Patent describes way to sell future rights to domain names through “encoding domains.”
Verisign (NASDAQ: VRSN) has filed two patents related to buying future rights to domain names for if they become available. The process is rather unique and it makes me wonder what Verisign (which manages the .com registry) has up its sleeve.
Only one of the patent applications has been published so far. Application number 15/488984 for “Domain Name Registration Reservation Through the Use of Encoding Domain Names” was filed on April 17, 2017 and published today (pdf). The application notes that an application for “Domain Name Registration Reservation Through the Use of Encoding Domain Names for Pools” was filed at the same time, but it has not been published.
The published application describes a system for backordering domain names should they become available due to a certain event, such as their expiration on a certain date or the current domain owner relinquishing the domain registration.
This would be accomplished by registering an “encoding domain”. This encoding domain might have information about the domain right purchased or refer to a database that manages the rights. The rights could be to a specific domain name or to a pool of domain names. Here are two examples from the application:
For example, an encoding domain name that reserves a right to register example.com upon its deletion on Mar. 28, 2017 may be written as, for example, “dn–example-20170328.com”
An encoding domain name that reserves a first-priority right to select and register any domain name deleted on Mar. 26, 2017 may be written as, for example, “dp–20170326-1.com
These rights could potentially be transferred like other domains. For example, if I had the first right to register example.com if it expires, I could sell and transfer that right to someone else by merely transferring the encoding domain to them.
There could also be multiple ranked rights to the same domain. Someone could have the second right to register example.com if the first person does not exercise her option.
This is an intriguing idea but begs a lot of questions. What is Verisign, which controls the lucrative .com contract, up to?
I can think of a lot of things. The answer might also be disclosed in the other patent application that hasn’t been published yet.
1. Verisign wants to insert itself into the current expiration game to capture some of the profit. This would be the most controversial and surely face regulatory challenges.
2. It wants to bring order to the existing expiration process. Instead of having all the registries ping it to capture deleted domains, it could grant each registrar a set number of encoded domains for each day, giving them ranked rights to domains that expire that day. Verisign has been investigating ways to change the drop process.
3. It could be an idea stemming from new top level domains. The application mentions that new top level domains have pools or reserved domains that could be allocated. It could also be a way to allocate ranked selection of domains on the day the top level domain is released.
(While the encoded domain examples above use .com domains, the patent explains that the encoded domains can be in a different TLD than the one for which rights are granted. This might be required when a new TLD hasn’t launched yet.)
4. The idea could apply to the domain aftermarket. Someone could register an encoding domain for a set price for a domain name, and then the domain owner could be contacted asking if they want to relinquish their right to the domain for a certain price. If they do, the encoding domain right is exercised.
Certain aspects of this patent are certainly intriguing but should also cause concern for registrars, domain investors and dropcatching companies.
I had another thought about Verisign’s overall patent strategy while reading through this patent application. In 2013, Verisign discussed monetizing its patent portfolio. It has dropped that discussion (at least publicly). It would be a huge risk for Verisign to go after other registries while it works to hold onto its .com contract.
But…once is clears the Cooperative Agreement with the NTIA, one option would be to sell its portfolio to a group that grants a license back to it. That way Verisign can continue operating, get a profit from selling the patents, and be arm’s-length from any actions the buyer takes.