Domain name speculation
Domain name speculation, popular as domain investing, domain flipping or domaining in professional jargon, is the practice of identifying and registering or acquiring generic Internet domain names as an investment with the intent of selling them later for a profit.
The main targets of domain name speculation are generic words which can be valuable for type-in traffic and for the dominant position they would have in any field due to their descriptive nature. Hence generic words and phrases such as poker, insurance, travel, creditcards, loan and others are attractive targets of domain speculation in any top-level domain, the most popular of which is.com.
The speculative characteristics of domain names may be linked to news reports or current events. However, the effective period during which such opportunities exist may be limited. Quick turnaround in the resale of domains is often called domain flipping. Domain flipping may also involve the process of buying a valuable domain name and building a related website around it, all this with the objective of selling the domain and newly built website to an interested party.
Concept
Sometimes, domain name speculation involves finding domain names early in a market, particularly when a new top-level domain is launched, registering them and waiting until the market grows to sell them. Domains such as voice.com, sex.com, and fund.com have sold for millions of US dollars.The COM top-level domain is the focus of most domain speculation activity as it is the largest TLD. Domain speculation occurs in other TLDs as well, such as NET and to a lesser extent in ORG, INFO, and BIZ. Of the Generic top-level domains, INFO is the most popular by registration volume compared to BIZ gTLD due to the low cost of initial registration and the recognizability of INFO as being an abbreviation of information.
Domain name speculation also occurs in country code top-level domains such as.uk,.de and.us. The German TLD consists of over 12 million domains. The UK's domain has over 7.7 million domains registered according to Nominet's domain registration statistics webpage, mainly in its commercial sub-domain co.uk. These TLDs are mature markets where good domain names may command high prices. The EU ccTLD is an example of what happens when speculative activity overtakes "ordinary" domain registrations. A combination of an inept registry and excessive speculation by businesses exploiting a poorly structured regulatory framework meant that, according to EURid's own statistics at the end of 2006, over 50% of the registrations could be considered at best speculative and at worst domain name warehousing.
Specialist and repurposed ccTLDs have also seen elements of domain name speculation. One of the best examples is that of the.tv ccTLD which has found the fact that TV is an abbreviation for the word television to be rather lucrative. The.mobi TLD is a good example of a specialist TLD in that it is specifically targeted at mobile phones and similar mobile technology. The operators of.mobi, mTLD, have reserved some of the premium generic words which will be auctioned off. The intent is to create a more level playing field for those interested in developing websites. The.mobi premium generic words and phrases list is a good example of the domain names that are at the heart of most early-market domain name speculation.
Domain name speculators, sometimes known as domainers or domain investors, also register domain names based on seemingly generic phrases such as propertyforsale in the hope that these domain names could be sold later to businesses. Some domain name investors will try to stay away from domain names containing trademarks as this could be considered cybersquatting.
Some country code TLDs or sponsored TLDs will have what is referred to as an eligibility or nexus requirement to limit registration to specific geographical or national regions. However this does not deter domain name speculation as various options such as using a local agent or company to enable people to register domains in such TLDs exist and have been used.
Evolution
Domain name speculation has evolved with the expansion of the domain name system. Domain names were registered primarily for business purposes. In the 1990s, much of the ccTLD landscape had yet to appear, and the growing public awareness of the COM TLD was gathering momentum owing to the growth of the Dot-com bubble. This inevitably attracted the attention of those who saw potential value in domain names, and by this time many of the most valuable generic domain names, such as sex.com and business.com, had been registered. No clear legal position existed to distinguish domain name speculation and cybersquatting. Due to the open nature of most TLDs, anyone could register a domain name. This led to the development of the Uniform Domain-Name Dispute-Resolution Policy in 1999.Distinction from cybersquatting
A common accusation against domain name speculation is that it is cybersquatting. Cybersquatting is defined as registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else. The key element in this definition is that the intellectual property rights of another's trademark are infringed by the cybersquatter. For a UDRP action to succeed one of the things that the complainant has to establish is that the domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights. Legitimate domain name speculation tends to steer clear of trademarks and concentrate on generic words and phrases as domains based on trademarks can be subject of UDRP actions by the trademark owners. As the number of registered domain names has increased, the number of UDRP cases has also increased. Trademark and service mark owners now use brand protection services that monitor TLDs for newly registered domains that potentially infringe on their trademarks. This is due in part to typosquatting, a form of cybersquatting where variations of the spelling of a brand's domain will be registered in an attempt to profit from users mistyping the URL of the site they wish to visit.Generic terms, such as the term "salt" when used in connection with sodium chloride, are not capable of serving the essential trademark function of distinguishing a product or service. This means that generic terms are generally not afforded any legal protection. The Canned Foods, Inc. v. Ult Search Inc. decision specifically deals with a case involving a generic term, "Grocery Outlet" and the domain name "groceryoutlet.com". The decision contains the key sentence "Generic terms receive no protection in US trademark law when they are used to label the goods and services that they describe."
Cybersquatting was first used as a legal term in March 1998 by a U.S. District Court in California in the case of Avery Dennison vs Sumpton. An early definition of the practice was given in Intermatic Inc. v. Toeppen, 947 F. Supp. 1227. The definition was "These individuals attempt to profit from the Internet by reserving and later reselling or licensing domain names back to the companies that spent millions of dollars developing the goodwill of the trademark."
As domain name speculation has evolved alongside the domain name system, the most memorable and shortest domains tend to be amongst those registered first in any TLD. For old TLDs like COM, these domains will be long gone and people registering their first domains are often frustrated at the lack of short and memorable domains in this and other mature TLDs.
One of the main problems concerning trademarks and domain names in unrestricted TLDs and gTLDs is that of trademarks in general: the rights of the trademark owner have to be asserted in order to protect the trademark. The trademark owner has to take legal action, typically a UDRP, to defend the trademark after the potentially infringing domain has been registered. The UDRP action has to follow a procedure of notifying the respondent, receiving a reply from the respondent, appointing an adjudication panel and awaiting a decision. The process can take two months or more and all costs are borne by the complainant, while the infringing party stands to lose nothing except the registration fee for the original domain and the registrar of the infringing name incurs no penalty at all.
The global and unrestricted nature of TLDs and gTLDs effectively means that anyone in any country can register a domain name in them regardless of whether they have any intellectual property rights in that name. With country code TLDs the jurisdiction is more clearly defined. The affected intellectual property rights owner would have to take a legal action, typically a UDRP case to transfer or cancel the domain unless the registrant is in the same jurisdiction as the affected intellectual property rights owner. In this case, local law may be sufficient as the action may be considered as common law tort of passing off.