Domain-name wars: Rise of the cybersquatters

Trademark owners say cybersquatting on the Web has gone too far -- and they're pushing back.

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Ignoring the problem is getting harder to do as the amount of brand abuse continues to rise. Cybersquatting activity rose by 18% last year, with a documented 440,584 cybersquatting sites in the fourth quarter of last year alone, according to MarkMonitor's annual Brandjacking Index report.

Lego's Kjaer has noticed an uptick in activity as well. "The number of cases in our monitoring reports and number of UDRPs has definitely increased," he says. And WIPO cited an 8% jump in dispute filings in 2008, to 2,329 complaints -- a new record.

Now, ICANN is preparing to open a potentially unlimited number of new top-level domains (beyond the current .com, .biz, etc.) as early as the first quarter of 2010, and intellectual property holders worry that the cybersquatting problem may be spinning out of control. That has them pushing hard for reforms.

Computerwrld.com

Computerwrld.com: domain parking or "typosquatting"? Click to view larger image.

Free ride

Ten years ago, most cybersquatters redirected users to porn sites or tried to sell domain names associated with major brands back to their rightful owners. But today advertising-based "domain-parking" sites are the fastest growing cybersquatting problem.

"Domainers" build portfolios of thousands of domain names and profit by reselling the names or selling advertising on those sites. They may generate revenues by posting pay-per-click ads (where the site owner receives payment every time a visitor clicks on an advertising link) and other advertising content.

Advertising-supported domain-parking sites that exploit trademarked names damage those brands by diverting traffic away from the brand owner's site -- or worse, by linking prospective customers to competitors' products. InterContinental Hotels Group suffers from both, says Lynn Goodendorf, global head of data privacy at Denham, England-based IHG.

Goodendorf says she doesn't like domain-parking cybersquatters, but she has to prioritize her activities. IHG will go after cybersquatters when the sites include objectionable content -- as Lego did in the FreeLegoPorn.com case -- or if they contain malware or refer visitors to competitors.

Although she's not happy about it, the company doesn't have the time or resources to pursue cybersquatting domainers whose sites contain more generic advertising, Goodendorf explains.

Even domain-parking sites that don't include advertising are a problem, contends Verizon's Deutsche. "Cybersquatters who register and hold onto valuable brands harm trademark owners by taking names the trademark owner could use for itself," she says.

Domain parking has transformed from a cottage industry to a big business over the past five years, as has cybersquatting activity associated with domain parking, says Doug Isenberg, an attorney at The GigaLaw Firm, an Atlanta-based firm that specializes in domain-name disputes. The reasons are simple: Start-up costs for domainers are low, the potential financial gain is huge, and cybersquatting penalties -- the potential loss of the domain name in a UDRP proceeding -- are small.

Domainers who register variations on popular trademarked names can drive up site traffic. This increases income -- and the value of the domain name, which they can then resell at a premium.

The cost of maintaining a domain can be as little as $6 per year. "If you can make $1 a year on domain traffic, that's worth keeping," Isenberg says.

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