April 5, 1999

New Rules May Challenge Internet Domain-Name Speculators

By JERI CLAUSING

om Kaplan is a stockbroker by day, managing money for wealthy clients who gamble their fortunes in regulated markets. But his off time is spent on a new and controversial investment game in which he and two partners have wagered tens of thousands of dollars on catchy words and names that they hope to resell as valuable Internet addresses.

	Vic DeLucia/The New York Times
	Eric Steurken, Rich Preisig and Tom Kaplan buy domain names in hopes of selling them at high rates.

Though often labeled hijackers, pirates or extortionists, "cybersquatters" is the most common term for investors who stockpile Internet addresses derived from popular words, titles or celebrities' names.

For an investment of just $70, they can secure two-year rights to an address. In return, they can reap handsome rewards from companies eager to protect products or trademarks. Sometimes the buyer is an individual with a compelling interest in using a specific word or name in a World Wide Web site's address.

Kaplan says he and his colleagues are simply creative investors, speculators who stake perfectly legal claims in the rough-and-tumble land rush in cyberspace.

But their investments may soon become a lot riskier. Faced with mounting disputes about Internet addresses and complaints from trademark holders, a U.N. agency is completing a proposal for bringing order to the chaotic assignment of addresses in cyberspace.

The agency, the World Intellectual Property Organization, or WIPO, is drafting new rules for registering domain names, as Internet addresses are known. It will submit its recommendations to the nonprofit corporation established last year by the Commerce Department to take over administration of the Internet.

A top priority of that nonprofit, the Internet Corp. for Assigned Names and Numbers, is to introduce competition into the business of registering top-level domains, which is now handled by Network Solutions Inc. under an exclusive government contract.

Esther Dyson, the interim chairwoman of the corporation, said she expected her group would adopt rules on cybersquatting before authorizing any new top-level domains, the categories of Internet addresses denoted by suffixes like .com, .edu, and .net.

Related Article Crackdown on Domain Name Registrants

Internet addresses can be valuable enough to attract speculators because most choice names within existing top-level domains are already claimed. But in trying to accommodate both special interests and international trademark laws, the proposals raise as many questions as they answer.

And those who would tame the Internet are finding that for every new winner, there is almost certainly a loser.

Among the most vocal critics of the WIPO draft proposal has been A. Michael Froomkin, a law professor at the University of Miami and a member of the agency's advisory board on the matter.

Froomkin says the consequences of the proposed rules could go far beyond the intended crackdown on cybersquatters. Unless the proposals are revised, he warns, the Internet will end up with a legal system that could stifle free expression and enable governments and corporate interests to intimidate individuals into relinquishing addresses to which they have rightful claims.

What is more, he says, enforcement would be a bureaucratic nightmare.

The agency has proposed, for example, that when people register names in any top-level domain, they must agree to a procedure permitting anyone anywhere to challenge that registration at any time. The disputes would be settled by arbitration, but the outcome might depend on any number of international trademark laws. And whoever loses could be liable for all legal costs.

Froomkin and others say that the plan would let companies engage in reverse domain hijacking, claiming any address that contains or suggests their names or trademarks.

Such a policy could, for instance, hurt people like Chris Van Allen, a Pennsylvanian teenager whose father registered pokey.org, an address that reflected Chris' nickname, Pokey, as a present for his twelfth birthday.

The Prema Toy Co., which holds the trademarks to the well-known Gumby and Pokey bendable toys, last year tried to seize the domain name, even though the boy had no content related to the toys on his page. Prema eventually dropped its claim.

The proposed U.N. rules also raise questions of free-speech rights. Is it a violation of free-speech rights to prevent someone from using the name of a politician, government official or corporation in the address of a Web site that criticizes or parodies its namesake? One trend among cybersquatters has been securing addresses based on trademarks with the addition of the word "sucks."

Companies often buy up such names to keep them out of the hands of critics and disgruntled former employees.

Francis Gurry, legal counsel for WIPO, said he intended to make significant revisions to the draft proposal before its submission later this month. He said he anticipated that the final proposal would define squatters more narrowly and would not give a trademark owner the right to make a claim just because a domain includes its name or a variation of it.

"There is a lot interest in differentiation of commercial and noncommercial domains," Gurry said last month in Washington, where the panel he heads was holding the last in a series of international public hearings on the draft proposal. "Another evolution that we see is limiting the mandatory administrative dispute resolutions procedure to cases of cybersquatting."

He defined cybersquatting as "repeated cases of targeting in bad faith."

Other claims, like standard trademark disputes or cases involving different companies with the same names, would still be resolved in traditional courts.

The proposal would also require prepayment of domain registration fees, to deter squatters who register names and then try to resell them before the bills come due.

Even modified rules could leave speculators like Kaplan operating in a gray area. He and his partners, Eric Stuerken and Richard Presig, have pooled some $40,000 and paid for all their domain names. He also said that some names they registered are no more than catchy words that people starting new businesses might want.

"This is pure arbitrage," Kaplan said. "It's a free market that they put out there." Still, he admits, he and his partners seek unclaimed names of celebrities or groups.

For instance, he saw Glenn Rifkin, the co-author of a book called "Radical Marketing," promote it on CNBC in January. Rifkin had already applied for the name radicalmarketing.com, but did so through an Internet service provider, rather than applying directly to the central registry.

Kaplan made his application directly and got the name. When Rifkin discovered that the address was taken, he tracked Kaplan to a Long Island brokerage firm, HD Brous & Co.

Kaplan insists that he and his partners have not -- at least yet -- tried to track down potential buyers of the names they have purchased, like barrydiller.com.

But that does not mean they are not for sale. Rifkin says Kaplan and his partners offered to sell him the name for "five figures" after he tracked them down.

"They quite aggressively tried to sell me the name, having three different people phone me," Rifkin said, "one in particular saying outright that I'd be surprised at how much information they knew about me, including the fact that I had access to the kind of cash I'd need to buy the name."

Furious, but left with few options, Rifkin instead registered the domain name radmarketing.com.

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Related Sites
These sites are not part of The New York Times on the Web, and The Times has no control over their content or availability.

• World Intellectual Property Organization

• WIPO Internet Domain Name Process

• Internet Corp. for Assigned Names and Numbers

• Network Solutions Inc.

• A. Michael Froomkin's home page, with links to critiques of WIPO proposals

• pokey.org

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Jeri Clausing at jeri@nytimes.com welcomes your comments and suggestions.

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