'Brandjacking' on the Web

A new study by MarkMonitor finds that cybersquatting and other abuses against big companies with well-known brands are on the rise

by Arik Hesseldahl

If ever there were two companies with more different lines of business, they would have to be InterContinental Hotel Group and World Wrestling Entertainment.

Both are the corporate parent of household names. WWE (WWE) is the $400 million (fiscal 2006 sales) producer of professional wrestling exhibitions and TV shows like Smackdown whose stable of stars includes Undertaker, Chris Benoit, and Rey Mysterio. InterContinental (IHG) is the Britain-based $1.9 billion (2006 sales) hotelier, which owns such storied brands as Holiday Inn and Crowne Plaza.

What these two markedly different companies have in common is a problem protecting their brands from abuse on the Web. From domain names that use trademarked words and phrases to direct users to sites with no connection to the company, to selling counterfeit goods on auction sites like eBay (EBAY), the cases of WWE and InterContinental illustrate how widely well-known brands are being exploited online, and how combating the problem is turning out to be a huge challenge.

A new study released Apr. 30 from MarkMonitor, a privately held firm that alerts companies if their brand is being abused online, has put some hard numbers on the scale of the problem. Using the top 25 companies on the Interbrand 100 list of most valuable brands, which includes names like Coca-Cola (KO), Microsoft (MSFT), Disney (DIS), Citibank (C), Google (GOOG), and Dell (DELL) (see BusinessWeek.com, "The 100 Top Brands 2006"), the San Francisco outfit found that brand abuse on the Web is greater than previously thought.

Microsoft on the Warpath

The biggest problem for the companies, at least given the overall number of incidents, is cybersquatting. It's the unauthorized use of a trademarked name or phrase in a Web domain pointing to a Web site that isn't owned by the trademark holder. MarkMonitor found more than 286,000 instances of cybersquatting for the 25 brands it studied—an average of 11,400 instances each. The data was collected during a four-week period starting Mar. 9 and ending Apr. 6 and was averaged over that period. If MarkMonitor's numbers, collected in what it has dubbed "The Brandjacking Index," are on the money, the scale of the problem alone is astonishing.

If a figure equal to more than 11,000 incidents per company on average seems high, then consider the case of Microsoft, one of the companies in MarkMonitor's sample group. It has been particularly active in suing people it says have been using domain squatting to infringe on its trademarks. It currently has four federal lawsuits pending and recently settled two others in the U.S. against companies it says have registered domain names that are close to Microsoft trademarks, such as 1microsoft67.info or freehotmail.net. In recent months it has reclaimed more than 1,000 different domain names. In Britain, it has five similar legal actions pending and recently settled another with a company that had registered as many as 6,000 different domain names that contained variations on Microsoft trademarks.

Clearly, cybersquatting is on the rise, and so are the number of domain-name registration disputes. The World Intellectual Property Organization, the global body that arbitrates such disputes, says its caseload jumped by 25% in 2006. Even so, it received only 1,823 complaints last year, the highest since 2000. That number suggests that WIPO in an entire year is likely to receive complaints on less than 1% of the domains hijacked in a single four-week span tracked by MarkMonitor.