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Porno and Madison Avenue, Strange Bedfellows

For those of you who have been in a digital fog, the Internet Corporation for Assigned Names and Numbers (ICANN) let loose the latest top level domain (TLD) — .xxx — this month. ICANN is a nonprofit 501(c)(3) California corporation that handles the administration of the TLDs on the internet (and makes millions doing so). A TLD is the word or string of letters immediately after the last dot in an internet address, e.g., “com” in “.com”. ICANN gets its authority from a so-called “Affirmation of Commitment” with the U.S. Department of Commerce, under the much-guarded international secret that the United States still controls most of the internet.

For the last four years, ICANN has been involved in a great debate on whether the internet needs new TLDs. (I reported on this in an earlier column in my series entitled the “Four Horsemen of the Apocalypse, Class of 2011″ — IPv6, recreational hacking, the cloud, and ICANN’s proposed TLD program).

In truth, the debate over the need for a multitude of new TLDs goes back to as early as 1996, before ICANN even existed, when the idea was rejected at World Intellectual Property Organization meetings in Geneva, in favor of improving search engines and directories. But that was before the U.S. essentially ceded control of its billions of dollars of investment in creating the internet to ICANN — without any financial return. But that’s another story.

After years of lying dormant, ICANN raised the idea of substantially increasing the number of TLDs and voted in June to open the door to hundreds more. But before they start taking applications in January 2012 to own a new TLD (at $185,000 each), ICANN sold one new TLD in 2011 — .xxx — that best illustrates Albert Einstein’s admonition that insanity is doing the same thing over and over again and expecting different results.

No doubt we’re all concerned about adult content on the internet. It’s rampant, and much of it is either illegal or very dangerous to youth. Yet it’s a multibillion dollar worldwide industry that skyrocketed in distribution and growth once the internet became its playground.

So ICANN, together with ICM Registry, the company that now owns .xxx, decided that the best way to corral porn purveyors was to create their very own TLD. The thinking, presumably, was that owners of adult content businesses would flock to this new TLD so that consumers itching for salacious content would know where to go. Never mind that there was no evidence that such a migration would occur. ICANN and ICM convinced themselves that it as all about “Field of Dreams”: build it and they will come. And they got that right, but for all the wrong reasons.

When the sellers of .xxx domain names put them on sale last week, they did not address their marketing campaigns just to adult content owners. Instead, they ran ads with headlines like “.XXX LANDRUSH IS NOW OPEN. PROTECT YOUR BRAND” or “SECURE YOUR DOMAIN. PROTECT YOUR REPUTATION,” By heeding their warnings, brands, universities, and individuals flocked to the sites of domain name sellers and bought up tens of thousands of names, at about $200 per name. According to press reports, more than 70,000 applications have been received since the doors opened, netting sellers more than $15 million barely out of the gate.

Interestingly, there was a “sunrise” period that ended in October were trademark owners could, at a relatively low cost, pre-block use of their registered trademarks before the .xxx domain names were sold. Either a lot of trademark owners missed the opportunity or they’re buying names that are not identical to their registered trademarks, e.g., cadillac (unregistered) vs. cadilac (registered). Only registered trademarks identical to their registrations could be pre-blocked.

Nice ROI. Even I grabbed my name and experienced what it’s like to actually own a .xxx domain name. Now I’m the proud owner of douglaswood.xxx, a site that will never see the light of day because I only bought it, as I was urged to do so by the domain name seller, to protect my reputation (whatever the reputation may be). Interestingly, nowhere during the application process was I asked if I had any connection to the adult content industry (which I do not). Landrush indeed.

But what about the headline of this column, you ask? Relax. I’ll get to it in a minute.

In the wake of the .xxx feeding frenzy, Manwin Licensing International, a company that claims it deals in highly trafficked websites and online adult entertainment, sued ICANN and ICM. Manwin is alleging antitrust law violations, claiming, among other things, that ICANN and ICM conspired to eliminate competitive bidding and any market restraints for certain .xxx registry services with the intent to injure competition and consumers. Manwin managing partner Fabian Thylmann told reporters that its case was “monumental … impacting the entire business community and the Internet ecosystem.” Expanding on Manwin’s concerns, Thylmann noted that ICANN’s and ICM’s deal forces trademark owners to purchase “defensive registrations” to prevent cybersquatters and others from exploiting those names. According to Manwinn, sales in .xxx are expected to reap their sellers more than $200 million in annual profits. Nice ROI indeed.

Doug Wood, We Expert

Reprinted from Corporate Counsel, http://www.law.com/jsp/cc/index.jsp

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