Domain Tasting: A Solution*
Alex
Tajirian
August
14, 2007
Abstract
We argue that the five-day registration grace period[1] creates a subsidy from domainers as a whole to tasters in particular
and should be abolished. We also suggest an alternative arrangement
that would put a huge damper on tasting.
Introduction
One issue that a large number of domainers agree on is that domain
tasting[2] under the current ICANN–approved policy is bad for the
industry. For one thing, a healthy portion of the practice involves
trademark use that not only is illegal but also destroys value. Of
course, particular segments of the domain name ecosystem can suffer
value destruction because of tasting that doesn’t infringe trademarks.
But most criticism is directed, and rightly so, at tasting that raises
trademark issues.
Litigation
over the trademark issues has done little to stop the practice
and destroys value for trademark holders and domainers alike. Now
the big trademark owners have begun pooling their efforts and given
us the Coalition Against Domain Name Abuse (CADNA). As their
creature, the group offers a real possibility of abuse. Conceivably,
individual domain name owners could be bullied into giving up names
that face only flimsy trademark allegations.
Meanwhile, tasting will continue as long as there
is an increase in the average PPC rates or in search volume, advertising
for new keywords or improvements in content to better match user
intent. Thus, a long-term solution needs to be implemented.
A taste of existing view
One argument invoked for eliminating the five-day grace period
is that the opportunity for tasters to go hog-wild puts stress on
the registries. But by now a number of the registries have installed
and paid for the extra capacity they require. It must be considered
a sunk cost and has no place in calculating the merits of eliminating
the grace period.
There have been suggestions that registries could
offer only partial, not full, refunds when a registration is canceled.
But this proposal would have no bite unless ICANN mandated a ceiling
for refunds; otherwise competitive market forces would make reductions
in the refund nominal at best. The recent announcement of the formation
of CADNA to tackle trademark-related domain tasting is primarily
aimed at enhancing the trademark owners’ market power while reducing
their monitoring and enforcement costs. The market power comes not
only from the aggregation of the coalition members’ trademark rights
but also from their call for action to enlist disgruntled domain
name owners who have lost their names to tasters. However, CADNA
and the route of confrontation are value-destroying for both parties.
CADNA does not present an effective solution and might be used to
pressure domainers into giving up domain names that don’t violate
trademarks.
What is the real problem?
Under the current ICANN pricing structure, the registration
fee implicitly includes an option that allows the registering entity
to force a full refund. This option has value, as demonstrated by
the volume of domains being tasted. But those doing the tasting,
by and large, are the few domain owners willing to risk trademark
infringement. Other domain owners, the vast majority, also pay the
higher registration fees that make the full refunds possible, but
they don’t benefit from the refund option. In effect, they are subsidizing
those of their competitors ready to play fast and loose with trademarks.
On the registrars’ side, of course, the players
with the capacity to handle the large volume of tasters’ five-day
transaction sprees often benefit from the current arrangement. As
a result ICANN is notably reluctant to tackle problems associated
with the grace period.
What needs to be done?
Any solution has to accomplish two things: (1) give ICANN an
incentive to overcome the bigger registrars’ resistance to action;
and (2) eliminate the subsidy to tasters.
One part of the answer would be to stop funding
the cost of refunds out of the same standard registration fee that
all domain owners pay. Instead domain owners would be given a choice
when they registered. Those looking for full refunds would pay extra
by purchasing insurance policies[3] guaranteeing them that option. Those who weren’t interested in refunds
would pay only the registration fee, now lower because it would
no longer carry the weight of subsidizing the tasters.
Different domainer risk classes would pay different
prices for their insurance, of course. But paying would give all
would-be tasters an incentive to abandon the spree approach to acquiring
domain names and to start using analytical tools instead. The change
would expand the field’s knowledge base and thus create value.
More is needed to conquer domainers’ “bad taste”
problem. But going through the legal venues cannot be considered
an answer. Done individually or coordinated through CADNA, lawsuits
would take too long to resolve and would destroy value for both
sides, domainers and trademark holders. Instead trademark holders
should explore solutions based on cooperation
with advertising agencies (such as Google and Yahoo) and monetizers.
Concluding Remarks
-
The proposed refund insurance policy
solution stops the wrongful subsidy from domainers to tasters
and satisfies ICANN.
-
To overcome “bad taste,” or bad tasting,
trademark owners need to follow a cooperative strategy instead
of litigation.
-
A coordinated effort by domainers is
needed to forestall abuse of CADNA.
* Prepared for the Domain Name Image session at the
3rd annual Domain Roundtable Conference (www.domainroundtable.com)
in Seattle.
[2] The practice refers to registering hundreds of thousands
of domain names and testing them for their potential to generate
ad revenue. After five days, the ones that “taste good” are
kept, the others are canceled for a full refund.
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