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Invasion of the Domain Snatchers

[whitespace] As domains become the real estate of the virtual economy, cybersquatters have made a fortune collecting and selling them. Now, a new law makes hoarding names a risky proposition.

By Michael Learmonth


Domain registration by independent operators has become a cottage industry, offering some nuggets from the Internet gold rush to someone other than the big corporations who now dominate the industry. Like land speculators and ticket scalpers, they invest and sometimes lose money buying positions, then make it back with some lucky sales.

While there are some clear cases of trademark heists, situations often fall into the gray zone. Usually civil courts are used to sort out conflicting intellectual property claims. However Senate Republicans, some of whom have been stung by critical Web pages, have passed a bill that would enact criminal sanctions against Americans who register a domain name that includes or is similar to a trademark.

This is not a matter in which Metro is a disinterested party. Like many publishers with new media divisions, this newspaper's affiliated companies have registered, bought, collected and sold a significant number of domains, the dollar value of which is not insubstantial.

Using criminal penalties and fines to resolve commercial disputes will once again unlevel the playing field in favor of the companies who can afford to pay fines, hire lawyers and research trademark claims, as well as foreigners not subject to U.S. laws. The little guy will lose if President Clinton signs into law the recent Senate bill criminalizing cybersquatting.

--Editor


BEING THE MAYOR of the capital of Silicon Valley is no small feat. Here, along with solving regular big-city problems, the government and its politicians are expected to reflect the technological and Internet savvy of its economy and its citizens.

During his campaign for mayor of San Jose, Ron Gonzales deftly capitalized on his background as a former executive at Hewlett Packard and was quick to give his campaign a high-tech gloss with www.Gonzales98.com. So imagine his surprise when he opened the San Francisco Chronicle Aug. 10 and saw the hits Mayor Willie Brown was taking. A consultant for Brown's mayoral opponent and personal rival Clint Reilly had snatched up williebrown.com, williebrownjr.com, and even da-mayor.com.

Reilly spokesman Tom Pier drove the point home: "He's the mayor of San Francisco, the gateway to Silicon Valley, and he [Willie Brown] doesn't have the sense to register his domain name? And now it's suddenly an issue 80 days before the election?"

That day, with almost 1,000 days before he is slated to stand for re-election, a Gonzales staffer checked Network Solutions on the Internet to reserve www.Gonzales2002.com.

He was already 141 days too late.

On March 22, 1999, that domain was registered to one Peter M. Lucas, 36, of Bridgewater, N.J. Lucas, who says he just finished an M.B.A. at Rutgers and has attended five Springsteen concerts in the last three weeks, is president of his own home business, Master of My Own Domains, LLC.

Through his corporation, Lucas has tied up his limited funds in an unspecified number of domain names: more than 100, he says, but less than 200. Earlier this year he got a list of the mayors of the 50 biggest cities in the country, found out when they were next up for reelection and registered the names and either 2002 or 2004.com. Then he started registering the names of United States senators like murray2004.com, helms2002.com and hatch2000.com. When he heard Al Lewis from the Munsters was considering a senate run in New York, he snapped up allewis.com.

"I already have 2002 for most incumbent senators and many 2004," Lucas says. "I'm hoping this will pay for my student loans, in the long run."

The Gonzales camp settled for second-best and added rongonzales2002.com to their current roster of domains that includes rongonzales.com and gonzalesformayor.com.

"We have not spoken with Peter Lucas," says Jude Barry, the mayor's chief of staff. "We've made no offer [for gonzales2002.com], nor do we think it's necessary."

Lucas hasn't yet sold a domain to a mayor, but he's now in negotiations to sell hatch2000.com to Orrin Hatch's sputtering presidential campaign. The Hatch campaign offered a four-figure amount for the address and Lucas says he'll counteroffer at $2,500 above their bid.

"It's nothing to quit your day job over," Lucas says (if he had a day job to quit; he admits he's "bumming around" this summer). "There's a big resistance from politicians to paying. They think they have a right to the names and nobody else does."

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Domain Game: Some useful websites on domain names.

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Willie Brown, Ron Gonzales and Orrin Hatch were all nicked by so-called cybersquatters, the latest class of cyber-entrepreneurs who are capitalizing on an increasingly scarce commodity: the coveted .com Internet domains. In an April study of the .com versions of 25,000 standard dictionary words, Wired News found that only 1,760 were still available. Squatters, speculators and start-ups had snatched them all. What's more, nearly every three-letter and four-letter dot com is already taken. And as the Tiffany domains get scarce, disputes over who has the right to use certain domains is a topic increasingly being taken to the courts and to Congress.

"It's just basic economics, supply and demand 101," says squatter Lucas.

AS THE POLITICIANS' names get snapped up, some have become inspired to draft legislation regulating who can use which domain for what. The Anti Cybersquatting Consumer Protection Act is one such bill that passed the Senate Aug. 5, though it appears to be headed for a presidential veto. The act was introduced by Sen. Spencer Abraham (R-MI) who, it should suprise no one, does not own abraham2000.com. That domain is registered to a Pennsylvania man who was apparently named for the first black soldier to be killed in the American Revolution, Crispus Attucks. The act is also sponsored by Orrin Hatch (R-UT), who was recently offered the opportunity to buy senatororrinhatch.com by Joseph Culligan of Miami for $45,000.

In its current form, the act says nothing explicitly about speculators who buy the names of people or politicians dot com, org or net--unless that name is also a trademark, like Ralph Lauren, Gianni Versace or Bill Graham. What the act would cover is domain names that resemble well-known trademarks like Ford, Heinz or Apple.

Currently, when a company with a trademark wants to wrest a domain name from its owner, it usually has a lawyer draft a letter and sometimes offers to settle for a nominal sum. If the owner of the domain resists, the dispute can go to court.

The act, if it passes Congress and is signed into law by the president, would levy penalties of $1,000 to $100,000 for the "unauthorized registration or use" of a trademark as a domain name.

Furthermore, the act creates a federal crime out of cybersquatting, a misdemeanor for the first offense and a felony for the second.

Yet it's unclear that trademarks need these extra measures of protection.

"Every time a court has ruled, it's ruled against [the squatter]," says Mitchell Zimmerman, a Fenwick & West attorney who is nonetheless anxious to employ the new legal tools on behalf of his clients.

Now, when so-called cybersquatters go to court to hang on to a domain, they are liable for their own court costs and face having to pay those of the corporation if they lose. If the act passes, the domain owner would face stiff judgments and criminal prosecution.

"What this really is is a way of intimidating powerless people," argues Mike Godwin, author of Cyber Rights. "The trademark holders have all the money and all the clout. There is so little resistance, it's just laughable. These guys in Armani suits are so threatened by these geeks in T-shirts."

ANOTHER ASPECT of the act would allow plaintiffs to sue in rem, that is, to sue the domain without knowing who the owner is. Porsche, one of the corporations lobbying for the bill, tried to do just that when it brought a mammoth suit against 200 domains in Virginia. That suit was thrown out, but proponents of the bill argue that it's often hard to locate owners of domains because they register under false names--Crispus Attucks?--or addresses or they move.

"It's a centuries-old concept," explains Randy Broberg, patent attorney at Heller, Ehrman, White & McAuliffe. "Let's say there's some polluting factory and you didn't know who owned it. You could bring a case against the factory itself rather than the owner."

Again, says Godwin, it's another tool to bludgeon a citizen who is likely engaging in the still legal activity of buying and selling a domain name for profit.

"This is basically a lobbyist's bill," he says. "The problem is, the intellectual property lawyers want to treat trademarks and domain names as if they were the same thing."

Even without the law, corporations have been adept at getting the domain names they want and believe they deserve. Frys Electronics wrested frys.com away from a Seattle businessman in 1997 who had been using it to promote his vending machine business, Frenchy Frys. Now Frys owns the domain, but isn't using it.

In a landmark case last year, the 9th Circuit Court ruled in favor of the Hollywood-based Panavision Company, which sought to gain control of www.panavision.com from Dennis Toeppen, who was using it to show an aerial photograph of Pana, Ill.

The first high-profile domain dispute in the short life of this new medium came in 1995 when the Princeton Review registered kaplan.com. Since then, according to Broberg, domain legislation has come in waves. The first was in the early years when well-known companies seemed to be the last to know about the Internet. By the time they found out, some of them discovered that their treasured trademarks, like mcdonalds.com, were already taken.

The next wave came with so-called typo cases, in which people register variations in spelling of well-known trademarks in order to poach traffic. Many of those are affiliated with the porn industry. Dosney.com, for example, capitalizing on typists who hit the "o" key instead of the "i," takes viewers to a porn site. Broberg just sued on behalf of Webside Story, a company that runs the list site hitbox.com, against the porn site with the name hitboxx.com.

The third wave is people's names. Nancy Kerrigan brought an action against the owner of nancykerrigan.com. And soon after her free kick hit the back of the net and her sportsbra hit the airwaves, brandichastain.com was registered by one Halsey Washburn of Cedar Crest, N.M., for God knows what purpose.

FOR AN individual or a small business, registering even the most innocuous name is a minefield. Just about every word in the dictionary is trademarked at least once, and often several times over with one or more of the 48 different types of trademarks.

Thinking about registering your name? Be careful. A college student named John Abercrombie was threatened for using abercrombie.net by Abercrombie & Fitch. And Avery Dennison Corp., the Pasadena maker of office products, recently got a court order to stop the use of avery.net and dennison.net by people with those last names.

Even the most common words in the dictionary can be trademarked. Thinking of registering idea.com? Well, "idea" appears in 195 registered trademarks. The word "idea" itself is registered 22 times. Any one of those trademark holders--regardless of what the mark is used for--could dispute the ownership of the domain with Network Solutions and prevent the domain from being used. If trademark infringement is criminalized, as with the Cybersquatting Consumer Protection Act, the holders of such generic trademarks could refer their beef to the FBI.

That terrifies Scott Day, the Oklahoma watermelon farmer who made news by registering georgebush.com and then handing it over to the Bush campaign in exchange for a meeting with the candidate.

Day, president of Digimedia in Terral, Okla., buys generic domains and then seeks to either sell or develop businesses around them. He owns desert.com, recipes.com and fantasyfootball.com.

"This bill would weed out the small business people," he says. Should a company decide to freeze one of Day's domains with Network Solutions, Day has little recourse except to come up with the $10,000 he believes it would take to pay a lawyer to defend his right to keep it. "I don't think that's quite fair," he says.

The value of these common-word domains is on an upward trajectory. Drugs.com took $823,456 in an auction Saturday, purchased by Tony Hseih, co-founder of LinkExchange and Venture Frogs in San Francisco.

THE FUTURE OF domain-name disputes may lie in a nongovernmental body headed by futurist Esther Dyson called the Internet Corporation for Assigned Names and Numbers (ICANN). ICANN, www.icann.org, is scheduled to take over the administration of top-level domains from Network Associates, the Virginia company that currently holds the government contract to manage top-level domains, in September 2000. Its staff is currently developing a dispute-resolution policy that would force domain speculators to submit to arbitration, a process that could strip them of their domains and require them to foot the bill for resolving disputes.

But classifying a domain owner as a "speculator" or as acting in "bad faith" throws the door open wide to interpretation. To civil libertarians, it's unclear that cybersquatting, no matter what the motivation, should be a crime.

"It's hard to identify the harm here," Godwin argues. "The state's job is to step in where harm is caused to people or property. Here it's unclear that there's harm happening to anybody."

So Peter M. Lucas will continue to be the master of his domains. He just registered the name of Jon Corzine, former president of Goldman Sachs, who's planning a possible Senate bid and happens to be worth about $300 million. In light of last week's surprise announcement by the talk show host, he considers springerforsenate.com "the one that got away."


Will Harper contributed to this report.

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From the August 19-25, 1999 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © 1999 Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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