By  on July 22, 2011

Battling counterfeits on the Web could become a little tougher.

Luxury and fashion brands are still digesting a major change in Internet domain names that broadens the generic names that can be used from the current 22 to an infinite number. It means that names like “.com” or “.org” could soon be joined by ones such as “.apparel”; “.footwear”; “.handbags,” or even “.Prada” or “.PoloRalphLauren.”

In a small auditorium in Singapore last month, a group of 17 Internet specialists, policy advisers and telecommunications business gurus voted on the matter, which will drastically change the Web. With a majority of 13 votes, the Internet Corporation for Assigned Names and Numbers (ICANN) voted to open the number of Internet name endings — called generic top-level domains [gTLDs].

The decision drew a standing ovation replete with whistles, hoots and camera flashes, but the implications for brand protection are already worrying companies overburdened with counterfeiting issues.

Although observers believe the ability for companies to register their own brand names as domain ones will be a net positive for brand ownership and protection, the worry is over the ability to register generic domains like “.apparel.” In this scenario, the owners of “.apparel” will be able to sell secondary domains, which will likely increase cybersquatting, adding yet even more corners for counterfeiters to hide in.

“It’s certainly not a plus,” said Bereskin & Parr partner Dan Bereskin, who works with outerwear brand Canada Goose Inc.

A staunch defender of its marks, Canada Goose recently busted a counterfeiting ring in China with the help of local authorities there. The company, which also works with other outerwear apparel brands against counterfeiters, said it’s “taking a wait and see attitude” in regard to whether it will register its name as a domain.

“What’s problematic is that there are more spaces [on the Internet] to police,” Steptoe & Johnson attorney and ICANN treasurer Brian Winterfeldt said. “For secondary domain names, a lot of the policing is on the brand owners, which frustrates people.”

The trouble with secondary domain names is that individuals registering them can misspell or even register company names that have already been registered as primary domains. This means that “Prada.apparel” or “Pradas.apparel” could be a potential domain. The only real penalty is a warning, Winterfeldt said, explaining that the price to obtain a secondary domain will likely be just a few hundred dollars.

That’s a price that won’t deter counterfeiters, he said, emphasizing that even if companies decide not to register a primary domain name, they can protect their brand by registering all potential derivations of their names now, in what ICANN calls the “clearinghouse period.”

Proponents of Internet expansion argue that owning your own domain is so empowering that it outweighs any negative consequences.

“I’m advocating my clients to jump on it,” said Robert Tucker, partner of Tucker & Latifi LLP, whose firm represents fashion clients like TechnoMarine, Steve Madden, Iconix Brand Group and Chrome Hearts. “Those who do a lot of e-commerce will want it. The world is not going to think ‘.shoes’ is going to belong to anyone. They will know who owns ‘.Prada’ though.”

But what is holding many brands back is the $185,000 they will have to fork over just to file an application, not to mention other costs associated with obtaining the domain name. Once the name is obtained, the company is committed to a 10-year contract with flat annual dues of $25,000 for the first 50,000 secondary domain names registered. After 50,000, there’s a 25-cent fee per name registered.

“Overall, my conservative estimate [to obtain a primary domain] will cost $750,000. Not everyone has that in their legal budgets,” said Yahoo Inc.’s senior legal director of global brand and trademarks J. Scott Evans, who has worked with ICANN in the past to draft policy to resolve disputes between domain name registrants and trademark owners. While electronics companies Hitatchi Ltd. and Canon USA Inc. have already indicated that they will apply for primary domains, Evans admitted: “There are all kinds of issues I don’t think they [both ICANN and the brands] are prepared for.”

Even so, ICANN has taken steps to ensure that there’s oversight throughout the domain registration process. Companies can begin filing for applications to obtain a domain from Jan. 12 for a window of 90 days. While there is no limit on applications, no more than 1,000 new domains can go live per year.

Filling out the application, which is several hundred pages long, is just one part of the painstaking process. The application must clear several stages, including review boards and background and financial checks.

While new domain names won’t start appearing on the Internet until 2013 — at the earliest — businesses should start thinking about registering their names now, experts said.

“This has huge implications for organizations,” said Fred Felman, chief marketing officer at online security firm MarkMonitor. Despite gaining business from brands in need of his company’s research and protection strategies, Felman, who was present for ICANN’s vote, said he has been “rabidly unsupportive of the program.”

While ICANN said that the driving force behind its decision is to “expand competition,” Felman added that many “hypothesized” that ICANN voted to open domains in order to generate revenue.

That’s debatable, according to experts, who hinted that it’s the buyers of generic domain names who are likely looking at this as a business venture.

While that’s not the case for everyone — legitimate businesses, nonprofit organizations or cause-oriented groups may want to own generic domains — those who apply for names like “.shoes” stand to collect money every time a secondary name is registered to their primary registry.

“Whether it’s ‘.shoes’ or ‘.picture,’ any expansion of the Internet is, by definition, bad for brands,” said Baker Hostetler intellectual property attorney Heather McDonald. “But I’m not sure it’s going to add to it [counterfeiting] exponentially.”

What is certain is that ICANN’s decision will help line the pockets of law firms, as the expansion of the Internet is likely to bring about a firestorm of legal issues, she said.

If Abercrombie & Fitch Co. wanted to register its Hollister brand as a domain name, it could have the city of Hollister, Calif., to contend with, she said, explaining that even though the ICANN board will decide which Hollister deserves the domain name, the decision will likely be revisited in courtrooms, too.

“Where technology is concerned, the law is completely at odds with itself,” she said.

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