Wednesday, April 24, 2013

Daunting Math Facing Brand Owners

The new reality on the Internet is a game of very large numbers -- a reality that brand owners and content creators trying to protect their intellectual property rights online may find depressing.  

Here are a few statistics to ponder:

Between 1995 and 2013, the number of Internet domain names registered went from 15,000 to 250,000,000.

There are nearly 150,000 new domain names created each and every DAY.  Even taking deletions and expirations into account, there is still a net gain of tens of thousands of new domain names created every single day, 365 days a year.  In addition, there are estimated to be 634,000,000 websites, with 51,000,000 added each year.

It is currently estimated that 2.4 BILLION people use the Internet worldwide, with 1.1 billion of them in Asia alone.

The statistics also demonstrate that counterfeiting on the Internet is similarly skyrocketing.  For example, domain name registrants frequently register names that cybersquat upon the established rights on trademark owners.

In the 1990's, Congress passed the Anti-Cybersquatting Consumer Protection Act (ACPA), to give rights owners a vehicle for protecting themselves by filing suit in federal court.  Brand owners can also initiate Uniform Domain Name Policy (UDRP) proceedings.  But litigation under the ACPA/UDRP can be expensive and time-consuming.

A very successful and aggressive brand owner may be able to set aside several hundred thousand dollars per year to budget for proactive brand protection on the Internet.

But is that even enough?

Given the massive scale and scope of counterfeiting on the Internet, this math presents a very daunting reality.

Assuming 20 newly-created domain names registered each day infringe upon a brand owner's rights, in one year alone, a trademark owner would need to spend hundreds of thousand of dollars getting all of them locked and transferred under Court Order.

Of course, a new infringer lurks around every corner, so there is nothing to stop new domain names from being created tomorrow, and the day after that, and so on.

A brand owner may hire a team of attorneys and investigators dedicated to combating this escalating problem.  But counterfeiters can find armies of extremely cheap labor to draw upon for programming, coding, marketing and distribution of counterfeit goods.

Therefore, in a long drawn out war of attrition, the math facing brand owners is daunting.

The solution?

First, brand owners need to act MUCH more aggressively and diligently.  The problem is not going away.  By ignoring the problem, it will only get worse.

Second, brand owners need to lobby the government for much more stringent penalties and enforcement mechanisms.  Individual ACPA and UDRP proceedings against infringing domain names made sense in the 1990's, but today they are anachronistic given the scope and scale of the problem.

Some brand owners have been creative and have filed large-scale litigations that have shut down thousands of domain names through sweeping Court Orders in a single case.  However, these cases have inherent limitations, and need to be filed repeatedly.

Third, ICANN needs to begin to adopt policies that are pro-brand owner, rather than pro-infringer.  The core economic dilemma is that ICANN (and its affiliated registries and registrars) stand to gain tens of millions of dollars in fees each year from newly-created domain names, and therefore have little incentive to protect the intellectual property rights of the few.  Their economic incentives, in fact, are quite in the opposite direction.

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