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Guest editorial: ISOC’s broken funding model and profligate spending

by — Policy & Law 15 Comments

[Editor’s note: The following is a guest editorial from Nat Cohen, who provides interesting details about the birth of Public Interest Registry and its role with Internet Society. While I don’t necessarily agree with all of the conclusions, I think it’s a good contribution to current discussions about the sale of Public Interest Registry to Ethos Capital.]

Blue background with white quote box and the words "Guest Editorial"

The Internet Society (“ISOC”) generates tens of millions of dollars for itself each year through its control of the .org registry, Public Interest Registry (“PIR”), which makes money each time a .org domain name is registered or renewed.  Running .org has become so lucrative that PIR is now a target for acquisition by private equity firm Ethos Capital.  Much of ISOC’s revenue comes from nonprofit organizations[1] which predominantly use .org domain names.[2]  As a consequence, funds needed by those nonprofit organizations to pursue their own worthwhile missions are transferred to ISOC.  This raises the question as to whether ISOC’s control over .org serves the public benefit.

The way the nonprofit funding model usually works is that the nonprofit does good work and raises funds from contributors who voluntarily wish to support the mission of the nonprofit.  A nonprofit, such as Doctors Without Borders, must demonstrate that it is a good steward of donated funds in order to be able to attract continued contributions.

In contrast, ISOC uses its modest financial support of the Internet Engineering Task Force (“IETF”), where most of the actual work is carried out by “thousands of volunteers from around the world”,[3] to justify fat compensation packages for its own executives, while imposing a $70 million upcharge on its base of .org registrants, and enjoying control of a public resource valued at over a billion dollars.  The funds it extracts are not contributed voluntarily but come from compelled payments from those wishing to use .org domain names.[4]  It spends vast sums of money without needing to justify that the money is being put to a worthwhile or efficient purpose and with no accountability to discipline its spending.

ISOC’s Purpose and its Profligate Spending

ISOC’s primary mission is to support the modest funding needs of the IETF.[5] The IETF is an Internet standards body made up of thousands of people volunteering their time and effort[6] to accomplish the IETF’s goal of “making the Internet work better.”[7] The IETF conducts three meetings per year, runs mailing lists and publishes Internet standards documents.  ISOC contributed $3 million to the IETF in 2018,[8] yet most of that was merely passing along outside contributions earmarked[9] for the IETF.[10] Click here to continue reading…

How ICANN uses the .Org registry to fund the Internet Society

by — Uncategorized 7 Comments

Editor’s note: this post is by Nat Cohen. I am publishing it because he provides a rich context for ICANN’s proposal to remove price restrictions on .org domain names. Any opinions in this post are those of the author.

Internet Society logo

Logo for the Internet Society, which benefits from registrations of .org domain names.

ICANN awarded the .org registry to the Internet Society (ISOC) in 2002[1] with the intention that the “profits from the registry will go to ISOC”[2] to provide a reliable source of funding for its mission.  ISOC has cumulatively received hundreds of millions of dollars in funding over the intervening years from the profits of the .org registry, allowing it to grow from 8 employees and a budget of a little over $2 million in 2001[3] to over 100 employees[4] and a projected 2019 budget of over $38 million, with $34 million of that generated from the .org registry.[5]

PIR (Public Interest Registry), the organization created by ISOC to manage the .org registry, is currently operating under an agreement that limits price increases to 10% per year.  ICANN staff is proposing that all price constraints be eliminated in the new .org agreement.[6]  If approved, PIR would be able, if it so chose, to sharply increase prices on .org domains with the result that revenues from .org registrants could increase by hundreds of millions of dollars annually, with much of that revenue coming out of the operational funds of non-profit organizations.

ICANN created an unusual structure in which one non-profit, ISOC, receives most of its revenue by extracting funds from other non-profits – the community of non-profits using .org domain names.  It might strike some as unseemly that one non-profit that is well-connected within ICANN was able to leverage those connections to extract funds from other non-profits around the globe whose focus is elsewhere than on building relationships within ICANN.

Click here to continue reading…

Small Businesses and Investors Losing Domains in Flawed UDRP Decisions

by — Policy & Law 6 Comments

[Editor’s note: Nat Cohen takes a look at recent UDRP decisions in this extensive report.]

Are you guilty of “cybersquatting” without knowing it?  Take a look at these recent Uniform Domain Name Dispute Resolution Policy (“UDRP”, or the “Policy”) decisions and the reasons the panelists give for finding the domain owners guilty of cybersquatting and for ordering the transfer of their domains.

If you want to see how the UDRP is being misused to seize properly registered domain names, read on…

HDRamp.com, March 9, 2016

Complainant: Heavy Duty Ramps LLC, sellers of heavy duty ramps
Respondent: Landsport, sellers of heavy duty ramps

A business operating on the plural version of a descriptive product domain (hdramps.com) for “heavy duty ramps” can seize the singular version (hdramp.com) from a competitor despite having no registered trademark rights at the time the disputed domain was registered, and based on a design mark registered just a few months before the UDRP filing and including a disclaimer of the wording.

While Respondent contends that the domain is comprised of common and descriptive terms and as such cannot be found to be identical or confusingly similar to Complainant’s mark, the Panel finds that such a determination is not necessary under Policy ¶ 4(a)(i) as this portion of the Policy considers only whether Complainant has rights in the mark and whether the disputed domain name is identical or confusingly similar to Complainant’s mark.

Thus, Respondent’s use of the domain disrupts and competes with Complainant’s business because Respondent uses the domain to sell products and services that compete with Complainant’s business.

Respondent has engaged in the tactic of typosquatting by simply removing the letter “s” from Complainant’s HD RAMPS mark, in order to register its domain name of hdramp.com.

hd-ramp

Screenshot of Respondent’s hdramp.com, before the domain was transferred to Complainant.

Click here to continue reading…

A domain investor goes to WIPO’s home in Geneva to learn more about UDRP

by — Policy & Law 10 Comments

Nat Cohen traveled to Geneva to learn more about the current state of UDRP. Here’s what he learned.

Last October, at the suggestion of attorneys John Berryhill and Zak Muscovitch, I flew to Geneva to attend a workshop presented by WIPO entitled WIPO Advanced Workshop on Domain Name Dispute Resolution: Update on Precedent and Practice.

I hoped to gain a better understanding of whether, despite the UDRP’s flaws and the pro-complainant bias built into the procedures, the UDRP retains a core of integrity so that domain owners can have some trust that they will receive a fair hearing when they are brought before a UDRP panel.

I’ve been very interested in the UDRP for nearly 15 years, since it was first introduced. I’ve directly experienced the good and the bad of the UDRP. I won one of the first UDRP decisions dealing with a domain based on trademarked dictionary word –craftwork.com, only then to lose my next UDRP – on crew.com. The crew.com decision was cited as one of the most egregious from the early days of the UDRP as the majority of the panel disregarded trademark law to give the complainant, J. Crew, total commercial rights to a common, everyday dictionary word.

Geneva

Nat Cohen snapped this photo while in Geneva for the WIPO conference.

Many UDRP disputes followed. Each time I was required to defend my integrity and my business practices before unseen strangers who would pass judgment on my intentions and on the viability of the business my family depends on for our livelihood.

It is not a comfortable feeling to have one’s fate depend so greatly on others – especially when the judgments they pronounce are so inconsistent and some of them express hostility towards the business of investing in domain names.

My curiosity got the better of me. The workshop offered a chance to learn first-hand the views of those in charge of implementing the UDRP. So off to Geneva I went.

The workshop is intended primarily for panelists and attorneys who are active in the UDRP. I was the only domain investor in attendance. I may have been the only attendee who wasn’t a lawyer.

Here’s what I learned-

1. Even though most of the attendees are attorneys who primarily represent Complainants, I felt welcomed. Some attendees said they were glad that a domain investor attended and were genuinely interested in my perspective. Others treated me as a bit of a curiosity, like an exotic animal in the zoo that they had never expected to encounter.

2. Despite some serious blind spots, WIPO appears to be trying to implement the UDRP with integrity.

WIPO staff said that when the outcome of a UDRP dispute depends on an interpretation that is a subject of disagreement among panelists, WIPO will not assign the dispute to a panelist whose views on the matter are already well known, as that would pre-determine the decision. Instead, they assign a panelist who has not yet staked out a position on the subject to give a fresh look at the matter. They also use three-member panels as an educational tool for less experienced panelists. When the Respondent and Complainant have each selected a very experienced panelist, then WIPO may select a less experienced panelist for the role of Presiding Panelist so that the less experienced panelist can benefit from the experience of his or her co-panelists. While one might assume that the role of Presiding Panelist would be assigned to the most experienced of the panelists, it is often the opposite. This approach helps give WIPO a broad roster of panelists with experience in the issues that arise in complex UDRP disputes.

3. I had not fully appreciated that as a non-profit agency of the UN, WIPO is not as motivated by profit as other UDR providers that are private, for-profit, corporations (e.g. NAF). I previously thought that the biggest threat to the integrity of the UDRP is that under pressure to make a profit from their operations, UDR providers would compete against each other to be the most biased in favor of the complainant, since it is the Complainant who picks the UDR provider. While this remains a serious concern as long as Complainants are solely empowered to select the forum, because WIPO does not appear to be motivated by profit it does not need to be so eager to chase after Complainant’s dollars which may lessen the corrosive effect of forum shopping. (As more UDR providers come online, competition may intensify which is likely to exacerbate the problem of forum shopping.)

That WIPO does not need to chase after profits manifests itself in other ways. My understanding is that WIPO loses money on its domain dispute service. WIPO also encourages parties to settle and has refunded over $5 million in filing fees to Complainants when disputes have settled after the UDRP is filed.

4. Nevertheless, WIPO continues to have serious blind spots that undermine the integrity of its implementation of the UDRP: 1) it does not see the conflict of interest that is created when it permits Panelists to also act as Complainant’s representatives, and 2) while it takes responsibility for determining who is entitled to be accredited as a Panelist, it takes no responsibility for Panelist behavior once they are accredited. There are panelists on WIPO’s roster from the earliest days of the UDRP who are most politely characterized as “rogue” panelists. These “rogue” panelists decide cases according to their personal preferences even when these preferences conflict with the UDR policy and with principles of trademark law. Yet although the only reason that these rogue panelists are able to decide cases is that WIPO or another UDR provider accredited them, WIPO washes its hands of any responsibility for their continued accreditation.

There are, in addition, questions about WIPO’s neutrality in its accreditation of panelists. WIPO has rejected several applications of highly-respected professors and experienced attorneys who are considered even-handedness in their treatment of domain owners, while WIPO then accredits as panelists active trademark attorneys of no special distinction who make a living representing trademark holders.

At the workshop, the head of WIPO’s UDRP program stated that WIPO has never de-accredited a panelist. Yet I learned recently that Dr. Milton Mueller, a well-respected professor who is one of the drafters of the UDRP, after serving as an accredited panelist for several years during the early years of the UDRP was then mysteriously dropped from WIPO’s roster of panelists. Is it a coincidence that Dr. Mueller is the lead author of Rough Justice, an influential paper that is critical of the UDRP, and that he had a reputation for being more willing to deny complaints than many of his fellow panelists? WIPO’s erasing of Dr. Mueller from the list of accredited panelists deserves explanation and is cause for concern.

5. WIPO tries to bring consistency to the implementation of the UDRP. WIPO publishes and maintains the “WIPO Overview of WIPO Panel Views on Selected UDRP Questions, Second Edition“, otherwise known as “WIPO Overview 2.0”.

This overview provides the consensus and majority positions on dozens of questions that arise in decided a UDRP, such as whether there can be bad faith if the domain name was registered before trademark rights were acquired.

The Workshop, which WIPO has been offering for many years, is itself an attempt to bring greater consistency to the implementation of the UDRP. An in-depth review of all aspects of the UDRP was provided by experienced panelists David Bernstein and Tony Willoughby with the aim of encouraging a common interpretation of the UDRP among the panelists. While Bernstein and Willoughby largely agreed, it was also instructive to learn the areas where they disagreed.

6. I was surprised to learn the extent that the panelists are left to their own devices in deciding how to implement and interpret the UDRP.

The UDRP resulted from a lengthy policy development process after extensive discussions and was then ratified by ICANN with input from its many stakeholders. Yet individual panelists are given free rein to interpret the UDRP as they see fit and those interpretations have evolved over time.

Now fifteen years after it was first adopted, is the UDRP being implemented in the way its drafters intended, or is it now primarily a vehicle for the panelists to impose their own views?

ICANN has apparently abdicated any oversight role over the UDRP. The absence of ICANN oversight means there is no authority that can correct problems in the implementation of the UDRP, such as misapplication of the policy, incorrect interpretations, inconsistent decisions, or rogue panelists. WIPO does not view its role as determining the proper interpretation of the UDRP. The panelists must therefore take on, whether willingly or unwillingly, the responsibility to interpret and implement the UDRP.

An interpreter of a text can exert more influence than the author of the text. For similar reasons some view St. Paul as more influential than Jesus.

Panelists are similar to High Priests. The panelists, like High Priests, claim authority as servants of a text, yet, like High Priests, they claim sole authority to determine the meaning of the text. While all panelists cite the language of the UDRP to support their decisions, their decisions are often in conflict. Are the panelists applying the UDRP as written or twisting it to fit their own preferences? We cannot say because the panelists are the ones charged with telling the rest of us what the UDRP means.

7. The evolving and dynamic nature of UDRP interpretation was on display at the WIPO workshop. Despite the professed goal of all involved to implement the UDRP in a consistent manner, the panelists are often experienced professionals with well-considered views who do not easily defer to a viewpoint with which they disagree. Strong differences of opinion persist among panelists, therefore it can be crucially important which panelist is selected to decide a dispute. For instance, Berstein expressed comfort with a “criticism site” operating on a domain that is an exact match of a trademark, while long-time panelist Richard Lyon thought such a use was confusing and illegitimate and that the domain itself should indicate that it is a criticism site, for instance by including “sucks” or “boycott” in combination with the trademark term.

Geneva streets

Strolling the streets of Geneva

8. Another more subtle difference was in the approach panelists took to perceived deficiencies in the UDRP. Some took the UDRP as written and accepted that it might not be suited to resolve every problematic domain registration. Others were more troubled by not being able to arrive at what they believed to be the correct outcome by following the language of the UDRP. Some panelists admitted at times taking an “end justifies the means” approach in which they first come up with what they think is the correct decision, and then liberally “interpret” (also known as unilaterally rewrite) the UDRP to support their position.

Several panelists expressed particular concern about the situation in which a domain is registered in good faith but then is used to target in bad faith a trademark that arose after the domain was registered. Under the UDRP as written, a domain that is registered in good faith cannot be transferred regardless of how it is later used. There was a sharp division in views towards the “renewed in bad faith” approach championed by Bernstein and certain other panelists, that they claim justifies a transfer in these circumstances. Willoughby, the co-leader of the workshop, and many other panelists disagree with this approach. A benefit of attending the workshop was to hear first hand the various perspectives articulated by the panelists themselves.

As Zak Muscovitch noted in his post about the WIPO Workshop, one of the risks in opening up the UDRP to reform is that many panelists appear to be in favor of changing the requirements in the UDRP for transferring a domain name from “registered AND used bad faith” to “registered OR used in bad faith”. Such a change in the UDRP would clearly permit the transfer of domains that are registered in good faith but then later intentionally put to a bad faith use. But it would be a huge threat to domain investors who have registered generic domains in good faith and then parked them with no intention of targeting a trademark holder, only to have a WIPO panelist find, years later, that a link on a parked page was evidence of ‘bad faith use’, and thus satisfied a condition for transfer of the domain under the UDRP.

9. A concerning aspect of the workshop is that both the Panelists and the Complainant attorneys who attended appear at times to view themselves as being on the same “side,” with troublesome domain registrants on the other side. It is not surprising, as a Panelist and a Complainant attorney is often one and the same person. The majority of the attendees are attorneys who primarily represent complainants. At times, the discussion veered towards a primer on how to use the UDRP to win your case. Some panelists spoke about the clever ways that they managed to find in favor of the complainant even though they could not find solid support for their decision in the UDR Policy itself.

10. I was able to meet with many of the panelists in attendance (including one or two who had ruled against my companies in UDRP disputes). Several conversations started at the workshop continued through email after the workshop ended, and in one case, led to an enjoyable lunch in DC with another attendee, a Complainant’s attorney who lives in the DC area.

11. It was great pleasure to see and spend time with the domain attorneys who attended the workshop – John Berryhill and his wife Mari Jo Keukelaar, Paul Keating and Zak Muscovitch. I could see how attending the workshop benefited their practice, as they could better understand the nuances of how certain panelists interpret different fact situations and which panelists might be more or less favorable under specific circumstances. The workshop also gave them an opportunity to engage the panelists on hot-button topics and provide a fresh perspective that the panelists may not have considered before, especially those panelists who have spent their careers representing trademark holders.

12. Geneva is a charming city. Its old quarter with centuries-old stone buildings and churches is great for walking. It is quiet and there are very few cars.

13. WIPO wins the contest for “best view from a cafeteria.” (see photo below)

I came away from the workshop much better informed yet still uncertain about the prospects for the long-term integrity of the UDRP. The seriousness with which WIPO and the workshop leaders took their responsibility to implement the UDRP is encouraging. Yet it also demonstrated why a system that relies so heavily on active Complainants’ attorneys to play the roles of judge, jury and executioner is not one that can reliably produce a fair outcome for domain registrants.

wipoview

Does the UDRP do more harm than good?

by — Policy & Law 26 Comments

In this post, Nat Cohen makes the argument that damage caused by the UDRP outweighs its benefits.

Why are we weakening ownership rights throughout the entire Internet space and subjecting millions of dollars of domains to attempted seizures each year so that mostly low value cybersquatted domains can be removed from circulation?

The UDRP is gaining popularity as a means for companies to seize valuable domains without paying for them. So many companies are now using the UDRP to target valuable domains that it raises the question of whether the primary function of the UDRP today is to combat cybersquatting, or instead to enable companies to seize valuable domains without paying for them. If so, the UDRP, as currently administered, is doing more harm than good.

The UDRP puts every .com, .net. and .org domain in existence at risk of loss through an administrative proceeding. The rationale for undermining the rights of nearly all domain owners is that the UDRP is necessary to combat blatant cybersquatting.

What good does the UDRP do?

Looking at UDRP complaints by total volume, the vast majority of them result in the transfer of a cybersquatted domain. Proponents of the UDRP will point to these numbers to demonstrate that the UDRP is working as intended. They’ll cite recent cases such as the one where Gucci won 182 .org domains in a single dispute, or one where Hermes went after another 182 .org domains.

Yet the volume of complaints doesn’t tell the whole story. Mike Berkens commented about the Gucci cybersquatted domains, “I can safely say there is not one of these .org domain names that is even worth the registration fee”. As for the Hermes complaint, he said it was “a huge waste of money” and “not sure any of these domains are worth the $8 a year to register or renew”. In other words, while these domains are used to pad the stats of those who trumpet the problem of cybersquatting, the domains themselves are worse than worthless – they have negative value.

Some typo domains receive substantial traffic and some cybersquatted domains are developed for bad faith uses. These sorts of domains would certainly be worth going after in a UDRP dispute. Yet a review of UDRP decisions shows that the domains that are targeted in UDRP disputes are rarely ones that are likely to receive a high volume of type-in traffic, for example domains such as Gieco.com or Verzon.com or GoDady.com. Now that the UDRP is in its 15th year, the big brands have had years to go after the highest value typo squats of their domains. Indeed these typos are already owned by Geico, Verizon, and GoDaddy, respectively. Nor are many of the domains that are targeted in UDRP complaints that contain well-known trademarks developed. These domains are primarily inactive or parked.

The domains that are targeted in UDRP disputes tend to be ones that don’t seem to justify the filing fees much less the registration fee. Recent examples are typical – petrobrasnigeria.info, onlineaccutanemall.com, ermenegildo-zegna-2013.com, swarovskischmuck-outlet.com, xenical-without-prescription.com and allover30freepics.com. These disputes are making money for the lawyers bringing these actions but are likely a waste of money for the brand owners. These domains are so obscure that they bring to mind a variation of the question, “If a tree falls in a forest and there is no one nearby to hear it, does it make a sound?” If a typo-squatted domain gets no traffic, does it do any harm?

A 2012 Internet Commerce Association analysis found that “for each million domain registrations there are about 41 domains alleged to be cybersquatting in UDRP cases” over the course of a year. Less than 0.01% of registered domains in a given year generate enough concern among brand holders that they will prompt a UDRP complaint.

There are 118 million registered dot-com domains which is not much less than the 129 million people in the combined populations of France and the United Kingdom. On any given day, there are around a dozen new UDRP complaints filed against dot-com domains. Anyone can file a UDRP complaint at any time. The fee is small. The forms are online and easily filled out. You don’t need a court order or a detective. There are no obstacles to file, and yet brand owners file only around a dozen disputes on average each day.

If across France and Britain on an average day a dozen people were charged with misdemeanor offenses, would strong new laws or procedures be required to combat this “crime wave”? Rather, France and Britain would be utopian paradises that would be by far the safest places on earth. (The UN reports annual total crimes in France and the UK at over 10,000,000 per year!) The extreme infrequency of UDRP filings, when compared to the number of registered domains, suggests that the economic harm caused by cybersquatted domains is vastly overstated.

Another indication that brand owners see little harm from cybersquatted domains is that big trademark holders, with large legal staffs who aggressively police their trademarks, are letting blatant trademark domains drop without bothering to pay the $10 fee required to secure them. Mike Berkens has several blog posts about this where he highlights recently dropped domains such as WiiConsoles.com, TheYouTube.com, NikonBinoculars.com, PaywithPayPal.com and many others that the brand holders can’t be bothered to register.

If cybersquatted domains were causing serious harm, one would expect to see hundreds, if not thousands, of UDRP cases brought every day on high priority trademark-infringing domains, and trademark holders aggressively buying up the most obvious domains incorporating their trademarks. Instead, we are seeing a relative trickle of cases on mostly low value domains and many trademark holders declining to purchase blatant cybersquatted domains when available.

What harm does the UDRP do?

In contrast to the relative indifference of brand owners in using the UDRP to go after cybersquatted domains, the UDRP is generating excitement among some companies due to its power to order the transfer of domains without any compensation to the domain owners. For these companies, the primary use of the UDRP is not in going after clear-cut cybersquatted domains. Rather, they see the UDRP as a low-cost way to secure desirable premium domains that are on their acquisition wish list and may even be preferable to their corporate domains.

The key to success in a UDRP complaint is to demonstrate that the current domain owner is acting in “bad faith”. This may seem difficult to do, but it can be quite easy. UDRP panels have accepted as sufficient evidence of bad faith the following- that the domain is parked (even without the owner’s knowledge), that the domain is inactive, the the domain is for sale, that the domain owner refuses to sell, that the domain once was used for a business but is no longer, that a domain is used as a criticism site, that the domain is currently used for an operating business (but one that is alleged to be trying to profit from traffic intended for the Complainant). It used to be that a Complainant had to demonstrate that a domain was registered in bad faith, but now if you get a favorable panelist for a complainant, you can win an aged domain simply by pointing out a recent objectionable link on an auto-generated landing page. Also, if at first you don’t succeed with one panelist you can simply refile the complaint less than a year later, and the next panelist may award you the domain (see the Sport2000.com decision from January 1, 2014 or mothersmilk.com from 2009 or others).

With UDRP panels making it so easy to take domains from their owners, especially if the domain is owned by a domain investor or by a small businessperson who is not currently using the domain, trademark owners are discovering that the UDRP is ideally suited for obtaining valuable domains on the cheap. Why waste the power of UDRP panels to order domain transfers on worthless typo squatted domains, when one can go after valuable premium domains instead? Paying for domains is old school. The UDRP thus sanctions this “snatch and grab” approach to domain acquisition.

What do the following domains have in common – YU.com, D1.com, Upbeat.com, Inshape.com, Opulence.com, lgg.com, Croma.com, Scram.com, Rive.com, Wala.com, SteelBuildings.com, SpaBreaks.com, Quirk.com, Reckon.com, Quebec.com, GoldCoast.com, and Palace.com?

The answer is that all these domains, and dozens of similar ones, were targets of UDRP complaints within the past year.

One of these domains, lgg.com, recently sold for $175,000. Others such as YU.com or Palace.com would fetch hundreds of thousands of dollars from investors and are similar in quality to domains that are selling for millions of dollars to end-users. The total value of the premium domains targeted in UDRP complaints in the past year is easily in the millions of dollars.

The owners of the premium domains targeted by UDRP complaints are forced to spend hundreds of thousands of dollars each year in legal fees and administrative costs — and to devote huge amounts of time, trouble and effort — to defend their domains against the false charges of bad faith behavior leveled against them by covetous companies. When the domain owner prevails, he or she recovers not one penny of these costs – even when the Complainant is found guilty of Reverse Domain Name Hijacking.

Sometimes the owner of a premium domain loses a UDRP dispute, even in the absence of solid evidence of any bad faith intent towards the brand owner. Unjust decisions are not a surprising outcome of the UDRP.

The UDRP has many flaws, as discussed elsewhere. It lacks uniform standards; it has a pervasive pro-complainant bias; decisions rely on widely differing and highly subjective views of what is meant by “bad faith”, and the reasoning of some of the panelists is sloppy and inconsistent with the language of the policy.

What next?

The challenge is to find a policy that strikes the proper balance between fighting the harm caused by cybersquatted domains against the harm caused by implementing a flawed and inconsistent UDRP that undermines the rights of domain owners and that allows companies to use the UDRP as a cheap tool to wrongly seize valuable premium domains.

An analogy may be helpful in thinking about how to find that proper balance. Let’s say you own a stable that boards valuable racehorses but the stable is also home to swarms of mosquitos. You fumigate the stables to try to kill the mosquitos. You discover that the pesticide is only partially successful in eradicating the mosquitos and has the unfortunate side effect of sickening and killing some of your racehorses. What would you do?

The mosquitos in this analogy are the cybersquatted domains, and the racehorses the valuable premium domains. The stable is the Internet and the pesticide is the UDRP. A racehorse is sickened when it is attacked in a UDRP and it is killed when it is wrongly ordered transferred by a UDRP panel.

Common sense would tell you that the highest priority would be to stop sickening and killing the racehorses by switching to a safer version of the pesticide that did not put the racehorses at risk.

To make the analogy more accurate, you’d need to add that some people are intentionally using the pesticide to sicken and to kill the racehorses. The need for a safer pesticide then becomes even more evident.

If you don’t care at all about the fate of the racehorses, and your single-minded focus is to kill as many mosquitos as possible, then you would recommend increasing the potency of the pesticide to make it even more deadly. CADNA, a lobbying group for corporate trademark interests, advocates just that position in pushing for penalties to increase in the Anti-Cybersquatting Protection Act and the UDRP. My view is that such a policy wouldn’t deter cybersquatting, as the UDRP already has a nearly perfect success rate in ordering the transfer of domains that are obvious cyber squatted domains. Instead, increasing penalties would make the ACPA and the UDRP an even more effective club for large companies to bully smaller companies into giving up their domains by threatening them with not only the loss of the domain but also severe monetary penalties if they end up on the wrong side of the outcome.

But what would domain owners have to fear from higher penalties if they are doing nothing wrong?

If the UDRP was properly and impartially implemented, then the domain owners may not have anything to fear from greater penalties. Unfortunately, the UDRP providers are acting without oversight and, left to their own devices, have developed a system that is riddled with bias and relies on panelists that often have, at best, a lack of knowledge of the domain industry and, at worst, are actively hostile towards domain investors.

Let’s not forget that many UDRP panelists earn their living and have spent their careers representing large brand owners. Their perspective on trademark matters comes from decades spent aggressively asserting the rights of trademark owners.

Let’s not forget that many UDRP panelists do double duty and also represent complainants before the UDRP. One day a particular lawyer, let’s call her Anne, will argue on behalf of a complainant before one of her colleagues, let’s call him Bill, who is the Panelist. The next day they can switch roles. Anne will become the Panelist for a different dispute while Bill is now the attorney for the complainant. Bill’s arguments on behalf of his complainant may sound familiar to Anne, as his arguments are likely to be the same ones she made the day earlier when she was representing her complainant. When Anne as a Panelist weighs the arguments made by Bill against the ones made by the respondent, what are the chances that she will reject the arguments made by Bill which are also the same ones she is relying on to win her dispute, in favor of the contrary arguments made by the respondent? It’s a very cozy arrangement. It is not one that leads to fair outcomes for respondents.

Being a UDRP panelists is a privilege that attorneys who specialize in representing domain owners are currently not allowed to enjoy, as none of them have been accredited as UDRP panelists. Only attorneys who specialize in representing trademark holders are apparently seen by WIPO and NAF and the other UDRP providers as sufficiently impartial to be entrusted with the role of UDRP panelist.

Remarkably, the same eagle-eyed Panelist who is so talented at seeing bad faith in circumstances where no one else can, is blind to the evident conflicts of interest that arise from his own behavior in acting as an advocate and as a so-called “neutral” in the same forum.

On such a shaky foundation as what passes for justice in the UDRP do the livelihoods of domain investors rest.

That a very valuable domain can be lost in a poorly decided UDRP decision is not mere speculation. Three recent prominent casualties of the UDRP are Vanity.com, Canary.com and Ovation.com. All were ordered transferred through, in my view, egregiously flawed UDRP decisions. These three domains alone are worth more than thousands of the nearly worthless cybersquatted domains that have been ordered transferred by the UDRP in the past year.

The UDPR has proven effective in transferring predominantly low-value cybersquatted domains. The UDRP has also proven effective, due to its serious flaws, in wrongly ordering the transfer of valuable premium domains and as a result encouraging many more frivolous disputes seeking the transfer of other valuable premium domains.

On balance, the UDRP, as currently administered, is doing more harm than good.

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