Happy 28th Birthday Domain Names!

Happy 28th Birthday to domain names! 

On March 15th 1985, Symbolics.com was registered – one more link for them here.

symbolics.com

The next couple of years will be interesting:

Will the proliferation of top-level extensions dilute the recognition, power and value of the .com?

Or will the increasing fragmentation of online assets add to the .com’s singular authority?…

Mobilephones.co.uk To Decide Future Of Domain Auctions

Auction of domain name mobilephones.co.uk could prove to be the biggest domain event of this decade. The domain community is already buzzing about the upcoming sex.com sale, and its news is filtering out to general media, but mobilephones.co.uk is now a more significant name sale – if indeed it is a ‘sale’.

Sold for £91,500 this week, in a Sedo public auction, the transaction is now contested by the seller. They have tried to cancel it, but can they? And if so what does this mean if they can? Read the background.

mobilephones.co.uk

Auction of the name is big news by itself: the opportunity to buy a premium 2-word domain name of exact match to the search term of a high volume high value market sector – [mobile phones] – is a seismic force 7 on the Richter scale.

But now the official sale is being disputed by its current owners, it has become an unparalled force 10, nearly off the scale, unrecorded in domain history.

Because of our own work in the Teleco sector, we’ve had the name on our radar for a few years, and understand that a 200k bid was turned down a few years ago, before the recent recession when domain prices were still high. It appears that owners of the .co.uk also own the .com, and they have quietly sat on the names for a few years.

Auctioned last week, the name received 58 bids from 10 bidders, on Sedo. Well done to Angie Barrow’s ANY-Web for having the forsight to purchase the name. £91,500 is widely recognised as a good price for such a high potential domain name. While there doesn’t seem to be any formal notice by Sedo on the issue yet, Angie herself reports the sale is being contested. Rightly, domainers are up in arms.

(Whilst buyers sometimes do not pay in domain auctions they have won – poor practice, but something we’re all familiar with from eBay auctions for example – it is rare for the seller to renege. Indeed we’re not aware of any for such situation before, particularly for a high value domain name >> please comment below with any you know of or have experienced.)

Mistake by the Seller?

It appears that a bid of £25,000 triggered the auction last week. The case for the sale being in error is supported by such a low initial bid meeting the reserve price, and the subsequent timing of the end of a 7 day auction being late at night (seasoned eBay’ers would be suspicious of a late night auction finish).

But there are numerous confirmation steps required in accepting a bid in Sedo and then releasing it for public auction. It is difficult to understand how this could be done in error, by honest mistake. There are numerous warning and update emails a seller receives during an auction, even before the public information about the auction. Neither an out-of-date email address to Sedo for alerts nor being off-line are plausible excuses, they reacted to the initial bid. Regardless they used Sedo services, and agreed to Sedo’s terms.

Sedo’s Role

Interestingly the name wasn’t given much profile on Sedo during the week – as those many of us who were watching the auction of such a name like hawks can confirm. Sedo was aware plainly aware of the sale, as those who signed up as premium bidders to enter the auction will also confirm. You would imagine Sedo’s own procedures are to perform due diligence behind such a premium sale, to authenticate and to provide the seller with customer service (given the 10% brokerage fee it makes).

Contract for Sale?

Could this series of events happen in error? IF the acceptance of the initial bid, AND the release to public auction, AND the auction house validation, AND the awareness of the auction by the seller, ALL went wrong, then perhaps. Hard to imagine, but perhaps.

Even if these unfortunate events culminated in the auction proceeding and completing, with Angie Barrow’s final successful bid, does it matter? They entered into a legal contract.

Whilst Sedo are only the broker, the terms and conditions of their domain auction spell out the binding agreement by the seller and the potential buyers in a legal contract. Claiming an auction is in error is the same as backing out of it if you don’t like the price you’ve achieved. This case could test the legality of the commonly used domain auction process.

Precedent

We are in unchartered domain-waters. If such a public sale can be made void, reneged on during or after the bidding process, then the outcome in this ‘sale’ of mobilephones.co.uk could set a precedent for ALL future domain auctions. If a name can be put up for auction, the auction run, and won, but then the sale cancelled, why bother bidding?

It would make a mockery of the notion of reserve price, and has enormous ramifications, not just for integrity of the seller and the domain houses running the auction, but the trading of domains as an activity and domain industry as a whole.

The domain market relies on the ability to trade names between buyers and sellers, structured and facilitated by auction houses. Domainers and their industry have had a poor image – somewhat unfairly  – and worked to improve it. The precedent for reneging on auctions could set them back years.

Resolution TBC

You can only imagine there have been a lot of people busy all weekend on this one: the seller stating their case; the buyer evaluating their options (legal or otherwise); Sedo bringing the domain-sale-that-wasn’t to clean and clear resolution. Without it, where do domain auctions go from here?

As the story rumbles on into this week, we’re anxious to hear where it goes, and we’ll keep you posted…

Cleuless

Originally from 30th April 2006:

Serious problems in the .eu registration process result in 25% fraud

Summary.eu

25% of the first million .eu applications were fraudulent – minimum. Fundamental design flaws in the registration process, together with numerous practical errors of implementation, leave the EU with an allocation of its flagship .eu domain address of which it can be truly embarrassed. More than 20 identifiable problems, including loop holes that have been exploited and left unchecked, riddled the process. Not only were these predictable and solvable but will even create in the future issues of disputed ownership. The key failings are highlighted by shocking examples.

Introduction.eu

Proposed in 1999 and approved by ICANN as the new Internet address for the European Union (EU), the .eu top level domain has taken 6 years to become a reality. A population of 500 million plus Internet-hungry EU residents awaits; as the EU grows the .eu name will be an expanding piece of virtual real estate.

The .eu is a top level domain (TLD), and one of currently only three regional level domains (the others being .asia, and .cat for Catalonia). Time will reveal its importance relative to ‘the master’ (.com), though its position hierarchically superior to country level domains (.co.uk, etc) provides it with huge potential. The value of domain names has increased with the value of Internet commerce, and high expected values have driven the incentive to seek advantage in securing domains.

Objectives.eu

The European Commission set clear goals to firstly promote commerce in the EU with the introduction of a new TLD, and secondly allocate names fairly by rewarding existing entitlement with preference, i.e. stop cybersquatting.

The design to achieve these goals allowed one central registry (EURid) to coordinate the release and supply domain names to accredited registrars for marketing and retailing. Initially a number of names were reserved before the public phases commenced, being deemed worthy of outright protection, for instance all ISO country codes (e.g. uk.eu). Then in phases registrars would send in applications on behalf of applicants (you and me) to the central authority for evaluation by PWC.

Rights.eu

First ‘Sunrise 1’ allowed those with prior rights based on trademark or geography to apply, followed by ‘Sunrise 2’ for ‘lesser’ prior rights of unregistered trademarks or of company name, family name, or titles of art. Prior rights defined as EU national or EU international legal rights.

These staggered phases were only open to EU residents and applications were considered on a ‘first-come first-served’ basis and, according to validation guidelines, the first application meeting requirements accepted. Any dispute over acceptance or rejection possible in an alternative dispute resolution (ADR) process. 19 million EU businesses were able, in theory exclusively, to apply according to pre-entitlement before a ‘landrush’ at which point any EU resident could apply.

Issues.eu

EURid provides visibility to a list of blocked/reserved names, but these were inconsistently applied. For instance Portugal reserved algarve.eu while monaco.eu was available. The .eu is inherently more restricted than .com – meaning P&G with pg.com had no possibility of obtaining the blocked pg.eu, for example.

More importantly prior rights differ fundamentally by country in the EU and this undermines the entire prior rights method: the disparity illustrated by ‘carrentals’ which is not possible to be trademarked in the UK due to its lack of distinctiveness, but however can be in more lenient EU patent offices – and this is exactly what happened, with a trademark from Malta, dated just before the .eu application, used to apply for carrentals.eu.

Such was the ease of this activity, a massive number of trademarks were ‘bought’ just before Sunrise I began with the express purpose of attaining prior rights. 23% of the 350,000 Sunrise applications were bought – allowable in the design of the registration process but by any reasonable definition unethical. A trademark dated 8 days before Sunrise 1 was lodged with the Netherlands patent office for “mon & aco”, which for the cost of €150 secured the fate of monaco.eu.

Fraud.eu

Lack of registrar integrity leads on to the next major problems: starting with registrars making their own applications for names, clearly a conflict of interest when they should be acting only on behalf of third party applicants.

Even more worrying was the absence of checks in registrar accreditation – in the last few weeks of Sunrise the number of registrars ballooned – with over 400 last minute ‘phantom registrars’ signing up (the main criteria was a €10,000 fee), taking the number up to 1500. Dishonest registrars created aliases to improve their chances of successful applications (highlighted by one honest registrar), making 27% of the 700,000 first-day landrush applications a cheat and a sham.

The bogus registrars sought to exploit the failure of the ‘first-come first-served’ principle for applications: these were queued up by registrars for system communication at a pre-set time when EURid ‘opened the doors’ on the first day of each phase. As first-come first-served really meant ‘fastest machine won’, it was tilted in favour of those making disproportionately high numbers of applications.

The natural consequence to real applicants of this was to make multiple applications, at multiple cost, to reduce the risk of being beaten – amazon made 22 separate applications in their ultimately successful bid to secure amazon.eu .

Practical errors litter the remainder of the process, including unclear decisions of acceptance, abuse of other validation criteria, and whois.eu system crashes, etc.

Examples.eu

Some examples of who got their names, who didn’t, and what’s been going on:

  • Brands successful: amazon, google, ebay, yahoo, internetexplorer, hp*
  • Brands unsuccessful: partypoker, pokerstars, avis, hertz, rowntrees, delta, norton, clio*, firefox*
  • Geography unsuccessful: Chamonix, Monaco*, Tenerife*
  • Most applications: 281 for sex.eu (even before landrush) of which 32 separate applications claimed a trademark on the word from 11 different countries
  • Real organisation buying a trademark as didn’t have real one: HP (for hp.eu)

(*not yet confirmed at time of writing but highly probable)

Virtually all unreserved two letter names (e.g. zi.eu) were applied for using bought trademarks. All 10 subheadings of this article were snapped up using purpose-bought trademarks (fraud.eu being a particularly nice touch) by two players, who together bought 1150 trademarks from the Benelux patent office just for .eu applications.

At the Benelux patent office alone we identified 50 organisations as trademark buyers of over 4000 (average of 80 each) in the last 2 months of 2005, days before Sunrise I: in doing so they spent €2 million on trademarks and applications.

Scenarios.eu

Prior rights were intended to protect brands, owners relying on existing trademarks. Where a bought trademark secured a branded term and beat (first-come first-served remember) a real trademark, this defeats one of the original goals. But the .eu process allowed this to happen, and any subsequent ADR (at a minimum cost of €2000) will unlikely overrule the main process, assuming it was valid according to the initial criteria. And although the .eu process legitimises this activity there could be legal challenges post-release – it is not clear at this time how WIPO will rule over PWC, but precedent will likely rule in favour of the original trademark holder. If so this will confirm the failings of the .eu design.

Perhaps Rowntrees (rowntrees.eu was caught by a profiteer and now for sale on eBay for €7,500) didn’t bother with Sunrise on the understanding they can gain ownership of the domain later due to duality of trademark and domain. This would make a mockery of the .eu process. Now is a good time to be in the legal services business (contact cressive for our recommended legal partner).

A bought trademark on a generic keyword is more contentious as whom does it hurt if no one else had prior rights anyway? Well it does stop the landrush for anyone else, means pre-release spend is inefficient (on trademarks and applications rather than business investment), and due to its organised nature puts names into the hands of a small number of players giving them oligopoly power over resale values.

Take ‘maps’ for example, one of the most commonly used words in search engines. The importance of generic keywords used in search engines means holders of those domains gain significant access over Internet traffic, and inflate prices in the secondary market for domain name reselling: maps.eu will be worth a lot of money.

Sedo.com predicts that fifty percent of the .eu domains registered during the landrush will be made available for resale: within a week there were 90,000 .eu names already available for resale on its domain auction site.

So: you’ve bought a trademark and secured your .eu name with high resale value, but why place it on an auction site and wait when you could contact directly others who also applied for the same name? – the EURid interface provides details for all those who made Sunrise applications, facilitating the resale of .eu names! The legal notice there prohibiting this re-engineering will no doubt put off those who have successfully exploited every other failing of the registration process.

Learning.eu

There are practical solutions to these key problems. A trademark should be a necessary but not a sufficient condition of prior right. Requiring that a trademark be older than the age of announcement would stop purpose-buying (declined in the .eu process, adopted in the .mobi process). Using other TLDs would be reasonable proof of existing web operations under a name (e.g. .co.uk , .de, .fr, etc).

Rather than constructing a first-past-the-post situation out of the control of applicants, groups of applications could be considered comparatively, perhaps those applying on the first day. (Using the date an application was received by a registrar wouldn’t work if they can’t be trusted.) And the method of accreditation should be extended with higher standards, with checks of authenticity beyond ability to pay.

ICANN has proposed an online auction for the intended release of single letter .com domains (e.g. a.com). This is a financially efficient method of valuing names, with a more developed primary market, making the secondary market less important. (Some registrars in the .eu process ran their own auctions to allocate names in the secondary market.)

A consortium of experts should be employed to collectively improve the design and implementation of releases: representatives from a leading domain company like Sedo, domain experts like cressive, registrars more involved, and a major search engine like Google for their keyword and Internet knowledge.

Conclusions.eu

The release of the new domain name will ultimately boost EU commerce but failings have made the process inequitable and inefficient. Whilst entrepreneurial spirit and opportunism should be applauded, those in charge of domain name release should act and look as though they really are. A eulogy this is not. The EU failed the .eu .

All of us, anyone and everyone who uses the Internet should care about this. ICANN and those involved in the administration of the Internet will care. You’ll care if you applied for your .eu name and missed out.

Maybe you got your name and now need to know what to do with it to maximise its value, monetise your new traffic effectively, and manage it? You should incorporate it into your overall domain strategy and online marketing strategy.

And if you want to plan how to best take advantage of future domain name releases and prepare to exploit the process as much as it allows, then use our expertise to approach it, talk to cressive and we can help.

For more examples of .eu registration victims, and to report your own .eu scandal, visit www.cressive.com . © 2006 cressive ltd

cleuless