Businesses in U.S. complain of .xxx shakedown

NEW YORK In preparation for a new triple-x Internet domain that will launch in December, lawyers for the most storied brands in the United States are scrambling to prevent an x-rated rip-off of an invaluable asset: corporate Web addresses.

The domain operator administering the .xxx domain is accepting early applications from brand owners who want control over their names. ICM Registry says it has received over 900,000 "expressions of interest" from companies that want to preregister their trademarks or block others from snapping them up to create, say, a Barbie.xxx or Coke.xxx.

While some adult-content providers are paying the approximately $200 fee because they want to use the domain, other non-porn brands ranging from MTV Networks and Budget Travel to the Red Cross are preregistering to avoid future legal battles with cybersquatters who register trademarks with the intention of reselling them.

Porn and mainstream businesses alike complain they are being forced to buy domain names they don't want, don't need and won't use -- and compare the process to a hold-up.

"Many feel they're being blackmailed to protect their brands," said Kristina Rosette, a trademark lawyer at the law firm Covington & Burling. She added that requiring preregistration fees to protect trademarks is not uncommon among domain registries, which then include the expected revenue in their business plans and projections.

ICM Registry, the private company that is introducing .xxx, was founded by Stuart Lawley, a British tech investor. He and his partners first proposed the .xxx domain in 2000 to the Internet Corporation for Assigned Names and Numbers (ICANN), the international governing body that oversees top-level domains and reviews new applications. Yet because of fierce opposition from religious and conservative groups on moral grounds, and the Internet pornography industry, which feared censorship, it took ICM until this past March to win a final approval from ICANN's board and a 10-year contract to manage the .xxx domain.

NOT MAKING A DIME

Now that Lawley is finally in the home stretch and preparing to launch ICM in December, he dismisses charges that he is shaking down registrants. "We're doing it on a cost-recovery basis. We don't make a dime out of it," he said, adding that the fees would serve to cover the cost of verifying the applicant's identity and trademark ownership.

ICM is the latest company to stake out territory in the fast-growing registry landscape. The most established player in the field is Verisign, which operates both the .com and .net domains. Another outfit, Afilias, owns .info and .mobi for sites designed for mobile devices. The number of registry companies is expected to explode next year, when ICANN will allow any company to apply for its own domain extension, like .apple or .facebook.

Most big companies own tens of thousands of domain names, according to Frederick Felman, the chief marketing officer of MarkMonitor which helps companies protect their brands online. Warner Brothers, for example, owns not only warnerbros.com but also batman.com, harrypotter.com and looneytunes.com among many others.

HERE COME THE TYPOSQUATTERS

Each new domain brings a new round of cybersquatters, who register well-known trademarks to increase Web traffic or later sell them at an inflated price. Close behind are typosquatters, who register famous names with slight typographic errors, like Peppsi instead of Pepsi. The threat of rampant brand hijacking has alarmed companies who worry about the costs of defensive registrations with the launch of new domains.

A trademark owner that falls victim to cybersquatting or typosquatting must take legal action against the domain name holder, invoking ICANN's dispute resolution policy to wrestle back the address. The process can take months and several thousand dollars in legal fees.

When ICANN opens the gates to new domains starting in January 2012, the cost of brand protection is going to skyrocket. "Multiply .xxx times several hundred, and that's the scale of the problem," said Felman.

The businesses most affected by the launch of the .xxx domain are big name adult entertainment companies, such as Luxembourg-based Manwin and U.S.-based Hustler, which own dozens of domain names. They are not only refusing to pay, but also demanding that ICM block their domains free of charge.

Manwin, one of the world's largest online porn companies, owns domains including Brazzers.com, Xtube.com and YouPorn.com. In June, its lawyers sent a letter to Lawley, listing 57 of its pre-existing domain names and warning ICM to protect those names or risk the consequences.

Manwin "has placed ICM on notice that registration of its domain names without its consent will constitute a violation of Manwin's rights," the company said in a statement. Hustler, which owns domains including Hustlertv.com, Hustlerclothing.com and Hustlerstore.com, has sent a similar letter.

ICM responded to the legal threats with a seven-page report in July, claiming that a registry cannot be sued for trademark infringement. The letters, though, have placed ICM on notice, which increases the potential for liability if ICM sells the trademarked names, said Rosette.

NO TO SPONGEBOB.XXX

Eighty percent of registrants so far have been from outside the pornography industry, according to Easyspace, a British registrar which has been taking preorders on behalf of businesses that want to protect their brands before the official registration period opens in September.

MTV Networks was among the early brands to sign up to protect names such as VH1 and Comedy Central. "This is a unique launch," said MTV spokesman Mark Jafar in an emailed statement. While the company will not operate a website at spongebob.xxx, it will "be preventing others from owning it," Jafar said, noting that MTV is registering more brands with .xxx than it normally would for a new domain.

Budget Travel cited similar concerns about a potential budgettravel.xxx. If people are Googling "budget travel" while planning a vacation, "We don't want them coming across something inappropriate," said Lisa Schneider, the digital general manager for the travel site Budget Travel.

SPECIAL TREATMENT FOR RED CROSS

Not all registrants have to pay the $200 to $300 fee. Under ICANN's rules, certain nonprofits including the Red Cross and the International Olympic Committee receive special protection in new domains because of their international status. At ICM's request, Red Cross has submitted a list of its brand names, along with their Spanish and French translations, which will be blocked from .xxx free of charge, according to a Red Cross spokeswoman.

People for the Ethical Treatment of Animals also signed up. However, instead of blocking its name, said PETA spokeswoman Lindsay Rajt, the organization will launch peta.xxx as a pornography site that draws attention to the plight of animals.

(Reporting by Terry Baynes; Editing by Eileen Daspin and Eric Effron)

(The following story was corrected to show that Manwin is not Canadian-based. The company is based in Luxembourg.)