. ICANN also reviewed the applicant to determine whether it had the requisite technical, operational and financial capabilities to properly operate the gTLD. If an application failed the initial evaluation or was inconclusive, there was an opportunity – in certain circumstances – for an extended evaluation.

Another key stage in the application process was the filing of objections against applied-for strings. ICANN provided several bases for objecting to an applied-for string, including string confusion, legal rights, limited public interest and community. Of greatest importance for ‘.brand’ applicants was the legal rights objection process, under which rights holders could object to competing applications for their ‘.brand’ string – mostly involving competing applications for generic or descriptive terms to be used as open gTLDs rather than ‘.brand’ gTLDs (eg, competing ‘.brand’ versus open generic applications for ‘.coach’, ‘.express’ and ‘.limited’). In the vast majority of such cases, the open generic applicants prevailed on the basis of freedom of expression.

Once evaluation and objections were completed, remaining applications for the same string (or strings determined to be confusingly similar to one another) were placed in a contention set, to give the applicants the opportunity to resolve the issue themselves. If there was no such resolution, the string would be put to auction and awarded to the highest bidder. As of May 2015, some contention sets are still unresolved, with auctions pending.

Once the contention set was resolved, the remaining applicant could proceed to execute a registry agreement with ICANN. This ended the application phase and began the transition to delegation phase.

New gTLD registry agreement and Specification 13

The registry agreement is the primary contract between ICANN and the gTLD registry operator, which sets out each party’s rights and obligations with respect to the gTLD’s operation. The original proposed new gTLD registry agreement was set out in the Applicant Guidebook, although this underwent several revisions leading up to the current version dated January 9 2014.

As the new gTLD registry agreement was refined and negotiated between the community and ICANN, ‘.brand’ applicants identified a number of issues posed by the base registry agreement which would hinder their ability to operate their gTLDs on a closed basis solely for their own company purposes. As a result, a number of ‘.brand’ applicants negotiated an addendum to the base registry agreement – Specification 13 – specifically for ‘.brand’ registries, which modified the registry agreement to enable such envisioned use of the gTLD. The ICANN board approved Specification 13 on March 26 2014.

More specifically, Specification 13 provides for the following changes to the rights and obligations of ‘.brand’ gTLD registry operators:

  • The registry operator is exempt from compliance with the requirements of Specification 9 of the registry agreement, also known as the Registry Operator Code of Conduct, which requires non-discriminatory access by accredited registrars to all registry services;
  • The registry operator is exempt from the requirement to provide a sunrise period and compliance with any requirements pertaining to this;
  • The registry operator may designate no more than three ICANN-accredited registrars to serve as the exclusive registrar(s) for the gTLD; and
  • ICANN may not delegate the gTLD to a successor registry operator for two years following the expiration or termination date of the current registry agreement for the gTLD without the registry operator’s consent, unless ICANN reasonably determines that such a transition is necessary to protect the public interest.

In order to qualify for the Specification 13 addendum, the following criteria must be satisfied:

  • The gTLD must be identical to a word mark that is registered and valid under applicable law, proof of which is provided to ICANN in the form of an accurate and complete copy of the trademark registration;
  • Only the registry operator, its affiliates or trademark licensees may be registrants of domain names in the gTLD; and
  • The gTLD must not be a ‘generic string’ as that term is defined in Specification 11 of the registry agreement.

To date, 505 gTLDs have applied for Specification 13. Of these, 218 have been granted by ICANN, 25 were not approved or withdrawn and 261 are pending a determination. ICANN has provided no further publicly accessible information as to why any particular application was denied or withdrawn, and does not specify whether the application was denied by ICANN or withdrawn by the applicant before a decision by ICANN. Of the applications listed as not approved or withdrawn, some are for clear brand names (eg, ‘.volvo’), while others are for generic terms and phrases, which in certain contexts might function as trademarks (eg, ‘.translations’ and ‘.cashbackbonus’).

All applications for Specification 13 were posted for review and public comment by the community. Only one substantive comment has been filed in connection with such applications, which requested that ICANN deny the Specification 13 application for the ‘.man’ gTLD, citing its generic meaning. The ‘.man’ Specification 13 application was granted by ICANN.

It is not yet clear what steps a ‘.brand’ gTLD could take in the event that its Specification 13 application is not approved, other than the standard ICANN reconsideration request and other review and accountability mechanisms; although such a gTLD applicant could likely still apply for a Registry Operator Code of Conduct exemption, as many ‘.brand’ gTLD applicants did before the passage of Specification 13. That said, ICANN has indicated that a gTLD operator can apply for Specification 13 at any time, including even after registry agreement execution. Therefore, if a particular application was withdrawn or rejected, but the gTLD is later deemed to satisfy the necessary criteria, the applicant or registry operator can then submit or resubmit its application for Specification 13.

Negotiating the ‘.brand’ registry agreement

Although the base registry agreement was drafted through extended negotiations between ICANN and the ICANN community, ICANN has afforded applicants the opportunity to attempt to further negotiate the terms of their individual registry agreements. However, many ‘.brand’ applicants have found ICANN unwilling to truly negotiate terms in good faith, instead receiving blanket rejections to requested amendments – even where ICANN has suggested that it agrees with the rationale for the proposed amendment. Therefore, at this time, it appears that opportunities for meaningful negotiation are quite limited and any further changes to ‘.brand’ registry agreements are unlikely.

As a result, many ‘.brand’ applicants have proceeded to execute the registry agreement essentially in its base form, without any additional modifications obtained through direct negotiation with ICANN. Given that the registry agreement term is 10 years, this represents a significant commitment for ‘.brand’ gTLD operators to contracts that may prove problematic for their business needs. Of course, the fallout from this process will require more time to develop before any meaningful analysis can be undertaken.

Launching and operating a ‘.brand’ gTLD

Basics of launch

Once a registry agreement is executed with ICANN, a ‘.brand’ gTLD (like any other gTLD) must undergo pre-delegation testing. This is a technical testing phase, typically handled by the registry back-end service provider, to ensure that the gTLD will function properly and will not cause any stability or security issues in the DNS once delegated into the root zone. Once pre-delegation testing is successfully completed, the gTLD proceeds to delegation, during which it is officially added into the root zone of the Internet.

Once the gTLD is delegated into the root zone, it is considered live on the Internet and may begin to register second-level domains in the gTLD.

Basics of general operation

All new gTLDs must operate two basic domain names: ‘nic.TLD’ and ‘whois.TLD’. The first – the network information centre domain – is the gTLD’s default homepage, where it must post its various mandatory policies pursuant to the registry agreement and ICANN consensus policy. The ‘whois.TLD’ is the page through which registrant data in the gTLD is accessible (ie, the identity and contact information for registrants of domain names in the gTLD). For ‘.brand’ gTLDs, all such data will reflect either the registry operator itself or its affiliates or trademark licensees, pursuant to Specification 13. The ‘.brand’ gTLD satisfies minimum operational requirements so long as these two domain names are in place (along with pertinent policies such as terms of use and anti-abuse).

Although defensive acquisition of a ‘.brand’ gTLD was the impetus for many applications, ‘.brand’ gTLDs provide a platform for a wide variety of business uses. Although adoption of ‘.brand’ gTLDs for uses beyond the mandatory minimum requirements has been slow, many ‘.brand’ registry operators are in the process of developing possible uses for their gTLDs. Ultimately, many ‘.brand’ operators may migrate their entire online presence to their ‘.brand’ gTLD – doing so is necessary to realise the full benefits of the gTLD. In particular, it may allow rights holders to take a fresh approach to building their online resources from the ground up without being limited by the unavailability of a desired domain name.

Any transition is likely to be slow, given the lack of general consumer awareness regarding the new gTLD programme as a whole and a lack of strong interest within companies to devoting time and resources to building up the gTLD space. However, brands could ultimately be at the forefront of increasing consumer awareness of the programme through marketing campaigns aimed at educating consumers about their ‘.brand’ space. In addition, brands are likely to have greater resources from their core businesses to leverage in supporting their gTLDs, whereas many non-‘.brand’ gTLDs will require income from the gTLD itself in order to market and develop it.

For now, it appears that many brands are taking a measured approach, observing the marketplace and working with business and marketing teams to develop uses for their ‘.brand’ gTLDs. It remains to be seen which ‘.brand’ operators will take the lead in innovating in the ecosystem, as there has been very little actual use and development of ‘.brand’ gTLDs to date.

Two-letter and country or territory names

One critical caveat to the otherwise relatively free range that ‘.brand’ gTLDs have in developing domain names is that restrictions are placed on the use of two-letter names (eg, ‘aa.TLD’, ‘my.TLD’ or ‘it.TLD’) and country and territory names (eg, ‘canada.TLD’ and ‘japan.TLD’) at the second level. This limitation is imposed on all new gTLDs, but it may affect ‘.brand’ gTLDs most severely, as geo-targeting is extremely important to brand owners and was a major factor in many companies’ decisions to pursue a ‘.brand’ gTLD.

That said, ‘.brand’ operators can seek permission to use two-letter second-level domains; but government and other objections to the use of certain two-letter names (typically, those corresponding to two-letter country codes) can prevent their use by the registry operator even where other two-letter combinations are authorised.

In addition, ICANN is working with government representatives to devise a streamlined procedure for registry operators to obtain permission to use country and territory names at the second level, which will likely consist of a database of government contacts that will receive notice upon a gTLD request for such permission and the opportunity to comment on the request.

‘.brand’ representatives within the ICANN community have lobbied ICANN to allow special permission for all ‘.brand’ gTLDs to use two-letter and country and territory names, given their closed, single-entity use model. These representatives have suggested that only well-reasoned and substantiated objections from governments citing likely confusion concerning the use of certain names should prevent a ‘.brand’ operator from engaging in such use. ICANN has not responded to these suggestions to date.

The inability for ‘.brand’ gTLDs to freely use two-letter and country and territory names at the second level may be one reason for the slow development of ‘.brand’ gTLDs, although hesitancy to execute the base registry agreement in light of the limited negotiation progress has led to the slow rollout of ‘.brand’ gTLDs compared to open unrestricted gTLDs, which have generally sought to launch as soon as possible, with significantly higher tolerance for risk stemming from the registry agreement requirements.

Looking ahead to a second round

The ‘.brand’ experience in the first round of new gTLDs has been anything but smooth. Challenges arose at nearly every stage of the application and launch process, including the basic lack of special consideration for closed ‘.brand’ gTLD models in the application phase, hurdles in legal rights objections, challenges in negotiating the registry agreement and prohibitions on registering second-level domain names, such as country and territory names with desirable business uses. In due course, ‘.brand’ gTLDs may prove to be the most successful new gTLD model, serving a critical consumer protection and brand goodwill function; while it is currently unknown whether most open new gTLDs will be useful to the internet community or may merely serve as risky entrepreneurial ventures catering to insider domain investors and serial cybersquatters. However, a number of key improvements to the new gTLD programme should be made to facilitate future buy-in by brand owners and increased adoption and awareness of ‘.brand’ gTLDs. Some of these possible improvements are discussed below.

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A number of ‘.brands’ have gone live in recent months

Possible programme improvements

One major fundamental improvement for ‘.brand’ applicants would be the creation of specialised application criteria and an evaluation track specifically for such gTLDs. Such criteria could be tailored to the closed, single-registrant brand use model, which could eliminate the need for a number of unnecessary formalities in the application, contracting and launch processes. Streamlining the process for ‘.brand’ applicants would reduce costs for all parties involved – including the applicant and ICANN – and encourage greater participation in the programme.

In a similar vein, ‘.brand’ gTLDs would benefit from reduced rights protection mechanism-related fees, including reduced Trademark Clearing House (TMCH) start-up fees, which are warranted in light of the lack of sunrise and low probability of trademark claims notices in ‘.brand’ gTLDs. In addition, it is unclear whether a ‘.brand’ gTLD operator will be required to pay the variable trademark claims registration fee for registrations corresponding to its own TMCH-recorded marks; in any event, such fees should not be assessed for a ‘.brand’ registry to self-allocate names in its gTLD that correspond to its own ‘.brand’ TMCH-recorded marks.

In addition, improving the objection processes – by minimising fees, clarifying objection elements and criteria, improving the consistency of determinations and implementing appropriate appeals processes – would enhance the overall fairness of the new gTLD delegation process and reduce risk for potential ‘.brand’ applicants, which view the current programme terms as speculative and unduly expensive. These changes would also improve the community’s trust in ICANN and demonstrate the organisation’s accountability, which is vital for ‘.brand’ and other new gTLD applicants alike.

In addition, the provision of additional support for ‘.brand’ applicants in developing economies would be a welcome programme improvement. Most ‘.brand’ applicants in the first round were located in North America or Europe, followed by Asia-Pacific. Virtually no ‘.brand’ applicants were located in South America or Africa. Although significantly fewer global brands operate in these regions, the expansion of the global Internet would be well served by including greater geographic diversity in ‘.brand’ representation.

Finally, another possible programme improvement would be to reconsider the rules surrounding the use of certain geographic names as gTLDs, to address applications where the proposed gTLD is also a valid and subsisting trademark. Currently, the new gTLD Applicant Guidebook prohibits the use of all country and territory names, including long and short forms, and two and three-letter International Organisation of Standardisation country codes. The Applicant Guidebook also requires government support or non-objection for any name that is:

  • the name of any capital city;
  • a city name, where the gTLD is to be used for purposes associated with the city;
  • a sub-national place name, such as that of a county, province or state; or
  • the name of a UN Educational Scientific and Cultural Organisation region.

Although the current Applicant Guidebook does recognise that certain of these geographic names – in particular, city names – may also be generic terms or brand names, it nonetheless subjects gTLD applications for such names to geographic name requirements (ie, government support or non-objection).

The community saw these rules play out in the first round of new gTLD applications with respect to such applied-for strings as ‘.spa’, ‘.amazon’ and ‘.patagonia’. The difficulties encountered by such applicants demonstrate the need to review and potentially revise the rules concerning geographic names. Several efforts are underway in this area, including a cross-community working group on the use of country and territory names as gTLDs and a Governmental Advisory Committee-member-led effort to produce a proposal on the use of geographic names as gTLDs. While the brand owner community has been active in responding to such proposals, to date there has been limited participation in the cross-community working group.

Other considerations for potential ‘.brand’ applicants

Many of the issues described above, including the geographic names issues, have been flagged within a Generic Names Supporting Organisation discussion group on subsequent gTLD rounds, which will likely feed into a new policy development process to update the Applicant Guidebook ahead of any second round of new gTLD applications. Rights holders with an interest in becoming future ‘.brand’ applicants should consider participating in these community discussions, regardless of whether they participated as applicants in the first round, in order to shape a better future experience.

At a minimum, rights holders and, in particular, potential applicants for ‘.brand’ gTLDs should continue to monitor new gTLD issues within ICANN. Of particular interest may be issues surrounding the negotiation of ‘.brand’ registry agreements – including whether ICANN will make any amendments to the base agreement at the behest of ‘.brand’ applicants. In addition, potential future ‘.brand’ applicants should monitor the first round of ‘.brand’ gTLDs closely to develop use concepts, for possible contractual compliance issues and for overall successes and failures in the space.

Conclusion

There is no precise timeframe for when ICANN will open the next window for new gTLD applications, although it looks likely to be some time in 2018. The current round is far from being fully rolled out, with most first-round ‘.brand’ gTLDs yet to be launched. While first-round ‘.brand’ applicants have experienced a number of challenges, early ‘.brand’ adopters may ultimately prove to be the engine that drives broader public awareness and adoption of new gTLDs.

By the next application window, potential ‘.brand’ applicants should expect a number of changes to the application process, as well as streamlined registry operation requirements. In order to ensure improvements to the ‘.brand’ experience, rights holders which have been content to sit on the sidelines while the new gTLD programme plays out should become active in the ICANN community if there is any possibility that they may submit a ‘.brand’ application in the future. We look forward to examining further developments in the ‘.brand’ space during this time of unprecedented change and development in the domain name ecosystem.

Brian J Winterfeldt is partner and Griffin M Barnett a staff attorney at Katten Muchin Rosenman
[email protected]  
[email protected]

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