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Utility to Small Business of New Top Level Domain Names Questioned

This spring, ICANN (the Internet Corporation for Assigned Names and Numbers), the non-profit private organization charged with coordinating internet addresses, released 600 new generic top level domain (gTLD) names, including .technology and .nyc.  Until this year, organizations were restricted to a couple of dozen top level domains, such as .com, .org, .net, or country code domains such as .CO.UK. In 2011, ICANN decided to permit the creation of completely new gTLDs.  From 2012 until the beginning of 2014, ICANN reviewed proposed gTLDs to ensure that the applied-for gTLDs did not violate existing trademarks or threaten the security or stability of the internet. ICANN has completed its review with respect to the newly issued gTLDs. Additional gTLDs will be released as ICANN completes its review of additional gTLDs.

There was much anticipation that, with the great number of new gTLDs, small businesses could obtain domain names that more precisely identified their brands and geographic locations. For example, landscape companies located in Baltimore could instantly let customers know their particular location through use of a .balto gTLD. While it is still early, to date, the expansion has not provided the hoped for opportunities, primarily because of the confusion and difficulty in obtaining a desired gTLD. Moreover, there is concern that the new gTLDs will confuse customers. One survey of small and medium business owners found that 81% of such owners believed customers would be reluctant to visit sites with new gTLDs.

The process for registering new gTLDs and subsequent sale of domain names using the new gTLDs is not simple. Once ICANN approves a new domain extension, it is auctioned to the highest bidder.  The winning bidder then contracts the marketing and sale of domain names using the new extension to multiple accredited registrars, such as Godaddy, Name.com, namecheap or 1and1. The registrars may sell new domain names to the public in different phases.  For a certain period, some registrars permit pre-registration for a fee which varies from registrar to registrar. After the pre-registration period expires, the gTLD becomes freely available.  Some registrars, however, are holding back certain names considered “prime” for auction. This means that one registrar might state that a domain name is “taken” when actually the name may become available at a later date by auction.  Another registrar may be offering the name freely. Different registrars also charge different fees. While previously searching available domain names was a simple process, the lesson now is that multiple registrars must be searched and results carefully  analyzed to  determine availability and  terms of purchase.

Businesses may find that they end up with domain names at multiple registrars, sometimes because the domain was only available with a particular registrar. In other situations, there were noticeable price differences.  This can become an administrative headache and some business owners are seeking to transfer all their domain names to a single registrar. The problem is that some registrars are refusing to support transfers at all and others are imposing fees on transfers.

It remains to be seen whether the promise of domain names using new gTLDs will be realized for small businesses.

Susan D. Baker, Esq. is a Partner in the Corporate/Commercial Department. She represents business clients in full range of matters, including entity formation and modification, owner agreements, contract review and negotiation, and, in particular, trademark and copyright issues. She can be reached at sdbaker@nilesbarton.com.

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