As the Internet adds valuable new
domain names that are luring the likes of Google Inc. and
Amazon.com Inc. (AMZN), a little-known company called Donuts Inc. is
making a grab that opponents say could fuel cybersquatting, the
practice of stealing website identities.
Donuts, backed by more than $100 million in venture
capital, is spending $56 million to bid for 307 of the 1,400 new
so-called generic top-level domain names, or TLDs, that will
shape how the Web will soon evolve. Instead of .com, the new
names include suffixes such as .book, .app and .law.
A lawyer who represents TLD holders is seeking to thwart
Donuts? efforts and is asking the Internet Corporation for
Assigned Names and Numbers, which authorizes domain name
suffixes and is known as Icann, to investigate Donuts? links to
Demand Media Inc. (DMD) That company?s clients have used domain names
to masquerade as other businesses, the lawyer contends. The
chief executive officer of Donuts used to run Demand Media, and
Donuts has an arrangement to sell Demand Media 107 of its TLDs
if it chooses to release them.
?Donuts and its key executives are, by Icann?s established
eligibility guidelines, unsuited and ineligible to
participate,? Jeffrey Stoler, a lawyer with McCarter English
LLP, wrote in a July letter to Icann, which manages the
architecture of the Web. ?Icann can and should reject the
applications from Donuts and its subsidiaries, Demand Media and
its subsidiaries, and their respective affiliated companies.?
?Bold and Large?
Donuts, based in Bellevue, Washington, and Demand Media are
distinct companies with no equity relationship, and Donuts is
?100 percent qualified? to be a TLD registry, said Brian Jacobs, founder and general partner of San Mateo, California-
based Emergence Capital Partners, a Donuts backer.
The company is bidding for so many TLDs because domain-name
expansion is long overdue, said Jonathon Nevett, one of Donuts?
four founders.
?When you do something bold and large, sometimes you put a
target on your back,? he said. ?We?re going to run a clean,
safe registry.?
Icann is now reviewing 1,930 applications for new TLDs in
its first major expansion of Internet naming since 2004. It?s an
effort to eliminate the constraints companies face when trying
to create a unique online name as Web browsing proliferates on
smartphones and electronic tablets like Apple Inc. (AAPL)?s iPad.
?Constrained Space?
Donuts wants to build a ?shopping mall? of domain names
that offer breadth and depth to consumers, Nevett said.
?This has been the most constrained space you can think
of,? with only 22 suffixes currently available, Nevett said in
an Oct. 15 interview in Toronto at an Icann conference. ?If you
think of it in the real-estate market, it would be like not
creating homes for years and years and years.?
Nevett had previously run a domain-name consulting
business, been an adviser to Icann, and has been working on the
current bid since about 2005. Donuts remains small, with just
eight employees. The company name is meant to evoke variety of
choice and the idea that everyone likes doughnuts, he said.
Though dwarfed by Google (GOOG), which is seeking to own and
operate the .buy and .ads TLDs among others, Donuts? 307 bids
outnumber the search-engine giant?s 99 bids. Amazon.com is
aiming for 76, based on a search of applicants? e-mail addresses
in Icann?s registry of applicants published in June. Each
application costs $185,000.
Amazon spokeswoman Mary Osako declined to comment. Google
spokeswoman Katelin Todhunter-Gerberg confirmed its 99 bids and
declined to comment on Donuts? bids.
Uncontested Bids
Nevett says about 140 Donuts bids are uncontested. So while
Donuts will have to fight Amazon and seven others for control of
.book, it faces no challengers to its ownership of .dentist or
.mortgage. Icann?s deadline for bids closed in May and the
application process will continue into next year.
While Icann can?t comment on individual applicants, the Los
Angeles-based organization oversees a rigorous screening
process, said Brad White, a spokesman for Icann.
Stoler, the McCarter English lawyer, said in his July
letter to Icann that Donuts has clear links to Demand Media and
its subsidiaries, which have received more than two dozen ?bad-
faith? rulings from Icann-recognized dispute panels. Stoler
declined to comment to Bloomberg News and wouldn?t say if any of
his clients are competing with Donuts to own new TLDs.
Internet registries like Donuts operate the top-level
domains which are the base upon which registrants can rent or
buy addresses, leaving the registries open to risk of abuse from
those who seek to fool consumers with misleading websites.
Public Allegations
Examples of bad-faith actions include buying a domain name
to block a rival that might have previously used the name as a
trademark or using a domain to deliberately mislead consumers
into thinking they?re on a different site. While cybersquatting
is illegal under U.S. trademark law, courts often defer to Icann
tribunals because many cases involve foreign parties.
?The allegations have been made fairly publicly by a wide
range of organizations,? said David Weslow, a partner with
Wiley Rein LLP specializing in Internet intellectual property.
?If the allegations are true, the concern would be the prior
actions of those other companies would be indicative of how the
Donuts group may operate,? he said.
Weslow said he represents businesses bidding for TLDs,
though none in direct contention with Donuts.
Donuts CEO Paul Stahura, one of its co-founders, was
formerly president and chief operating officer of Demand Media.
The Santa Monica, California-based company is applying for 26
TLDs in the auction, in addition to the 107 it may get to
acquire from Donuts.
?Slum Lord?
Nevett said it?s unfair to criticize Donuts when the
company has done nothing wrong.
?It?s kind of like being called a slum lord before you
have an apartment to run,? he said. ?If Demand thought it had
a problem and wanted to create a new company to apply on its
behalf, they wouldn?t apply for 26 on their own.?
Demand Media Executive Vice President Dave Panos also
disputed Stoler?s complaint, calling it ?rife with false
statements and misinformation? in a letter to Icann in
September. Panos, reached by e-mail, declined to comment on the
specific decisions that went against his company.
Donuts won?t allow site operators that use its domain names
to practice cybersquatting or phishing, where sites try to steal
Web users? information, Nevett said.
?If there?s cybersquatting or phishing, we?ll certainly
take them down,? he said.
To contact the reporter on this story:
Hugo Miller in Toronto at
hugomiller@bloomberg.net
To contact the editor responsible for this story:
Nick Turner at
nturner7@bloomberg.net
Article source: http://www.businessweek.com/news/2012-11-05/upstart-donuts-grab-for-domain-names-triggers-web-scam-concerns
Tags: coupons, domain name, domain names, domains, law, register, registrar, rules
Source: http://registerbetter.com/2012/11/donuts-grab-for-domains-raises-fears-of-cybersquatting/
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