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No room for cybersquatters - Part II

A new breed of Internet millionaires is making it big by reselling coveted domain names.

Part 1

It's pretty easy to see what the ruckus is all about. Domain names have become extremely valuable commodities -- much more so than anybody expected. Case in point: Compaq paid $3.3m (£2.2m) for the domain AltaVista.com. eCompanies recently bought Business.com for $7.5m. Now America .com is for sale at Great Domains.com. The owners say they won't entertain a bid of less than $10m.

As Jeff Tinsley, CEO of Great Domains.com, puts it, "We've been saying this for years, that these domain names are going to be worth millions and millions of dollars." As an example, Tinsley points to Loans.com, which his company just sold for $3 million (though Tinsley had hoped for $7 million). "It's the absolute best name you could have for the lending industry," he says. GreatDomains.com did $4 million in domain sales in December and is currently doubling traffic every month. Not bad for a business that pockets 7 to 15 percent of each domain's selling price.

However, the domain-name resale market isn't just a matter of throwing together a Web site and waiting for the buyers to come calling. "There's a lot of marketing behind the scenes," says Tinsley. "You can't just put out a press release and expect something to sell. And you have to verify your buyers and their ability to pay."

Despite the frenzy over domain name sales, the ACPA has had little effect on Great Domains.com's business. As far as potential cybersquatters, Tinsley says simply, "We don't deal with them. There are enough good, generic names out there that we don't need to get in a legal mess with [cybersquatters]. We don't want trouble." Great Domains.com has even gone so far as to ban words like AOL and Lycos from appearing as part of any domain listing on its site.

Is the ACPA going to stand up against potential constitutional and other legal challenges? Says Neil A. Smith, a partner with intellectual property firm Limbach & Limbach: "I think it will. It's a reasonable exercise of the court's powers."

However, several years ago the American Civil Liberties Union challenged a similar anti-cybersquatting law passed in Georgia and successfully obtained an injunction against it. But the legal action group has yet to take an official position on the national act.

Will the ACPA spawn more litigation? Smith says it already has. In fact, Smith has been in the thick of domain-name battles under the ACPA before. He represented Network Solutions during the Quokka case. Now he's representing Ecards.com, a company being sued by E-cards.com.

The good news is that attempts to keep the frenzy of litigation to a minimum are under way. Namely, the Internet Corporation for Assigned Names and Numbers (ICANN) approved its Uniform Domain Name Dispute Resolution Policy on Oct. 24, 1999, calling for arbitration when a domain-name dispute arises.

Louis Touton, ICANN vice president and general counsel, is bullish on the new policy. "I think it will reduce the number of cases that would otherwise be filed. It's much faster and much cheaper [than going to court]." How cheap? "The fees that the complaining party would pay are between $1,000 and $3,000, and the dispute can be resolved in less than 60 days." Touton points out that a full-blown domain-name lawsuit can drag on for a year or more.

However, Limbach & Limbach's Smith argues that it's too early to tell if arbitration is going to work for cyber squatting issues. "My early read is that [ICANN's] arbitration policy is too narrow to be helpful to trademark owners," he says. "Most people will still have to go to court." Regardless, one thing that arbitration won't resolve is a little-read section in the ACPA that actually makes cyber squatting a criminal act. It's now a Class B misdemeanor in the US to knowingly register a deceptive or trademark-infringing domain name. Repeat offences will earn you a Class E felony, which could mean prison for up to 10 years.

If you find that someone has snatched a similar domain or is using your trademark illegally, Smith offers the following advice: "It depends on your particular situation. The cybersquatting legislation should be helpful, and if you can't get the issue resolved through alternative methods, you'll have to go to court."

Your best bet: Lock up every permutation of your trademark. "To the extent that it's possible you should register everything you can," says Smith. "It avoids having to deal with lawyers."

If you're on the other end, your road is just as rocky. "Trademark owners have been accused of overreaching," Smith says, "but I don't know if that's the case. If someone's in the clear, it may take a court decision to get the trademark owners to back off."

In other words, get a good lawyer.