ICANN and those gTLDs again: another view

There are invariably two sides to any dispute --
and Merpel is happy to take on her adversaries

Merpel has let off her head of steam concerning ICANN, and this has attracted the attention of World Trademark Review's Adam Smith.  Writes Adam:

"The $185,000 application fee is allegedly calculated on a cost-recovery basis, rather than being a money grab by ICANN. Moreover, it is an investment that is small relative to the amount of money a successful gTLD applicant could earn from it. If you win the right to run .blog, for example, how many domain name registrations in that space could you sell at $10 a pop? [A gTLD which is wholly generic or descriptive is always likely to have massively profitable prospects -- but these aren't the ones that brand owners tend to be unhappy about] While brands are not likely to generate revenue from their .brand, phasing out all existing domain names (imagine how many, say, Mars Chocolate owns) and folding every brand under your own .brand could prove cost-effective [This is presumably on the assumption that phased-out names will remain off the market and unavailable for others]. Moreover, the high fee will deter bad actors from applying – something brand owners would support (although the flip side is, of course, the potential cost if seeking to register gTLDs for a multitude of brands!) [Wikipedia lists Nestle as having over 370 brands. Allowing for some duplication, if the company decided to go for gTLDs for just 150 of them, that's not much less than $28 million up-front].

A scenario in which Google or Facebook “snaffle up lots of words including surnames” would not come to pass - under the rules, it would not be possible for this to happen [Can we have legal ruling on this, please?]. Nor do I think those companies would be interested in attempting to do such a thing - Facebook may rather apply to run .facebook, and offer a domain name registration within that space to users and brands, thus www.adamsmith.facebook. Fans of Facebook would probably salivate at this prospect. How about that as a brand experience?

Returning to the fee, ICANN will not make a profit of 70% on every unsuccessful application – it is worth noting that ICANN is a non-profit (the fee breakdown is available here from page 23 onwards). That said, questions do remain over ICANN’s fiscal situation should it receive 10 applications or 1,000. Similarly, controversy remains over the war chest it is compiling to fund any later legal fees, as we have covered in WTR:

…the Internet Corporation for Assigned Names and Numbers (ICANN) plans to amass a hefty war chest to fight lawsuits arising from the expansion. The cash will come from the fees paid by applicants wishing to run a new generic toplevel domain (gTLD) space. ICANN intends to set aside $60,000 from every fee received for “risk costs” – that’s almost one-third of the full $185,000 fee. Based on ICANN’s prediction of 500 new generic TLD applications, this could raise $30 million for the non-profit organisation.

When WTR asked Peter Dengate Thrush, chair of ICANN’s board, for the reasoning behind the risk tax, he answered: “Prudence. If we hadn’t done it, we would be highly criticised when the first lawsuits appeared. What fuels prudence is the uncertainty factor.”  

The fund reveals not only that ICANN is arming itself for legal battles, but that it has put a figure on how much it may need. “All of the costings have gone through rigorous analyses,” Dengate Thrush explained. “We’ve taken financial advice and looked at buying insurance against the cost of litigation.” When asked whether this implied that the board expected litigation, he replied: “No, it’s just prudence – most people have life insurance.” 

But life insurance policyholders know that they are going to die. [Good point!]

Finally, I believe that WIPO will be concerned by the implication that it did not fully understand ICANN’s plans during its consultation process. WIPO has sent a delegation to many, if not all, ICANN meetings and has submitted comments at every stage in the consultation [Sending delegations and submitting comments is not evidence that any organisation has mastered the issues and, after the apparent lack of effective engagement by WIPO with UNCITRAL in the latter's work on security interests in IP as intangibles, brand owners may be forgiven for thinking that WIPO's larger agenda and responsibilities may prevent it from taking up cudgels on their behalf even if it should be disposed to do so] The organisation’s arguments are usually well constructed, even if they do bear all the hallmarks of Geneva’s bureaucracy. That WIPO has been limited to submitting statements and has not been consulted by ICANN to the same extent as governments have must irk WIPO no end, but it has played along nevertheless.

At present, uncertainty surrounds the impact of the new gTLD programme, so it’s important that IP owners, the IP press, industry and the public at large address the facts. As such a well-respected blog, IPKat should provide as informed a picture as possible about the gTLD regime – both its positives and negatives (and there are plenty of each!)".

Thanks, Adam: it's always good to hear from you. This Kat suspects that he and Merpel may be hearing from others too in the near future ...

Artwork: 'Table Tennis Cats' by icequeen5560, hosted on photobucket.