Registrars under fire in domain disputes

Are domain registrars making money from cybersquatters at the expense of legitimate brands? If so, why isn't ICANN stopping it?

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Some registrars, for instance, offer services and automated technologies that domainers can use to monetize Web pages with pay-per-click advertising. "The technology exists to have an automated Web page appear almost immediately after registering a domain name, and have links on that page relative to a particular industry," says Doug Isenberg, an attorney The GigaLaw Firm in Atlanta. Those domain names may be legitimate, he says, but often they're not.

Verizon has pursued thousands of cybersquatters in court and says that registrars are at the center of the problem. "Most of the registrars had hundreds or thousands of names [specific to Verizon and its brands] in their portfolios," Deutsche says.

One of Verizon's biggest victories came last December, when it won a $33 million judgment against OnlineNIC Inc., which Deutsche says is the largest registrar in China. The company, which lists a San Francisco address on its Web site, had registered 663 domain names that were variations on Verizon brands, according to the complaint. Verizon was awarded $50,000 per domain name.

Also in Verizon's sights is Lead Networks Domains Pvt., a Mumbai, India-based registrar that Verizon claims actively solicits domainers and then protects their identities behind India's weak intellectual property laws. Not only can complainants not find out who the registrants are, Verizon contends, but Lead Networks has been known to file "phony lawsuits" that can tie up the UDRP process for years. It then negotiates a payment with the complainant for the domain name in dispute.

In February, after Lead Networks established a U.S. presence, Verizon sued. And Verizon isn't the only disgruntled intellectual property holder to have taken action against Lead Networks. In April, WIPO submitted a formal letter of complaint (download PDF) about the company to ICANN, which says it is investigating.

Undue influence?

Some intellectual property owners contend that ICANN has been less than prompt in responding to their complaints about registrars. "All the complaints to ICANN [about registrar misbehavior] have fallen into a black hole," Deutsche says.

ICANN may have sound policies in its contracts with registrars, but it "has been weak" on compliance, says Lynn Goodendorf, global head of data privacy at InterContinental Hotels Group PLC, which is based in Denham, England.

Paul Levins, vice president of corporate affairs at ICANN, disagrees on both counts. ICANN "is aware of the manner in which several registrars conduct their business," he says, noting that its auditors are investigating "a small number of registrars and their practices relative to implementing UDRP panel decisions."

In addition, ICANN has responded to complaints over the past year by beefing up its compliance audits of its 952 accredited registrars worldwide, Levins says. In that time, it has doubled the number of auditors from two and a half full-time positions to five, and it has decertified 10 registrars and put 10 others on notice. The vast majority of registrars are fully compliant with accreditation agreements, he says.

Part of the problem behind timely resolution of disputes, say critics of ICANN, may be that the registrars (which sell and register domain names) and registry operators (which administer top-level domains) provide most of ICANN's funding. "Ninety-three cents of every dollar that comes to ICANN comes from registrars. It gives them outsized control," says the IPC's Metalitz.

The vast majority of ICANN's funding does indeed come from registrars, Levins confirms. (ICANN receives about $22 million annually from registrars -- 20 cents per year for each of the more than 109 million registered domain names under the 16 generic top-level domains its registry operators administer.) But he says budgets are developed by a "community of interests," including the IPC, and are not unduly influenced by registrars. The process is "extraordinarily open to scrutiny," he says.

"If we were being influenced by registries and registrars, there's no way we could have gotten more teeth into our compliance efforts," he adds.

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