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Dot-Complicated: New Domain Names Bring Opportunities, Concerns

In January 2012, ICANN began accepting applications for new top-level domain names. We asked franchise attorney Keith Klein to provide additional information about this and relevant information for pursuing a customized top-level domain name. Klein is a partner at Bryan Cave LLP and is certified by the California Board of Legal Specialization as a specialist in franchise and distribution law.

Q: New top-level domain names are now for sale. What should franchisors know?
A: Currently, Internet domains consist of 22 generic top-level domains (gTLDs), such as .com, .org, .net, etc.; and more than 250 country code top-level domains (ccTLDs), such as uk, .mx, .jp, etc. Starting in January 2012, ICANN, the nonprofit organization that governs Internet domain names, began accepting applications for new gTLDs. ICANN expects to receive hundreds of applications for domains in four categories: (1) generic word TLDs (e.g., .shop, .radio, .franchise); (2) corporate or brand TLDs (e.g., .franchiseupdate, .bryancave) owned by trademark owners; (3) community TLDs (e.g., .historicpreservation) where domains are limited to members of a community; and (4) geographic TLDs (e.g., .losangeles, .london) owned by cities and geographic regions. The new TLDs will also allow the use of certain non-Latin characters, allowing them to be in the native language of non-Latin based alphabets.

Q: Can a franchisor buy the .brand TLD for their system?
A: Yes, they could own a gTLD with their brand name. This means that they will own and control their new gTLD. For franchisors and others not already in the domain name business, they will be entering into a new business line: that of a domain registrar. Obtaining a gTLD is not inexpensive. In addition to the $185,000 evaluation fee and ongoing registry operating costs, applicants must demonstrate sufficient financial depth to keep the registry fully operational for at least 3 years, even if the business plan does not achieve its objectives.

Q: What are some of the benefits to owning a gTLD?
A: There are many potential benefits. The owner will be the domain registrar with the power to regulate who can obtain second-level domain registrations and the cost of the domain registrations. For franchisors and other trademark owners, this means that if they obtain a gTLD for their trademark they can limit second-level domain registrants to authorized franchisees, employees, and others the owner wants to allow into the brand community. Using a .brand gTLD may be the next opportunity to connect, socialize, and create a social community with a brand's customers and followers. Ownership of a brand gTLD may also be a way to ensure with customers and contract counterparties. The brand owner could advise all customers and counterparties that they will receive electronic communications only from the .brand gTLD and should communicate with persons associated with the brand only through the .brand gTLD or through an email address using the .brand gTLD. It also may simplify trademark enforcement as brand owners will be able to quickly identify unauthorized uses of the brand (e.g., anyone not using a domain under the new .brand gTLD).

Q: What deadlines should franchisors know about?
A: The registration application process has the following milestones: (1) January 12, 2012: application window opens; (2) March 29, 2012: last day to register for access to the TLD Application System; and (3) April 13, 2012: application window closes. Before an applicant can complete and submit their application they must complete a registration. Registration consists of several steps, including completing an applicant profile, a legal review, and submitting a first deposit. ICANN advises applicants not to wait until the deadlines to register and submit applications. ICANN advises that the application evaluation process can take as little as 9 months and as long as 20 months (or longer) to complete.

Q: How does a brand owner that does not buy their gTLD protect their brand?
A: After the application process is complete, ICANN will publish portions of all applications. At that point, there will be a public comment period and a formal objection process. ICANN advises that the formal objection process will last for approximately 7 months. Formal objections using pre-established Dispute Resolution Procedures may be filed on any of four specific grounds, including confusion with an existing or applied-for gTLD, and legal infringement. There are no other grounds to object to a gTLD. All franchisors (and for that matter all trademark owners) are well advised to monitor the application process, whether or not they apply for a new gTLD. A legal rights objection may be made based on registered and unregistered trademarks.

Following the launch of the new gTLDs, franchisors and other rights owners must continue to monitor and enforce their rights in the domain names registered under the new gTLDs. ICANN currently proposes to have a "trademark clearinghouse" that will assist in the prelaunch sunrise period for the new gTLDs. Trademark owners will want to avail themselves of the clearinghouse so that they may take advantage of the proposed Uniform Rapid Suspension System to challenge domain names that are identical or confusingly similar to the trademark. Following this process there will likely still be the traditional enforcement mechanisms.

Q: What are the next steps?
A: The new gTLDs present an opportunity for brand owners to regulate and control their brands on the Internet and potentially open new business methods and ways to connect with their customers and franchisees. Brand owners with the financial wherewithal and who see a business reason will have to go through the application process. At the same time, all trademark owners will initially need to watch the proposed new gTLDs, and then expand their domain name registration procedures to include registrations under the new gTLDs and their policing of domain registrations under the new gTLDs they do not obtain.

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