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The Rise of a Secondary Market for Domain Names (Part 1/4): A Tale of Competing Interests

Gerald M. Levine

The Trademark Act of 1946 defines trademarks and service marks to include "any word, name, symbol, or device, or any combination thereof." [1] Marks composed of lexical and numeric elements (as opposed to images) also can be described as strings of characters. Before the Internet there was no commercial use of such strings other than as marks, but the functionality of the Internet depends on strings of lexical and numeric characters in the form of domain names that serve as electronic addresses. A domain name is an "alphanumeric designation." [2] These designations are essentially the result of transforming the vocabulary of 0s and 1s into "human-friendly forms." [3] Without this technical legerdemain the Internet would be unworkable.

In their native habitats no one would confuse marks and domain names, but for navigating on the Internet, their difference is narrowed to their functionality "as part of an electronic address." This raises the specter of marks and domain names being confused with each other. And herein lies the seed of their owners' competing interests. Mark owners are entitled by law to exclusive use of their marks in commerce, which includes the virtual marketplace, but these rights now must be balanced against those of domain name holders who may lawfully have registered the same characters as domain names.

In their separate dominions, marks and domain names can be valuable property. The conflict occurs when domain name owners (1) have registered strings identical or confusingly similar to marks; (2) lack rights or legitimate interests in them; and (3) have registered and are using them in bad faith. The resolution of such disputes requires a balancing of each party's rights. There is nothing in the law that necessarily prohibits persons from registering strings of lexical or numeric characters identical or confusingly similar to marks, but it is unlawful for investors to acquire domain names for the sole purpose of capitalizing on the goodwill and reputation of corresponding marks.

Soon after the introduction of the internet, and increasingly after investors began realizing that web addresses were potentially valuable assets (sometimes even before mark owners came to the same realization only to find themselves under siege), they went on acquisition sprees for domain names composed of generic terms, which occasionally brings them into conflict with mark owners. As I will explain more fully below, the value of domain names for investors is principally realized in two commercial ways: (1) monetizing through pay-per-click advertising and (2) reselling them.

My focus in this article is on sales of domain names through a secondary market that is now well established and thriving. It is a curious fact, and may come as a surprise, that the emergence and rise of this secondary market for domain names has been facilitated by panelists adjudicating disputes under the Uniform Domain Name Dispute Resolution Policy (UDRP). In what follows, I will examine how panelists appointed to hear cybersquatting complaints created a body of law that has helped the domain name secondary market to thrive.

Endnotes:

[1] 15 U.S.C. §1127, Construction and Definitions.
[2] Id. ("The term 'domain name' means any alphanumeric designation which is registered with or assigned by any domain name registrar, domain name registry, or other domain name registration authority as part of an electronic address on the Internet.").
[3] The Management of Internet Names and Addresses: Intellectual Property Issues, Final Report of the World Intellectual Property Organization Internet Domain Name Process (Apr. 30, 1999), ¶ 22. The report is hereinafter referred to as the WIPO Final Report. It is available here on the Internet.

Other parts in this series:

Part 1: A Tale of Competing Interests
Part 2: Origins of the Competition
Part 3: Domain Names as Virtual Real Estate
Part 4: Facilitating the Secondary Market

Originally published in Vol. 26, No. 3 of Bright Ideas (Winter 2017), a publication of the Intellectual Property Law Section of the New York State Bar Association.

By Gerald M. Levine, Intellectual Property, Arbitrator/Mediator at Levine Samuel LLP Information about the firm can be found on the Firm’s website at iplegalcorner.com. Mr. Levine has a litigation and counseling practice representing clients in Intellectual Property rights and management, Internet and Cyberspace issues, domain names and cybersquatting, as well as a diverse range of legal and business matters from working with client to resolve commercial disputes, to copyright and trademark counseling and registrations. Visit Page
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