GNSO Initial Report on Domain Tasting

ICANN recently issued a report on domain tasting which often results in squatting of trademarked domains. it does appear that ICANN is poised to do something about domain tasting.  The only questions are when ICANN will act and whether it will impose a delete fee or simply end the grace period altogether.  There was no significant support for leaving the current add/grace period in place. Here are some highlights.

Executive Summary
Background: The practice of domain tasting (using the add grace period to register domain names in order to test their profitability) has escalated significantly in the last two years. ICANN community stakeholders are increasingly concerned about the negative effects of domain tasting and in the spring of 2007 the At Large Advisory Committee (ALAC) asked that the domain tasting issue be studied further by the ICANN GNSO. The ALAC request enumerated five areas of potential concern for Internet users:

1. Potential destabilization of the domain name system through excessive operational load on registry systems;
2. Creation of consumer confusion as names quickly appear and disappear, or as users are redirected to advertising or otherwise confusing sites;
3. Potential increased costs and burdens of legitimate registrants and service providers;
4. Facilitation of trademark abuse, where existing dispute resolution mechanisms may not be sufficiently timely or cost-effective for trademark holders to use against short-term infringement; and
5. Facilitation of criminal activity including phishing and pharming.

They also discuss changes that might be made to discourage domain tasting. Three potential mechanisms were discussed in particular: 1) making changes to the add grace period, such as eliminating the add grace period entirely; 2) making the ICANN transaction fee apply to deletes within the add grace period (see also 1.3 below); and 3) making contractual changes in individual registry agreements with ICANN, such as imposing
an “excessive deletion fee” as was done by PIR effective June 2007.

4.1 Constituency Views on the Effects of Domain Tasting

The BC notes that domain tasting makes up the majority of domain transactions today and states that the practice is abusive and contrary to goals of creating a fair and open Internet that encourages competition and delivers relevant experiences for all users. The BC states that domain tasting only benefits a small number of registrars and registrants while causing harm to the vast majority of Internet users. Restriction of choice is another adverse effect noted by the BC, as tens of millions of domain names are caught up in the 5-day AGP at any given time, making them unavailable to interested parties. The BC notes that the increase in domain tasting is correlated to the increase in domain registrations, and also that too many of those registrations are infringing or otherwise being made in bad faith. The BC adds that examining domain names owned by serial domain tasters shows that the objective is to monetize traffic via PPC advertising. While recognizing that domain name monetization is not illegal, the BC asserts that the combination of tasting and monetization has created an Internet environment that is counterproductive to providing all users with relevant and tailored experiences, and that is conducive to cybersquatting. The BC emphasizes the potential risks of domain tasting to end users. The BC describes a typical example, in which an unsuspecting user who mis-types a variation of a brand name into a browser bar is linked to irrelevant content, or to a competitor’s products, or to other advertisements of the infringed brand owner itself. The BC is also concerned that domain tasting ties up millions of domain names at any given time, leading to fewer choices of domain names as users find that names they want are unavailable. Moreover, noting that domain tasting has primarily taken place in .com, the BC predicts growth of the practice into other TLDs if left unchecked.

The IPC states numerous harmful effects on IPR holders, as the tasted domain names frequently are registered intentionally because they are typographical errors of trademarks, and quotes a recent report identifying domain tasting as a major factor in the recent growth in “typosquatting”, which causes consumer confusion and erodes brand reputation. According to the IPC, large IPR holders with famous or well-known brands are more likely to be exposed to domain tasting and incur costs for action against the practice, while smaller IPR holders often do not have the resources needed to take such actions. As registrants, IPR holders subsidize domain tasting when any increased costs attributable to domain tasting are passed on by registrars and registries. Harmful effects for IPR holders include lost advertising and sales revenues from parked pages associated with the tasted names, and misdirection of potential customers to competitors, exploiting the goodwill of established brands. Domain tasting also prevents IPR holders from registering and using for legitimate purposes the domain names that are being tasted. Costs for IPR holders are increased by domain tasting as they pay once when “purchasing” the keyword from an advertiser as part of its advertising efforts and pay a second time to the domain taster for directing Internet users via links from parking pages to the IPR holder’s site. IPR holders incur further costs to police tasted domain names, although efforts to police are often unsuccessful. The IPC finds that UDRP and remedies under national law are ineffective against the ephemeral nature of domain tasting. In addition, domain tasting increases IPR holders’ costs for defensive domain registrations, for enforcement and litigation against domain tasters.

The IPC further finds that domain tasting forces Internet users to sort through numerous false hits when searching for legitimate sites, leading to confusion, frustration and waste of time. Users may inadvertently end up doing business with someone other than an intended supplier, be exposed to inferior goods or services, become disappointed and lose confidence in Internet-based commerce. Users may also be diverted to potentially harmful sites, as bad actors may exploit the anonymity facilitated by the temporary nature of tasted names. Individual registrants must also bear costs passed on both by registrars and registries, and by businesses. Domain tasting harms businesses and users by restricting the selection of domain names available to registrants at any point in time. The IPC finds that all the effects of domain tasting combine to reduce the user trust in the DNS and in Internet navigation generally. In the view of the IPC, domain tasting risks turning the DNS into a mostly speculative market. Domain names, intended to be identifiers of businesses and other entities, may become mere commodities of speculative gain.

The ISPC states that domain tasting is deleterious to the stability and security of the Internet and sees the following harmful effects:

1. Domain tasting facilitates the practice of short-term infringement on and dilution of trade marks, as well as phishing. It allows criminals to employ a hit and run strategy wherein domain names may be held at no cost to the registrant for up to 5 days. By dynamically changing registrations, these malefactors can defeat the existing dispute resolution mechanisms which were not designed to deal with such short time frames.
2. The rampant use of domain tasting, and particularly its abuses, gives rise to a huge number of complaints to ISPs, both from individual consumers and businesses. It significantly weakens our customers’ trust and faith in the validity of domains and the DNS. This is a stability issue.
3. At any given time millions of domain names are being tasted and there is a high turnover from week to week. This added operational load potentially threatens the stability of the DNS. And, since all but an insignificant percentage of domain name resolutions are performed by ISP domain name servers, the burden of this excess falls on ISP members.

The Ad Hoc Group received over 200 responses to the RFI conducted as part of the Outcomes Report. Most of the respondents represented the interests of intellectual property rights owners and registrants/users. A clear majority of respondents expressed the view that the disadvantages with domain tasting significantly outweigh the benefits. Most respondents are in favour of discouraging domain tasting by eliminating the add grace period, although a number of respondents recommended alternative mechanisms, a number of which are also highlighted in the constituency statements summarized above. Allowing domain name registrations at no cost is regarded by most as facilitating domain tasting and
a majority of respondents suggest that ICANN should stipulate minimum registration fees, while some state that such action is outside of ICANN’s mandate. A number of respondents provide examples, statistics and suggested sources of additional information.

5 Conclusions and Next Steps
The practice of domain tasting is of significant concern to many constituencies and community stakeholders. These concerns have been explored for the past several months, as reflected in the Issues Report prepared by ICANN staff, and by the extensive research and data gathering conducted by the Ad Hoc Group of the GNSO Council and reflected in the Outcomes Report. Based on these reports, the GNSO Council has voted to initiate a policy development process to explore the specific policy changes that should be made to curb domain tasting.