U.S. House of Representatives

Committee on the Judiciary

Henry J. Hyde, Chairman www.house.gov/judiciary

For immediate release July 26, 1999

Contact: Sam Stratman/Michael Connolly (202) 225-2492

Judiciary Subcommittee to Review Intellectual Property Issues in Internet's New Domain Name System

The Internet is often described as a "network of networks" because it is not a single physical entity but, in fact, hundreds of thousands of interconnected networks linking millions of computers around the world. Every computer connected to the Internet is assigned a numeric address, called an Internet Protocol Number (IP number), that designates its specific location, thereby making it possible to send and receive messages and to access information from computers anywhere on the Internet. Most Internet sites, however, are better known to the public by their domain names, common, oftentimes popular, names that allow users to access a Web site without requiring them to remember a long string of numbers. For example, the IP number for the location of the THOMAS legislative system at the Library of Congress is 140.147.248.9; the corresponding domain name is "thomas.loc.gov". Domain names are relevant because consumers often perceive them as performing much the same role as trademarks and trade names have historically played in more traditional modes of business, that is, a means of identifying a favorite or trusted company or product.

Top Level Domains (TLDs) appear at the end of a domain name and are either a given country code, such as .jp or .fr, or are generic designations (gTLDs), such as .com, .org, .net, .edu, or .gov. The Domain Name System (DNS) is the distributed set of databases residing in computers around the world that contain the address numbers, mapped to corresponding domain names. These computers, called root servers, must be coordinated to ensure connectivity across the Internet.

The Internet originated with research funding provided by the Department of Defense Advanced Research Projects Agency (ARPA) to establish a military network. As its use expanded, a civilian segment evolved with support from the National Science Foundation (NSF) and other science agencies. NSF was responsible for the registration of nonmilitary domain names, and in 1992 put out a solicitation for managing network services, including domain name registration. In 1993, NSF signed a five-year cooperative agreement with a consortium of companies called InterNic to provide network management services. Network Solutions Inc. (NSI), a Herndon, Virginia engineering and management consulting firm, operated the Internet domain name registration services under this cooperative agreement. Until recently, only NSI assigned second-level domain names (e.g., www.companyname.com) for the .com, .org. and .net generic Top Level Domains (gTLDs).

Recent Developments

Since NSI began imposing fees for the registration of domain names in 1995 (the current fee is $35 per year), criticism of NSI's sole control over the registration of names in the .com domain has grown. Additionally, there has been an increase in trademark disputes arising out of the enormous growth of registrations in the .com domain. According to NSI, registration of domain names within a few generic top-level domains (.com, .net, .org) has increased from several hundred per month in 1993 to a predicted one million in one month in 1999, the overwhelming majority in the .com category. These concerns prompted actions both in the United States and internationally.

An International Ad Hoc Committee (IAHC), a coalition of individuals from the Internet Society (ISOC), Internet Assigned Numbers Authority (IANA), Internet Architecture Board (IAB), Federal Networking Council (FNC), International Telecommunication Union (ITU), International Trademark Association (INTA), and World Intellectual Property Organization (WIPO), released a proposal for the administration and management of gTLDs on February 4, 1997. The proposal recommended that additional registrars be selected to compete with each other in the granting of registration services for all new second level domain names.

Following a meeting hosted by the ITU in April 1997, various organizations signed or pledged to sign a Generic Top Level Domain Memorandum of Understanding (gTLD-MoU) based upon the IAHC proposal. The gTLD-MoU recommended that a Council of Registrars (CORE) be established to manage the master database and DNS main computer servers that route address information around the world. Under the proposal, CORE was to operate as a non-profit association subject to Swiss law. The proposal recommended that all existing gTLDs, including those registered and maintained by NSI, ultimately be shared and that existing registrars join CORE. The U.S. State Department expressed concerns about this proposal and ITU's authority to undertake a lead role in the domain name system.

To assess whether the IAHC proposal should be supported by the U.S. government, the executive branch created an interagency group to address the domain name issue and assigned lead responsibility to the National Telecommunications and Information Administration (NTIA) of the Department of Commerce ("Commerce"). After receiving extensive comments from the public, Commerce released "A Proposal to Improve Technical Management of Internet Names and Addresses" on February 20, 1998 (also called "the Green Paper"). The proposal called for a private, non-profit corporation, headquartered in the United States, to manage the DNS and IP addresses. The corporation would be incorporated under United States law, but have a board of directors that included representatives from foreign nations. The Proposal also recommended creating an unlimited number of "registrars" to compete for the subscriptions of new Internet users. The U.S. government would oversee the transition to the new system, but would phase out its involvement no later than September 30, 2000. Commerce received over 650 comments on the Green Paper, both positive and negative.

On June 5, 1998, Commerce issued a final statement of policy, "Management of Internet Names and Addresses." Called the White Paper, the statement reaffirms the principles and goals of the Green Paper, but essentially defers to the private sector in deciding how those principles and goals might be met. The White Paper stated that the U.S. government was prepared to recognize and enter into agreement with "a new not-for-profit corporation formed by private sector Internet stakeholders to administer policy for the Internet name and address system." In deciding upon an entity with which to enter such an agreement, the U.S. government assessed whether the new system ensures stability, competition, private and bottom-up coordination, and fair representation of the Internet community as a whole.

In effect, the White Paper endorsed a process whereby the divergent interests of the Internet community would come together and decide how to administer Internet names and addresses. Accordingly, Internet constituencies from around the world (calling themselves "the International Forum on the White Paper" or IFWP) held a series of meetings during the summer of 1998 to discuss how the new, not-for-profit corporation might be structured. The new corporation proposed by the group was called the Internet Corporation for Assigned Names and Numbers (ICANN). After five iterations, the final version of ICANN's bylaws and articles of incorporation were submitted to the Department of Commerce. On November 25, Commerce and ICANN signed an official Memorandum of Understanding, whereby Commerce and ICANN agreed to jointly design, develop, and test the mechanisms and procedures necessary to transition management responsibility for DNS functions to ICANN. Until the full transition to a private sector controlled DNS system is completed, the Department of Commerce remains responsible for monitoring the extent to which ICANN satisfies the principles of the White Paper as it makes critical DNS decisions.

Under its bylaws, ICANN is governed by a nineteen member Board of Directors. This Board consists of the President of ICANN, nine at-large members representing six different international geographic regions, and nine members representing ICANN's three supporting organizations - the Address Supporting Organization, the Domain Name Supporting Organization, and the Protocol Supporting Organization. In turn, each of these supporting organizations is comprised of constituencies that represent various interests that wish to take part in ICANN policymaking. For example, the Domain Name Supporting Organization (DNSO), which is responsible for recommending trademark policies to the Board, is comprised of several self-organized constituency groups that have an interest in policies relating to Internet domain names. The current designated constituencies include: ccTLD registries, commercial and business entities, gTLD registries, ISPs, non-commercial domain name holders, registrars, and intellectual property interests. The DNSO is close to full formation, however, the Address and Protocol Supporting Organizations are further from completion.

Although ICANN is in its formative stage, controversy has already arisen over its structure. Specifically, questions have been raised as to how the original nine at-large members were chosen and some critics have complained that the new, interim Board has operated in secrecy and lacks the legal authority it purports to hold. Given such criticisms, ICANN has been reluctant to implement policies addressing several important intellectual property concerns until its permanent Board is elected and all of its supporting organizations are represented on the Board (a process that will not be complete until November, 1999 at the earliest).

In addition to spurring the formation of ICANN, the White Paper also signaled the Department of Commerce's intention to ramp down the government's Cooperative Agreement with NSI, with the objective of introducing competition into the domain name registration process while maintaining stability and ensuring an orderly transition. On October 6, 1998 Commerce and NSI announced an extension of the Cooperative Agreement between the federal government and NSI through September 30, 2000. During this transition period, government obligations will be terminated as DNS responsibilities are transferred to ICANN. Specifically, NSI committed to a timetable for development of a Shared Registration System that will instill competition into the registration of domain names by permitting multiple registrars (including, among others, AOL, Register.com, CORE, and NSI itself) to provide registration services within the .com, .net, and .org gTLDs. ICANN is responsible for overseeing this transition and is charged with ensuring both competition and Internet stability through the accreditation of these new private registrars.

Pursuant to its agreement with Commerce, on April 26th, 1999, NSI initiated the test bed phase of the Shared Registration System designed to allow five private registrars to begin registering Internet domain names. According to the agreement, the Shared Registration System was to be fully deployed by June 25, 1999 and open to all private registrars accredited by ICANN. Due to technical problems which have slowed the five test-bed registrars in their efforts to begin registering new domain name applicants, this deadline has been pushed back to at least the beginning of August and possibly later. ICANN has accredited almost fifty private registrars, in addition to the original five test bed registrars, that are now waiting for these technical problems to be resolved before they can enter the market and begin competing to register new domain names.

The move to competition in domain name registrations has sparked considerable controversy. Some critics charge that NSI is slowing the transition to the Shared Registration System in order to continue to reap monopoly profits. The Department of Commerce responded to this delay and NSI's refusal to enter into an accreditation agreement with ICANN by threatening to terminate NSI's cooperative agreement with the federal government, a move that would eliminate NSI's right to assign any Internet domain names. Commerce and NSI are also currently in a dispute over proposed changes in their cooperative agreement. Specifically, the Department of Commerce is concerned with what it perceives as excessive fees NSI wants to charge its rival registrars for managing the master database registry. Additionally, Commerce and many intellectual property owners are troubled with NSI's claim that it has proprietary rights over the "Whois" database that lists the owners of current Internet domain names.

On the other side of the debate, NSI and several other organizations contend that ICANN is wielding too much authority over the Internet. They argue that ICANN's original role was limited to providing technical management to the DNS, but has instead greatly expanded to include making broad Internet policies, including assessing a $1 domain name registration fee. These critics point out that such power is especially worrisome given ICANN's lack of accountability and what they claim to be its secretive decision-making process. Additionally, some observers worry that ICANN will grow into an unaccountable international organization that could impose regulations on the Internet that are not in the national interest of the United States. These critics charge that by ceding control of Internet policy to ICANN, the Department of Commerce is failing to protect American economic interests. In an attempt to quiet its critics, on July 19, 1999 ICANN announced that it would suspend its efforts to collect the $1 domain name registration fee and, in an effort to dispel concerns about its secretive decision-making process, would open its next Board meeting to the public.

NSI has thus far refused to sign ICANN's registrar accreditation agreement because it claims this agreement gives ICANN too much regulatory authority (including the ability to terminate a registrar's accreditation with only two weeks notice). Because of its refusal to sign the ICANN accreditation agreement, NSI does not have to comply with several ICANN policies designed to protect intellectual property owners (policies that the other private, accredited registrars must follow). An example of one such ICANN policy is the requirement that registrants pre-pay to register a domain name, rather than allowing them to reserve a name for up to two months without payment as NSI currently allows. By requiring pre-payment, ICANN hopes to prevent "cybersquatters" from registering thousands of domain names, at no cost, and then extorting companies to pay for those names. Both Commerce and intellectual property owners are concerned with NSI's refusal to sign the ICANN accreditation agreement. Given the important issues at stake, the ongoing debate between NSI, ICANN, and Commerce over how to introduce competition into the domain name registration process presents intellectual property owners with several different challenges.

Intellectual Property Issues

The foregoing structural background is relevant due to its impact on intellectual property rights. A great deal of controversy surrounds trademark rights vis-a-vis domain names. In the early years of the Internet, when the primary users were academic institutions and government agencies, little concern existed over trademarks and domain names. As the Internet grew, however, the fastest growing number of requests for domain names were in the .com domain because of the explosion of businesses offering products and services on the Internet.

Because people use domain names to locate Web resources, companies doing business online now want domain names that are easy to remember and that relate to their products, trade names, and trademarks. Owners of famous trademarks typically register their trademarks as domain names (such as "microsoft.com"). This kind of identification can be highly important to a business that conducts commerce on the Internet. In fact, many consumers who do not know the domain name of a company will first try the principal trademark or trade name of that company to locate the company's Web site.

Since domain names are available from NSI, and now other registrars, on a first-come, first-served basis, some companies have discovered that their name has already been registered. The situation has been aggravated by some people, known as "cybersquatters," registering domain names in the hope that they might be able to sell them to companies that place a high value on them. These cybersquatters have no intention of using the domain name in commerce, and instead often attempt to exact money from a company in exchange for domain names that relate to that company's trademarks.

Disputes involving domain names and trademarks place registrars in the awkward position of being pressured to takes sides in disputes, or to deny, grant, or suspend a domain name. NSI has maintained a domain name dispute policy since 1995, but it has been criticized by many intellectual property owners. Only owners of trademarks that are registered with the U.S. Trademark Office's Principal Register and are identical to the disputed domain name can invoke the dispute policy. This means that NSI will not act on complaints from parties that have federal registrations on the Supplemental Register, have state trademark registrations, or have only common law trademark rights. Additionally, even if the policy is applied, NSI will only place the domain name on hold, rather than terminating it, unless there is a court decision directing it to do so.

The criticism of the current domain name dispute policy and its failure to adequately protect intellectual property interests led the United States government to ask the World Intellectual Property Organization (WIPO) to undertake a study of the issue and to propose recommendations to ICANN. Following extensive discussions, including seventeen meetings in fifteen cities throughout the world, WIPO released its final recommendations on April 30, 1999. The WIPO report highlights two key areas that are important for ICANN to address in order to adequately protect intellectual property interests within the domain name system: (1) open access to contact information and the "Whois" database and (2) the implementation of an improved administrative dispute resolution process for dealing with cybersquatters.

Contact Information and the "Whois" Database

Intellectual property owners have a strong interest in establishing a simple process whereby they can identify and contact owners of domain names that violate their intellectual property rights. For example, a company confronted with a cybersquatter attempting to extort money in exchange for the ownership of a domain name has a significant interest in being able to obtain the identity of the cybersquatter in order to pursue a trademark dilution or infringement action against that person. Similarly, copyright owners, especially the music and motion picture industries, have a strong interest in tracking down owners of Web sites that pirate copyrighted material without permission. For several years, NSI has assisted these searches by providing a list of the owners of domain names (along with identifying information) in what it calls the "Whois" database. Although the "Whois" database has been an important tool in pursuing intellectual property claims, some critics have complained that NSI's database does not provide enough contact information and that the information that is provided is not always up-to-date.

The WIPO recommendations to ICANN address these concerns. Under the WIPO recommendations, provision of accurate and reliable contact details would be a condition of registration of a domain name. These contact details would include: the name of the applicant, the applicant's mailing address, email address, and telephone number. An applicant would also have to state that, to the best of their knowledge, the registration of their domain name does not infringe the intellectual property rights of another party. Finally, the WIPO report recommends that the registration agreement contain a term making the provision of inaccurate contact information, or the failure to update such information, a material breach of the registration agreement. WIPO recommends that registrars develop a procedure to "take-down" domain names that fail to provide such information and thus violate the agreement.

Most intellectual property organizations have praised the WIPO recommendations. Thus far, however, ICANN has failed to implement them (which it can do by including them in its accreditation contract with registrars). ICANN has asked its Domain Name Supporting Organization (DNSO) to review the WIPO recommendations and report back to ICANN in August. As a result of this delay, many intellectual property owners fear that the new private registrars will create their own individual, non-uniform contact information policies. This could be especially harmful to intellectual property owners if the new registrars engage in a "race to the bottom" and require only minimal contact information in order to attract customers. In implementing the WIPO proposals, ICANN is between a rock and a hard place: intellectual property owners are pushing for quick adoption of the WIPO recommendations while many of ICANN's critics charge that it must first elect a permanent Board before adopting any significant policies.

The transition to competition in the registration of domain names has also raised concerns about the "Whois" database. Until now, NSI has maintained a single, authoritative "Whois" database. With the introduction of competition, NSI is providing only a registry-level "Whois" service that simply gives the domain name and the sponsoring registrar for all registrations in the .com, .net, and .org gTLDs. Individual registrars keep the contact information on their own registrants. The lack of a uniform, interconnected "Whois" service makes it more difficult to track down trademark and copyright violators. An additional problem has arisen concerning who owns the information in the current "Whois" database. NSI claims that it has proprietary rights to the contact information currently in the database. Such a claim of ownership has caused great concern for many intellectual property owners who fear it could eventually lead to NSI restricting access to the database or charging a fee to access its information. They believe a fully accessible, integrated, accurate "Whois" database is one of the most important tools for preventing violations of trademark and copyright rights on the Internet.

Cybersquatting - Administrative Dispute Resolution & Proposed Legislation

"Cybersquatting" involves individuals seeking extortionate profits by reserving Internet domain names that are similar or identical to trademarked names with no intention of using the names in commerce themselves. Such actions undermine consumer confidence, discourage consumer use of the Internet, and destroy the value of brand-names and trademarks of American businesses.

Cybersquatting can hurt businesses in a number of ways. First, a cybersquatter's expropriation of a mark as part of a domain name prevents the trademark owner from using the mark as part of its domain name. As a result, consumers seeking a trademark owner's Web site are diverted elsewhere, which means lost business opportunities for the trademark owner. A cybersquatter's use may also blur the distinctive quality of a mark and, when linked to certain types of Internet activities such as pornography, may also tarnish the mark. Finally, businesses are required to police and enforce their trademark rights by preventing unauthorized use, or risk losing those rights entirely.

Currently, the legal remedies available to trademark owners to prevent cybersquatting are both expensive and uncertain. Federal courts have generally found in favor of the owner of a trademark where a similar or identical domain name is actively used in connection with a cybersquatter's Web site.⁽¹⁾ The law is less settled, however, where a cybersquatter has either registered the domain name and done nothing more, or where the cybersquatter uses a significant variation on the trademark.⁽²⁾ Regardless of the ultimate outcome of litigation, trademark owners must expend significant resources and endure the inevitable delay associated with bringing a civil action in order to validate their rights. Many companies simply choose to pay extortionate prices to cybersquatters in order to rid themselves of a potentially damaging headache with an uncertain outcome. For example, Gateway recently paid $100,000 to a cybersquatter who had placed pornographic images to the Web site 'www.gateway20000.' Given the uncertainty and expense surrounding civil litigation, trademark owners have strongly supported revising NSI's current domain name dispute-resolution policy to create a stronger, more efficient administrative process for dealing with bad-faith cybersquatters.

In response to the concerns of trademark owners, the WIPO report calls on ICANN to adopt a policy that requires all registrants to submit to a mandatory administrative dispute-resolution procedure for resolving certain domain name conflicts. The WIPO recommendations would limit this procedure to cases of abusive registration of domain names (i.e. cybersquatting).⁽³⁾ Under the WIPO proposal, alleged cases of abusive registration would be adjudicated by a panel of three neutral decision-makers. If a registration was found abusive, then the panel could (1) cancel the offending domain name registration, (2) transfer the registration to the third party complainant, and (3) allocate the responsibility for payment of the costs of the proceedings. Importantly, the proposed administrative procedure is designed to preserve the right of either party to litigate their dispute in civil court. To this end, the recommendations encourage ICANN to require registrants to submit to jurisdiction of the courts of the country where the registrar is located in order to prevent cybersquatters from avoiding prosecution due to jurisdictional restraints.

The WIPO recommendations have received both praise and criticism from the intellectual property community. Some observers do not believe the dispute process goes far enough and are especially concerned with its limited application to only cases of abusive registration (cybersquatting) and not to cases of other, more legitimate domain name trademark disputes. Alternatively, some critics charge that the WIPO proposal goes too far because the panel of decision-makers will often consist of non-U.S. intellectual property attorneys that may not fully value American free speech and consumer complaint rights. Despite these complaints, most of the intellectual property community strongly supports the WIPO recommendations. These recommendations were forged after months of meetings around the world and after WIPO received thousands of public comments on its draft recommendations. Many in the intellectual property community are concerned that, despite this overall support, ICANN has been slow to adopt the WIPO recommendations, leaving trademark owners without a cost-effective remedy when confronted with extortionate demands from cybersquatters. Additionally, many people are concerned that ICANN may be undermining support for the WIPO recommendations by insisting that any dispute-resolution procedure it adopts should apply to general trademark disputes over domain names and not simply to cybersquatters, a proposal that WIPO specifically rejected due to the intense opposition it generated.

Given the importance to American businesses of finding an effective tool to combat cybersquatters, legislation has been introduced in the United States Senate to criminalize cybersquatting. On June 21, 1999, Senator Abraham introduced the Anticybersquatting Consumer Protection Act (S. 1255). The bill would establish criminal penalties ranging from $1000 to $300,000 for people found guilty of fraudulently or in bad faith registering popular trademark names. Under this bill, evidence establishing bad faith would include the registration of a domain name with the intent to cause confusion, mistake or deception or with the intent to dilute the distinctive quality of a famous trademark. Additionally, an offer to transfer a registration to the rightful owner in return for money or something else of value would also be considered evidence of bad faith.

Although businesses and other trademark owners support most measures for fighting cybersquatting, the question remains whether such legislation would be necessary if ICANN adopted the WIPO dispute-resolution recommendations.

Key Policy Issues To Be Addressed During Hearing

• With the transition to a privately-controlled domain name system, are American intellectual property interests being adequately protected?



• What is delaying ICANN's adoption of a uniform contact information policy? Until such a policy is adopted, what are NSI and the other private registrars doing to ensure intellectual property owners have access to the contact information they need in order to police their rights?



• Does NSI have a legitimate proprietary claim to the information contained in the "Whois" database? If so, what would this mean to the intellectual property community?



• What is being done by ICANN, NSI, and Commerce to ensure that intellectual property owners have access to an accurate, easily accessible "Whois" database?



• What are the prospects of ICANN adopting the WIPO-recommended administrative dispute resolution procedures for dealing with cybersquatters?



• Although ICANN has not yet adopted a uniform dispute-resolution procedure, what are the private registrars doing to adopt such a policy voluntarily?



• Will the proposed dispute-resolution procedures be effective in dealing with cybersquatters or is additional legislation needed? If legislation is needed, what is the panel's opinion of S. 1255?

1. See, e.g., Toeppen v. Panavision International L.P., 141 F.3d 1316 (9^th Cir. 1998) (noting that the registration of the trademark "Panavision" as a domain name by a cybersquatter resulted in the dilution of that mark); Cardservice International Inc. v. McGee 950 F.Supp. 737 (E.D.Va. 1997), aff'd without op., 129 F.3d 1258 (4^th Cir. 1997) (ruling that the owner of the registered mark "Cardservice" is entitled to a permanent injunction against the use of the domain name "cardservice.com" by another party because it is likely to confuse customers).

2. See, e.g., Toys "R" Us Inc. v. Feinberg, 26 F.Supp. 2d 639 (S.D.N.Y. 1998) (holding that the use of "gunsareus.com" as a domain name does not infringe or dilute the mark of "Toys 'R' Us" due to the dissimilarity of the terms).

3. The definition of abusive registration (cybersquatting) requires that: (1) the domain name is identical or similar to a trade or service mark; (2) the holder of the domain name has no rights or legitimate interests in respect to the domain name; (3) the domain name has been registered and used in bad faith (bad faith is defined to include: an offer to sell the name, an attempt to confuse the complainant's customers, or an attempt to disrupt the complainant's business).