Bloomberg News

Faux Coke Porn Site Symbolizes Cybersquatting Concerns

May 14, 2012

Coca-Cola Co. (KO:US) had to win a complaint at a United Nations agency last year to get control of an adult website called pornforacoke.com.

Online name theft is called cybersquatting -- and companies with recognizable brand names say it is about to get much worse. The organization that manages the Internet’s addresses is moving ahead with plans to add as many as thousands of new Web suffixes. Right now, there are a limited number, such as .com and .net.The group wants to open it up to new endings like .shop or .music.

That, in turn, would add the potential for millions more websites, providing fresh channels for cybersquatters to hijack brand names for their own sites and siphon consumer traffic and revenue.

“It’s quite literally a new gold rush,” Fabricio Vayra, assistant general counsel for Time Warner Inc. (TWX:US), said in an interview.

The Internet Corporation for Assigned Names and Numbers, a nonprofit that operates under a U.S. Commerce Department contract, is allowing companies, cities and interest groups to apply for their own extensions to the right of the dot in a Web address.

For $185,000, New York City, for instance, could apply for .nyc, which would allow for new websites with the .nyc ending, such as concerts.nyc. The risk is that cybersquatters could be among the buyers of such .nyc sites.

Lucrative Misspellings

The Association of National Advertisers, a Washington-based trade group, assembled an industry group last year including Coca-Cola, Johnson & Johnson (JNJ:US) and General Electric Co. (GE:US) to oppose Icann’s expansion of suffixes, known as top-level domains, saying they will increase costs for companies, confuse consumers and spark new Internet crime.

Petro Kacur, a spokesman for Atlanta-based Coca-Cola, declined to comment on cybersquatting or the company’s arbitration case over the pornography site.

Cybersquatters go to companies that sell names on existing top-level domains like .com to buy unused or misspelled derivatives of brands, creating sites such as verizoniphone4s.com or verison.com.

Squatters fill their websites with pay-per-click advertising links to generate revenue, Claudio Di Gangi, Internet policy manager for the International Trademark Association, a New York-based trade group, said in an interview.

Such sites can also be used to distribute viruses and malicious software, or sell counterfeit goods such as fake pharmaceuticals, Di Gangi said.

‘Vast New Spaces’

“All these new domains will possibly open up vast new spaces for cybersquatters,” Francis Gurry, director general of the UN’s World Intellectual Property Organization, said in an interview. “The cost of surveillance and enforcement will go up. That’s a big risk for businesses.”

Verizon Communications Inc. (VZ:US) amassed as many as 12,000 site names through legal action against cybersquatters before paring down its portfolio to about 6,000 by last year, Sarah Deutsch, associate general counsel, said in an interview.

“We’re very concerned the top-level domain expansion is going to turn something that’s a bad problem into something that’s out of control for most brand owners,” Deutsch said.

Phishing Fears

The U.S. Federal Trade Commission, in a December letter to Icann, said the domain-name expansion could magnify the problem of Internet scams such as phishing, in which e-mails coming from legitimate-sounding Web addresses seek people’s passwords or other information.

The FTC, which has authority to protect consumers against unfair and deceptive trade practices, recommended that Icann turn the domain-name expansion into pilot program and limit the number of new suffixes.

Icann, based in Marina del Rey, California, said its expansion is designed to promote online innovation and competition.

The group began accepting applications for new suffixes in January. It received more than 2,000 submissions before shutting its application system April 12, citing a software malfunction that allowed some users to view information about other applicants. The group said it plans to reopen the system May 22 and officially close it May 30.

Icann said it has received $350 million in application fees, five times its budget for the fiscal year ended June 30.

Mike Tyson

Trademark holders filed a record 2,764 cybersquatting cases with the World Intellectual Property Organization in 2011, up 2.5 percent from the previous highest level in 2010, the UN agency said in a March 6 news release.

Apple Inc. (AAPL:US), Yale University and retired boxer Mike Tyson, in addition to Coca-Cola, have used the UN agency’s arbitration process.

There are too many infringing websites to go after all of them, Verizon’s Deutsch said. Her company focuses on sites that are attracting a large volume of Web traffic or have strategic importance, such as targeting consumers before the introduction of a new product or service.

Taking domain disputes to arbitration costs between $5,000 and $10,000 and litigation in U.S. courts can run into the millions of dollars, Deutsch said.

Icann is creating trademark protections within its program, Kurt Pritz, the group’s senior vice president for stakeholder relations, said in an interview. They include a clearinghouse for trademark data, a rapid-suspension process for infringing websites, and a procedure to terminate Internet registries that facilitate abuse, he said.

“The new top-level domains will have those added protections,” Pritz said. “Will it eliminate cybersquatting? No. Will it make it more difficult? Yes.”

Do Not Sell

The new suffixes will be less attractive to cybersquatters because they’ll have less traffic than established extensions like .com, he said.

ANA, the advertisers’ group, urged Icann in February to set up a do-not-sell list of trademarks that would stop applicants from acquiring other companies’ brands as a Web suffix. The group will seek similar defenses for trademark owners once new suffixes are created and start selling names, Dan Jaffe, ANA’s executive vice president for government relations, said in an interview.

Vayra of Time Warner served on an Icann working group that recommended trademark safeguards that he said were watered down.

“We’re going to have increased expense, increased policing and, bottom line, all the ills that come with an increased cybersquatting landscape,” he said.

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • KO
    (Coca-Cola Co/The)
    • $42.05 USD
    • 0.26
    • 0.62%
  • TWX
    (Time Warner Inc)
    • $77.8 USD
    • 0.42
    • 0.54%
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