Frager Factor

Saturday, November 06, 2010

Guest Post: Enrico Schaefer-- "You cannot bury your head in the sand on these things".

Now, where domainers typically are having problems in today's world is not so much on the technical side, it's on the trademark side where they've got this huge portfolio of domains, and all of a sudden, they get a threat letter. They need to know whether or not to treat it seriously or not. They get a UDRP complaint. They need to know how to deal with that.




Here is part one of a three part interview that took place on Domainsuccess.com. It's an excellent legal primer from a pro that every domainer should be aware of.

Today's guest is Enrico Schaefer, a leading Internet, domain, and intellectual property law attorney.

When does developing a generic domain become trademark infringement? How can posting RSS feeds break copyright law? Can a seemingly simple redirect put you at risk of liability in losing a valuable domain as damages? What is the Uniform Domain Name Dispute Resolution Policy or UDRP, and why should you care?

Well, let Enrico Schaefer tell you. Arguably, one of the most experienced attorneys in Internet domain and trademark law, Schaefer has tried negotiated cases related to Internet and domain law, cybersquatting actions, intellectual property, UDRP and intellectual property licensing.

As founders of Traverse Legal, PLC in Traverse City, Michigan, Schaefer has represented plaintiffs and respondents and has among his clients some of the largest companies in the world in domain name, trademark and related matters.

Ignorance of the law is no excuse, especially when your costly domains and portfolio are at stake. Let this "legal eagle" help you better understand the often puzzling rules of the information superhighway in the business of domaining. So, if you're ready, let's call the Legal Department and dive right in.

Enrico, thanks for joining us today.

Enrico: No problem. My pleasure to be here.

Jeff: Glad to have you on board. You know, you got into domaining after a career with an Internet solutions company out in Colorado in the 1990s. Instead of going into a big law firm, you decided to launch a boutique focused on the Internet and intellectual property in the domain space.

Tell me, how do you handle it? It's a lot to handle. It's a fast unfolding market with a lot of change. How has your business unfolded as this industry has taken shape?

Enrico: Well, our business has been growing steadily and rapidly since we founded the firm over four years ago, and part of that is a result of our own traction on the Internet. You know, we are domainers and web developers along with the rest of these folks here. We developed properties on the Internet around issues related to trademark rights, Uniform Domain Dispute Resolution Policy, Anticybersquatting Consumer Protection Act, Internet law licensing, all these different issues. And we drove A+ content in all of those areas.

The interesting thing is that I live in paradise here in northern Michigan in Traverse City, but most of our clients are outside the state of Michigan. In fact, 50 percent of our clients are outside the country, and they almost all find us over the Internet as a result of our page one Google results.

So, as more and more people go to the web and as the market itself has grown, especially in the trademark area, people have had disputes under the UDRP, our business has grown right along with it. We're starting to see more Federal court cases around copyright and trademark matters as well. That's the big stuff that costs hundreds of thousands of dollars to deal with.

Our business has been growing. We're now at six, soon to be seven attorneys. We have offices here in Traverse City and Los Angeles, and we'll be opening up an office in Florida soon.

Jeff: Tell me, what are the most common ways, as opposed to a domainer, which are many of the people who are listening today, we might have people out there who run businesses that own domains. So, domaining necessarily is not their business, but what are the most common ways that a business, rather than a domainer, lose their domain names?

Enrico: Well, a big part of our particular legal business deals with business owners who are doing tens or hundreds or millions of dollars worth of business off the web, but the interesting thing is they treat that asset as an afterthought. And when all of a sudden they've lost control of their domain and their website's down, it occurs to them that they probably should have been paying more attention.

What typically happens is, not surprisingly to many of the people on this call, they do not keep track of their registrant log-in information with their registrar. That's either because number one, a partner registered the domain when they started up their business, or they had a technology kid in the back room take care of all their domain names. And then, any number of things can happen. That kid gets fired. That kid moves on, what have you. And now, who is receiving the renewal e-mail from Network Solutions? Nobody.

They lose it because when they go to launch their business, they turn over the entire project of web development to the web developers who move the domain or register a domain in that company's name. A big chunk of it is partners fighting amongst themselves, and the question becomes whether or not the domain belonged to the company or the individual.

All of these things can be taken care of, of course, on the front end by understanding the asset that you hold. And if you're doing business off the web, that's great, but would you leave the front door of your office unlocked at night? No. And yet, that's what many companies do when it comes to controlling their log-in information at the registrar.

So, if you register your domain name with Moniker or, more typically, GoDaddy, everything related to your domain name, all your notices, all your renewals, everything is going to come to the e-mail that you provide to the registrar. If you're not controlling that e-mail or if you do not know the password that goes along with that e-mail, I don't care that the domain also happens to be your trademark, your registered trademark, or your company name, that domain is severely at risk. And so, you need to really be careful about that registrant information. It's very hard to get in trouble as a company, trademark issues aside, if you control that registered information, and that becomes the key. In today's world, companies need to treat their domain asset as an asset, and unfortunately they don't.

Jeff: As we look at, for example, let's take it to the next step where many of the people who are on here are domainers. What steps should they take to protect their portfolio of domains? It could be a couple dozen, a couple hundred, a couple thousand, obviously, a big investment, an ongoing investment that they're hoping to pay dividends down the road. How should they be protecting their portfolio of domains?

Enrico: Well, typically domainers are in a much better position than brick-and-mortars in that they understand the space, and they certainly understand that these are assets and they control the registered information and the log-in information. And so, they're pretty good about that, but we do get occasions when domainers lose track of their domains. And I know that in this market if you're not really paying attention to where you have all your different domains, who are the registrars for all your different domains, if you're not keeping track of the log-in information, if you are not using real e-mail addresses, then you're certainly at risk on the technical side.

If you have partners, then you've got the same problem. If there's a falling out, whoever has access to that account, which is typically both domainers or all three domainers, however big the group is, all of a sudden one person's holding the domain, they change the password, and the fight is on.

And so, some of the same rules for brick-and-mortars apply to domainers. You need to make sure you're keeping track of those assets, you're auditing those assets, and you're controlling them. We like companies, like Moniker, that provide a domain lock service above and beyond simply sending an e-mail that, by the way, your domain's about to transfer somewhere else. Moniker will go above and beyond for an extra fee, and I think it's a hundred and some odd dollars for your entire portfolio of domains to get domain lock. Look it, domainers have this fundamental problem of history where they understand that people have made 10, 100, 1,000, 10,000 times the original investment on these domains. And so, they're used to monetizing at very high levels. What they need to understand is most companies work on margins of 20 percent, and they need to reinvest some of that money into auditing and control and security and really protect their assets as well at a very, very high level.

So, in terms of the technical side, obviously, you want to get the domains consolidated, if you can, with a single registrar, and you want to make sure you can control the log-in information.

Now, where domainers typically are having problems in today's world is not so much on the technical side, it's on the trademark side where they've got this huge portfolio of domains, and all of a sudden, they get a threat letter. They need to know whether or not to treat it seriously or not. They get a UDRP complaint. They need to know how to deal with that.

The trademark side is the biggest risk that most domainers face, and what I would tell every domainer is this. If I'm making scones for my business, I have a vested interest in understanding the scones business; how to make them, where my ingredients are coming from, how to cost them, etc., etc., etc. Domainers need to understand that their business is impacted by trademark law, and domainers need to understand trademark law at the highest level. The best domainers understand trademark law at a very high level, and then they can make the decisions they need to make about whether they're going to park, whether they're not going to park, whether they're going to redirect, what they're going to do, all of these various activities which may put their domains at risk.

Jeff: How do you know whether, for example, that was going to be my next question, talking about how trademark. What do I do if I have a trademark protected domain in my portfolio? How do I know, I mean it might sound silly, but how do I know if something is trademark protected? If I have something I think is pretty, maybe, close to generic or not close enough to infringe on trademark, what's the best way to know if I have something that might be protected?

Jeff: Well, that is the million dollar question for a lot of domainers, and part of the question really is how many domains do you have and is it even possible for you to know, because you have a couple hundred thousand domains or tens of thousands of domains and you've got a challenge. You're not going to do trademark availability search on every domain. Keep in mind the challenge for domainers is that it's not only U.S. registered trademarks but registered trademarks from all over the world.

And so, let me give you an example. You've got a domain, and two-word domains tend to be higher risk. I always tell domainers, "If you've got two words, two generic words that you put together, the chances are there are trademark rights somewhere on that."

Jeff: Interesting.

Enrico: If you've got a single word domain, if it's a common dictionary word, you probably still have issues. What could be more generic than the word apple.

Jeff: Right.

Enrico: Yet, I think we all understand that if you had Apple.com and you parked it and put up a bunch of computer ads, that domain is all but gone. That's going to be taken from you, and you're probably exposing yourself to Anticybersquatting Consumer Protection Act penalties of $100,000 plus attorneys' fees. So, the short answer is on almost everything, there is a potential trademark. It may be a weak mark. It may be a strong mark.

On your highest value domains, we tell domainers to figure out which domains are worth the most. Those are the ones that you need to pay attention to in your portfolio. Which ones would hurt the most if they transferred out of your portfolio as a result of a transfer order under the UDRP or a court order under the ACPA? Those ones, what you need to do, is you need to do some Google searching, and you need to at least do a USPTO, a U. S. Patent and Trademark Office search to see what is out there.

Now, trademark law works like this. Trademarks are phonetic, okay? So, not only is the literal word, whatever it happens to be, protected, but variations and spellings, typos, if it's a C, if trademark law is going to see it as a C or a K because it makes the same sound. So, you've got to do more than a literal search. But you want to do some various searches at the USPTO.gov site and see what else might be out there.

Then, you're going to have to make a decision about how you want to use that domain. Again, the apple example is the easiest one. Many of the parking companies will let you exclude categories of goods and services from the ads that are displayed. You need to make sure that you have that capability.

If you find out that you've got Apple.com and there's a company out there that's selling computers, you need to either not park the domain because I think we all understand that Apple.com is worth hundreds of thousands of dollars, at least. And why the hell would you put it in jeopardy for a little bit of money?

Now, the dilemma of domainers is this. You can make an awful lot of PPCs if you happen to show computer ads on that domain or a typo of that domain. But once you do that, you are taking the risk that it is going to be taken from you, number one, where someone is going to drag you right into federal court without any notice and sue you for penalty damages under the U.S. Federal Anticybersquatting Consumer Protection Act, which provides for penalties of $100,000 per domain, up to, and attorneys' fees for bad faith registration.

I'm telling you, if you got a parking page putting up computer ads, your defense that I didn't know and I don't control the software isn't going to get you very far. You cannot bury your head in the sand on these things.

So, a lot of domainers are really making that balanced decision every day about, do I want the PPC revenue off a domain which I know has got other trademark activity on it and I may be serving up competitor ads, or am I really thinking that this domain is on a third party sale or to an end user is going to be worth more and I need to make sure that I'm either excluding categories of goods and services from being displayed as ads which isn't perfect. We all know that's not going to necessarily mean no ad shows up there. If it happens to be a competitor, the software, the parking software is not that good at excluding. But at the end of the day, you've got to decide, are you going to have a parking page up there, or are you going to try and monetize it some other way.

Now, one of the things we are always trying to encourage domainers to do on their high value domains is, at least, to develop to a point, and that point is the point of non-infringing use. If you have Apple.com, you are going to want to develop to the point where you are showing produce on that page or nothing at all and simply hold it and resell it for later.

There is a lot of activity out there in terms of trying to figure out non-infringing uses for high value domains. I have a client that has Gap.org, and it's the Global Alliance Performers, a non-profit organization. That is not infringing on the Gap that we all know as a clothing manufacturer because it's a non-infringing use. Now, that non-infringing use means that we can't be showing ads about apparel, which we're not. But by establishing that non-infringing use, if some day Gap, the company, wants to come in and buy that domain for a lot of money, I'm not battling on the client's behalf the proposition that my client is a bad faith cybersquatter, and therefore, they are going to take it from me if I don't sell it to them at a deflated price. Those are the types of things, Jeff, you've got to be thinking about as a domainer.

To be continued.... to contact Enrico visit http://www.traverselegal.com/


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