Domain Privacy Service – Too Risky For Registrars? 07/20/2009
Posted by stuengelman in Domain Law.Tags: domain name, domain names, domain, domains, trademark, Domain Law, privacy service, privacy services, registrar, registrars, domain registrar, domain registrars, internet registry, registry, registrant, common law, due diligence, trademarks, agency, concept of agency
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There are two opposing sides in this issue, and frankly both have some merit. The “practical” side is that domain registrars offering privacy services are simply acting as “ministerial middlemen” between the domain owner and applicable registration authority, and just offering access to a service that the latter is really providing. Under this theory, the substantive, though not legal, relationship is between the domain owner and the internet registry. Hence, the domain registrar should be held unaccountable for mischief on the part of the registrant.
The “legal” side, possibly based on common law, is based on the concept of “agency.” When the domain registrar acts as intermediary on the registrant’s behalf, it becomes the former’s legal agent. Add to this the fact that the domain is actually legally owned by the domain registrar, and you are left with a strong legal, if not entirely practical, end result that the domain registrar has taken on a due diligence responsibility under the law.
Speaking purely from a “common person’s” standpoint, as opposed to that of a lawyer, I tend to support the first (“practical”) argument more. The need to protect legitimate trademark holders needs to be weighed against the business friction and resultant potential loss of availability of valuable services if the strictly legal approach is taken. To settle the issue for good, an exception needs to made in federal statute to ensure that the concept of agency does not apply to this special situation. It’s simply a matter of recognizing that the unique aspects of internet related activity do not always fit neatly into the constructs of “offline” law.
I guess if worse comes to worse, the domain registrars can pay up for more comprehensive liability insurance, but this really is skirting the issue. It would be far better for the federal authories to issue a logical, definitive opinion than for the potential defendants to be left drifting in the wind deciding about whether or not to self insure. The primary thing is to get the law right, and not leave certain parties guessing about whether or not to keep or pass on financial risk.
Internet Domain Registration Law 07/20/2009
Posted by stuengelman in Domain Law.Tags: country extensions, country specific extensions, domain, domain extensions, Domain Law, domain name, domain names, domain registration law, domains, extensions, ICANN, internet, internet domain names, internet domain registration law, lanham act, law, nexus, registered agent, trademark, trademark law, web domain
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This article is to acquaint you with some of the factors affecting which domains you can register safely; i.e., without violating any statutes or risking unpaid confiscation by others desiring to own your domain. The discussion to follow is somewhat USA-centric, so if you are not a US citizen you’ll need to research the differences that may apply to your country of residence.
Trademark Law
In the US, this is a somewhat nebulous subject, impacted by a combination of federal intellectual property law in general, trademark law specifically, applicable case law, and ICANN practices. As a general rule, it is risky to register a second level domain name identical or “confusingly similar” to a phrase already trademarked. You can check for live, trademarked phrases at uspto.gov, which provides a powerful search feature to help you.
The mere fact that a phrase is trademarked does not automatically mean you are out of luck. For example, if the trademark is for a single real dictionary word, like “dog” or “cat,” you may be able to challenge the trademark on “public domain” grounds. The same applies to commonly used phrases, like “time will tell”. Unique phrases, like “Joe’s Pro Bike Shop” will certainly lead to problems on your end.
Sometimes, even a specific trademarked phrase, or something very similar to it, may be safe as long as there is little chance of confusion with the trademarked business, and a low probability that your domain will siphon internet traffic away from the trademark owner’s web site. An example might be a phrase that is used within a completely different business sector than that of the trademark owner, and there is no duplication of the trademark owner’s unique styling of the phrase in his/her corporate logo. These decisions can be complex, and may require the advice of a competent intellectual property lawyer.
The Clinton era Lanham Act provides some guidance on the general topic of internet domain trademark law. It is not an all-encompassing law, as common law and state regulation also impact the subject. Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) disallows “false or misleading description of fact, or false or misleading representation of fact in commerce, which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.” As you can see, this somewhat clarifies the issue of what can and cannot be considered a safe harbor for domain registration. The mere duplication (or semi-duplication) of a trademarked name does not automatically lead to risk of confiscation. The potential harm to the trademark owner is factored into the analysis.
Another aspect of the Lanham Act is that it protects, to an extent, the right of an individual to how his or her own name is used, even if his/her name is not trademarked. For example, if you create a domain like “daveletterman.com” and use the domain to falsely imply that Dave Letterman is endorsing a product you are selling on the associated web site, you would be in violation of the Lanham Act. You run a lower risk if the associated web site is non-commercial (say, an informational site about the individual), as long as the material you present is factual. Lanham Act aside, you need to be very careful in general when the individual’s name is trademarked (either as the name by itself, or as part of a phrase like “Dave Letterman Enterprises”). These cases have been litigated in the past, typically in favor of the plaintiff.
Domain Extensions
Each domain extension (like .com, .net, etc.) falls under the jurisdiction of the laws and customs of a particular country. The major generic extensions, like .com, .net, .org, and .info may be registered by anyone anywhere.
Many other extensions have what are called “nexus requirements.” These are conditions the applicable jurisdiction and registration authorities impose in determining whether or not you are entitled to own a particular domain name (for reasons apart from trademark infringement). For example, the .us extension is limited to US citizens, US residents, and those operating businesses or organizations in the US.
Nexus requirements vary by extension. Some relate to citizenship, others relate to residency, yet others relate to whether or not you are operating a web site related to the second level domain name, etc. Some extensions involve multiple nexus requirements (e.g., residency and relevance of the second level domain name to site content). Australia (.com.au) has one of the strictest nexus requirements; you have to actually be running physical business operations in Australia that are related
to the domain name.
Important country specific extensions that are safe for anyone to own, without any material nexus requirements, include .at (Austria), .be (Belgium), .ch (Switzerland), .co.nz (New Zealand), .co.uk (Great Britain), .de (Germany), .eu (European Community), .ph (Philippines), .ro (Romania), .ru (Russia), and .co.za (South Africa). By “material,” I am referring to the fact that a small number of the above extensions have the requirement that your domain be held by a registered agent with a physical presence in the applicable area (the .eu extension is an example) if you are not a local citizen. Major domain registrars sometimes provide registered agent services at no charge when you register a new domain using their system. The domain registrar simply owns the domain for you beneficially; you retain full rights to use or sell the domain as you wish, just as with any other domain.
In Closing
Domain registration law can be complex, and is an evolving topic, both in terms of formal “black letter” requirements, as well as applicable case law. There will be situations where you are obviously within a safe harbor, and other times where it is equally obvious that you are at material risk of uncompensated confiscation. In gray areas, a well trained intellectual property attorney may be required to help you make the correct call.
How To Value A Domain Name 07/19/2009
Posted by stuengelman in Domain Valuation.Tags: domain, domain appraisal, domain name, domain names, Domain Valuation, domain value, domains, internet, internet domain names, online business, web domain
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You’ve decided on a domain name for your new business, and the domain is already registered and for sale. How much should you be willing to pay? This is becoming a common question, as so many quality domain names have already been taken. While there is no scientific method to determine a precise value for any domain name, there are some considerations that go into determining a reasonable ballpark value for that domain name you want. Please read on, and learn about some of the techniques professional domain appraisal companies utilize to ply their trade.
Valuation Factors
There are quite a few technical factors that go into determining what a domain name is worth, and there are differences of opinion as to the relative importance of the various factors. Here we will examine a number of commonly considered parameters in domain valuation. This collection is not necessarily meant to be all-inclusive, but is instead intended to give you a flavor of many of the fine points to consider.
One of the most important considerations in valuing a domain name is the “TLD,” or Top Level Domain. This is the extension that appears at the end of the domain name, such as .com, .net, .org, etc. All other things being equal, a .com name will generally sell for about four times the otherwise equivalent domain in one of the other common global extensions, such as .net, .org, and .info. The .mobi extension, utilized for content to be delivered to mobile devices, is rapidly gaining popularity and value, especially for domain names suitable for such devices. Some country specific domains, such as .co.uk and .de (Germany) are very prestigious, and can also command high prices in certain cases. The .tv extension, later to hopefully be used in connection with internet enabled TV, results only occasionally in high value sales at current (until hardware, distribution, and media companies resolve their mutual “cut of the pie” concerns, there is likely to be little content to drive this market).
An extremely important consideration in the value of a domain name is the number of words it contains. Single “real word” domains (no misspellings or abbreviations), especially in easily monetizable internet industries, can be enormously valuable, particularly in the .com extension. Two word domains, again without misspellings or abbreviations, can also be quite valuable, as long as the domain name can easily be monetized, and the TLD is of high quality. Values really plunge when you get to three words or more.
Domains containing misspellings, abbreviations, hyphens, characters not on a standard keyboard, and other oddities often have very little value. Also, domains containing phrases that are trademarked may be worth nothing, as the trademark owner may be able to summarily confiscate the domain.
The extent to which a domain can be monetized has a major impact on its value. Domains in the sex, financial, and health industries often top the list in terms of high value sales. Domains related to industries that cannot easily generate revenue on the web will usually have little value.
Generic domains tend to be more valuable than non-generic ones. A generic domain is one that contains only real words (ones you can find in a dictionary), and has no contribution from proper names (first or last). Generic .com domain names in highly monetizable industries can be immensely valuable, and are for the most part very hard to obtain (without spending a lot of money!).
The number of letters in a domain name also affects its value. Three letter .com names can be quite valuable, even if they mean nothing. Four letter .com names usually need to be pronounceable to have value, but they need not necessarily be real words in the dictionary (cool sounding four letter .com names can be very brandable, even if they are made up). When you get to five letters or more, value is driven by quality of the word or words (generic vs. non-generic, monetizable vs. non- monetizable, etc.). Once you start getting over 8-9 letters, value tends to decrease a lot, unless the name is highly monetizable.
The extent to which a domain can be branded may be very important in determining value. Domain names that are easy to say and remember, easy to type in, highly reflective of predictable monetizable content, and/or generate a lot of “type-in” traffic (people typing your domain name directly into the address box in their browser rather than finding your domain via a search engine) are highly sought after, and may transact for significant sums.
The size and profitability of the market to which the domain name applies is also important. This directly impacts how easily the domain name can be monetized. Needless to say, products and services that do not lend themselves to e-commerce (directly, or indirectly through selling ad space) will most often have little value.
We could go on almost forever listing factors that impact the value of a domain, but the above gives you a sense of what to consider.
Where’s The Beef?
You’ll notice the discussion thus far has presented no magic formulas for computing the right price to pay for your new domain name. I would love to give you a cool formula with lots of neat math symbols, but sadly things aren’t that simple or elegant. In order to understand what you are going to have to pay, you need to learn a few things about the domain aftermarket.
First, there is way more supply than demand. This at first may sound encouraging, but unfortunately it isn’t. Most domain resellers are very inexperienced, and tend to price their domains way too high, and as a result drive buyers away. Haggling often results in little movement in the price.
Second, the really great names, one or two real word .com domains in high traffic, high margin internet sectors are essentially all bought up. They do sometimes become available for sale, but always at extravagant prices.
Third, you have to be very careful when buying non-generic domain names (domains containing words that are not in the dictionary, or domains containing words that are in the dictionary but combine to form an unusual phrase that the courts will not consider “public domain”). These domains may be protected by a trademark. In such cases, the trademark owner can sue for ownership in court, and quite possibly be able to confiscate your domain without remuneration.
The Bottom Line
At this point you’re probably wondering how much to pay for that domain on the aftermarket. As stated above, I can’t give you a precise formula. I can, however, give you some advice based on the above principles, via reference to contemporary sales history. The basic idea is that I can provide you with anticipated price ranges (rather broad ones) that seem to be well in sync with recent domain auction closings.
At the very top of the spectrum, you have one word, and very high quality two word, generic domains in easily monetizable internet sectors. These may sell for $100,000 USD or more, and will usually have .com extensions, although occasionally some will be in other high value TLD’s (such as .net, ,org, .info, .mobi, .co.uk, and .de). The very best of these domains may approach $10,000,000.
Global (non-country specific) TLD’s other than .com’s rarely sell for more than $100,000. The best of these, again one word and very high quality two word generic domains in easily monetizable internet sectors, usually sell for between $10,000 and $100,000, but sometimes may go as high as about $250,000. The best country specific extensions, mainly .co.uk and .de, lend themselves to the same kind of pricing as the non-.com global TLD’s ($10,000 – $100,000). Some excellent domains in the .eu (Europe), .se (Sweden), .tv (Tuvalu), and .ch (Switzerland) extensions are starting to command these prices too.
Every week, there are several dozen sales of .com domains in the $10,000 to $100,000 range. These tend to be one to two word generics, but not as easily monetizable as the ones that sell for over $100,000.
There is an active aftermarket in two to three word .com names that are long (10 letters or more) and sell for $2,000 to $10,000. These tend to be generic, although some non-generics may be found here as well. These domains will in general be harder to monetize than the more premium names, either due to industry (not a high profit internet sector) or scope (serve only a subset of a larger sector).
There is also a market in global TLD’s other than .com’s in the $2,500 to $10,000 range. .net’s and .mobi’s tend to dominate this space, although you will also find .org’s and .info’s here. These are generally one to two word generics that are less monetizable than their otherwise equivalent brethren that sell for more.
Certain country specific domains tend to sell in the $1,000 to $10,000 range. These tend to be one word or short two word generics in the most attractive country extensions (especially .co.uk, .de, .eu, and .tv). Needless to say, these are not as monetizable as their more premium brethren.
If the domain you want does not fall into one of the above categories, you should think long and hard before spending more than $2,000 or so. Admittedly, there will be times when purchasing a particular non-generic name may be unavoidable (e.g., you already have an offline business name which is not trademarked, and need the corresponding domain for your online presence). The key point here is that absent proof of pre-existing heavy traffic, and/or profits from an already deployed web site at the domain, these names are just not that valuable.
In Closing
My hope is that this article has helped you to become a more educated domain buyer. The main takeaway should be that unless you have a truly urgent need to obtain a specific domain, you should use common sense principles and not overpay. Remember, in spite of the fact that so many good names are taken, most domains just sit and wait at aftermarkets like Sedo and Afternic because of the vast supply overhang. If the owner of the domain you want will not sell for a reasonable price, try to be creative and find alternatives, like using a different TLD, pluralizing, reordering the phrase words, etc.
The internet domain market will never lend itself to discounted cash flow pricing like financial securities, and the value of a domain is really nothing more than what the market will bear. Ultimately, values are determined by sale prices of similar domains. This article has hopefully armed you with that knowledge so you can negotiate with confidence.