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Fighting cybersquatters
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April 18, 1999: 4:54 p.m. ET
There's big money in selling Internet addresses, but that may end soon
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NEW YORK (CNNfn) - Mike Mann has an interesting little side business going, and not everyone is happy about it.
Mann, a Bethesda, Md.-based Internet consultant, owns the rights to about 30 Internet addresses, including taxes.org, government.net and tourism.org. He sold one, menus.com, to an Internet startup for "many thousands of dollars."
Mann has no plans to use any of these names for his own purposes, even though he plopped down $70 a piece for them to Network Solutions Inc. (NSOL), the company that doles out top-level domain names. Instead, Mann is offering his Internet address holdings at a premium, as much as $35,000 for a prized address.
"It's surprising how many domains are still out there," Mann said.
It's also eye-opening to find out how much money there is in domain speculation, or cybersquatting.
Mann is hardly the most aggressive domain name speculator out there. He said he has owned his collection of Internet addresses for several years now and had no intentions of selling them until he heard about others making outrageous sums of money for selling their addresses.
One of the most famous cases involved AltaVista. The Web portal now owned by Compaq Computer Corp. (CPQ) reportedly paid more than $3 million for the rights to altavista.com, which had been owned by AltaVista Technologies Inc.
Earlier this month, online magazine Salon paid an undisclosed amount of cash and stock to acquire the rights to salon.com, which had been owned by an entrepreneur hoping to use the site as a portal for hairdressers. For the last three years, Salon had been using the names salon1999.com, salonmagazine.com and salon.net.
Also recently, the owner of www.wallstreet.com decided to auction off the name after receiving a $250,000 offer from a pornography Web site operator.
"It's become an underground economy because of the power domain names have in the Internet economy," said Brian O'Shaughnessy, a spokesman at Network Solutions.
Black market in cyberspace
Technically, speculators can hold names for years without paying a dime because payment for registration isn't required for 60 days. During that period, cybersquatters can publicize their holdings and begin taking bids. If nobody bites, they merely let the grace period expire and re-register with phony contact information.
Not everyone is thrilled with this type of business plan. The issue has taken on greater urgency as Network Solutions' government-approved monopoly is nearing its conclusion.
The Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit corporation, was created by the government last year to establish competition in the Internet address-registration market. The company is also responsible for the creation of new top-level domain names.
In addition to the current list (.com, .org, .net and .edu), ICANN will be responsible for managing new top-level domains (TLDs), possibly .store, .computers and the like. The firm reportedly wants the World Intellectual Property Organization (WIPO) to take measures before assigning new top-level domain names.
The problem is nobody knows when those new domains will be assigned. Michael Froomkin, a law professor at the University of Miami, said a clear plan for adding new TLDs would eliminate much of the speculation.
"If there were a clear sense of when these new TLDs were coming, a lot of the speculative frenzy would go down and take a lot of the pressure off," he said.
A company like AltaVista, for example, wouldn't need to shell out big bucks for altavista.com if it knew that it had the opportunity to obtain altavista.search within a year.
"What's causing all the blackmailing is that the blackmailed don't know when the new names are coming," Froomkin said. "Knowing another (TLD) is coming next year will change the psychology."
Froomkin believes the companies that are harmed the most by speculators -- and have the most to gain with new TLDs -- are those that manage multiple brands, such as Procter & Gamble (PG) and Nabisco (NA).
But Mann, for his part, believes new top-level domain names will only encourage more speculation.
"Nobody will know what's going on," he said. "People will be trying to register cocacola.org, or microsoft.computers. There will be a lot of trouble and a lot of lawsuits."
With that in mind, WIPO is scheduled to submit its final recommendations to ICANN on April 23. Among its proposals, individuals and corporations would be allowed to challenge a registered name and send the issue to arbitration.
Network Solutions has made its own recommendations, including the removal of the creation date on a registrant's application form. Since owners must re-register every two years to keep their Internet addresses, speculators can target sites that are about to expire and scoop them up if owners are lax in making renewals.
WIPO also wants to allow owners of "famous marks" -- trademarked brands or well-known names -- to obtain an exclusion, which would prohibit third parties from registering the mark as a domain name.
Mann said he is careful not to stake claims to Internet addresses that are registered trademarks, sticking with generic names and phrases. The one exception is gateslibraryfoundation.org, named after Microsoft Corp. (MSFT) Chairman Bill Gates' charitable foundation.
Mann hasn't yet informed Gates that the name is up for sale. "I would imagine that one day, they'll wonder why they don't own the rights to the name," he said. "I think $5,000 is a bargain for Bill Gates."
Keeping the spirit free
Though WIPO is clearly seeking ways to curb cybersquatting, the organization realizes the importance of striking a delicate balance between preventing individuals from holding names hostage and maintaining the free spirit of the Internet.
WIPO, for example, declined to recommend that ICANN require registrants to state an intention to "use" the domain name.
The organization also noted that sometimes names are taken with the most innocent of intentions. Archie Comics threatened legal action against David Sams, who set up a site called veronica.org in honor of his two-year-old daughter. Archie Comics, which already owns veronica.com, eventually dropped the issue.
But not everyone is pleased with WIPO's proposals. Froomkin maintains a Web site with an extensive critique of WIPO's guidance.
Froomkin, a member of WIPO's domain name advisory board, believes the organization's proposals favor trademark holders over individuals and that they "would create an enormous potential for 'reverse domain name hijacking.' "
In other words, companies would be able to lay claim to any address that contains or alludes to their trademarks.
"Wealthy parties could threaten to impose substantial costs on registrants unless they surrender their domain names without a fight," Froomkin wrote. "Many individuals and small businesses likely will surrender their domain names rather than run the risks of losing in the administrative procedure."
As an alternative, Froomkin suggests ICANN require advance payment from registrants, which would help prevent cybersquatters from reselling domain names before their registration bills are due; de-register Internet addresses that come from parties who supply false contact information; and create differentiated commercial and non-commercial top-level domains.
Froomkin also believes changes in technology will make domain names less important in a few years, pointing to new Web browser technology that allows users to find sites simply by typing in a keyword instead of an address.
"I'm dead certain that within five years this problem is going to go away," Froomkin said.
Until then, the AltaVistas of the world will continue to pay for the use of their names. 
-- by staff writer John Frederick Moore
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