Reed Smith Client Alert

ICANN (the Internet Corporation for Assigned Names and Numbers) is rushing headlong in its efforts to bring the world a massive expansion in the number of new gTLDs (the part of an Internet address that follows the dot, such as .com). As ICANN developed this plan over the past several years, various groups raised concerns regarding the potential for a corresponding massive expansion of trademark infringement, cybersquatting, and cybercrime. In response, ICANN grudgingly developed a very limited set of additional “rights protection mechanisms” (RPMs) that solely apply to the new gTLDs.

As part of the RPM process, ICANN outlined a Trademark Clearinghouse (TMCH), which opened for business on March 26. Brandowners will need to register their marks in the TMCH in order to take advantage of two RPMs for new gTLDs: Sunrise registration periods and Trademark Claims notices. Only trademarks registered in the TMCH will be eligible to participate in Sunrises and only trademarks registered in the TMCH will trigger Trademark Claims notices.

The Sunrise registration period in each new gTLD launch allows trademark owners to register domain names that exactly match their trademarks (whether they want to use them or merely want to keep them away from cybersquatters and the like), prior to the general registration open to the public. The Trademark Claims notice will be sent to domain name applicants during the first 90 days of open registration if the name the third party is applying for is an exact match to a brandowner’s trademark (the brandowner gets a notice as well if the applicant elects to go forward after seeing the notice).

Just days before the TMCH opened for business, ICANN made some last-minute renovations. In response to pressure from brandowners and business users of the Internet, ICANN changed three features of the TMCH and the related RPMs. First, the Trademark Claims notice period, originally 60 days, was extended to 90 days. Second, the TMCH will now provide 30 days prior warning of each new Sunrise period. Third, brandowners will now be able to register up to 50 variations on their marks in the TMCH, if those variations had previously been the subject of successful litigation or UDRP arbitration due to abuse by third parties. Regrettably, ICANN declined to put in place Limited Preventative Registrations, which would have allowed brandowners to buy defensive registrations of their marks across all eligible new gTLDs for a reduced price using a streamlined procedure.

Since Sunrise registrations require brandowners to spend massive amounts of money to preempt third-party registrations, and Trademark Claims notices evaporate after 90 days, the value of both RPMs is dubious. Nonetheless, this is the result of the “multi-stakeholder process” of ICANN (which pits a “minority party” of trademark owners against a multitude of stakeholder groups generally opposed to any rights protection mechanisms at all).

Brandowners must now decide whether to register some or all of their trademarks in the TMCH to take advantage of these limited protections. In order to be eligible for registration in the TMCH, trademarks must be either (1) registered in a national or regional (e.g., EU Community Trade Mark) registry, (2) validated by a court proceeding “at the national level,” or (3) protected by statute or treaty. Proof of use (including a statement and a specimen) must be submitted for all registered marks. If the registration will expire during the term of protection in the TMCH, a copy of the renewal application must be submitted as well.

Trademark licensees, as well as owners, may place trademarks in the TMCH. While this allows licensees to trigger Trademark Claims, one can imagine the mischief and misunderstandings that could arise from this as well.

Not all trademarks will be eligible. If trademarks contain a design element, the words must be “predominant” and easily separable from the design. Trademarks containing a dot (“.”) are not eligible. Trademarks with characters not usable in domain names (e.g., “&”) must be registered in a modified form (and if multiple modified forms are registered, each will be a separate registration at full cost).

Trademark owners may register directly with the TMCH or through “Trademark Agents” – which, in TMCH-speak, means third party service providers (and perhaps a few intrepid law firms) that will act as middle-men for trademark owners.

The TMCH is not cheap. Recording a trademark in the TMCH will cost $150 per year. There are some modest discounts – if a trademark owner registers for five years up front, they will “only” pay $725, rather than $750. Assuming the new gTLDs are launched over a five year period, a brandowner with 100 marks will pay at least $72,500 in TMCH fees. Payments must be made by credit card, unless the trademark owner goes through a Trademark Agent or registers for the Advanced Fee Structure, which requires a $15,000 deposit account to be set up with the TMCH. Further discounts are available to those in the Advanced Fee Structure, but the lowest level discount doesn’t kick in until at least 334 five-year registrations (or 3,001 one-year registrations) are placed in the TMCH. Clearly, this fee structure favors Trademark Agents rather than brandowners. While Trademark Agents (and a few very big brandowners) will qualify for larger discounts, the extent to which Agents will pass these discounts on to trademark owners is unknown (like so much else in the TMCH universe).

The TMCH is also not user-friendly. Full details of each trademark registration must be entered manually, including full descriptions of goods and services (probably for each class – TMCH representatives weren’t sure as of last week). There is no interface provided to allow automated input (e.g., from docketing software or spreadsheets). The TMCH has provided application program interfaces (APIs) to allow applicants and Agents to build their own interfaces. This will not appeal to the small brandowner or the faint of heart, especially since the APIs have not yet been fully tested. This also seems to push brandowners toward using Trademark Agents unless they intend to register only a few marks.

Trademark owners should be aware that, if they go through a Trademark Agent, the agent, not the owner, will receive the Trademark Claims notice that a third party has registered a domain name identical to a TMCH-listed mark. Owners will need to rely on their agents to forward these notices.

The two RPMs that use the TMCH are not particularly attractive, but they are arguably better than nothing. If trademark owners want to participate in even a single Sunrise – whether for defensive purposes or because they actually believe a registration in a new gTLD will be useful, they will need to pay the piper at the TMCH. Similarly, no matter how much of a “paper tiger” Trademark Claims notices are, if trademark owners want third parties to receive notice of their marks, they will need to sign up and pay the price. In sum, trademark owners should carefully strategize regarding those marks that they wish to place in the TMCH and those marks for which they will take a “wait-and-see” approach and enforce on a case-by-case basis.

Many elements of the TMCH are still under construction and it remains unclear how well it will all work. For those who like moving into houses while they are still being built, you will feel right at home. For the rest of us, we’ll need to watch for construction debris.


Client Alert 2013-075