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Studies &
Opinions
Don’t
Litigate, Open Them Up!
Alex
Tajirian
January 31, 2007
Introduction
Companies have adopted two diametrically opposite approaches to
dealing with domain name owners infringing[1] on their IP, namely, to either take aggressive legal action or do
nothing. Unfortunately, however, both these approaches destroy shareholder
value.
Instead,
companies should “open them up” for development. This will create
shareholder value through better utilization of scarce resources
and improvement of the domain name ecosystem.[2]
Disadvantages of Current Solutions
The legal strategy for
IP enforcement is typically based on the following argument: A
lax and selective enforcement of IP sets a bad precedent for the
seriousness of the company in protecting its IP, while an aggressive
strategy deters others from the practice.[3]
The following are the sources of shareholder
value destruction under the current legal regime:
-
The intrinsic value of a domain name
can be broken down into two components: captured value and wasted
value.[4] The latter occurs when it
is not put to its best use, i.e., when visitors’ intent is not
congruent with the site’s content.[5] Thus, decreasing waste increases
value.
-
Legal action is expensive to enforce.[6]
-
Companies that are not taking any action
to enforce their IP are also losing value by relinquishing the
revenues that their IP is generating to the owners and by being
exposed to brand value dilution through the content of the associated
website.[7]
-
A protectionist strategy by a hub[8] creates an unhealthy ecosystem
by reducing diversity, limiting consumer choices, and stifling
innovation. On the other hand, a healthy ecosystem benefits
the hub.
What can be done?
Based on visitor intent, one can distinguish
two types of IP violations, whereby the visitor is served content
different than what he or she is looking for: the visitor intends
to go to the IP owner’s site or is interested in items related
to the IP owners products and services, i.e., domain names that
are compose of the brand name and keywords, but does not find
the intended information at the site visited.[9] Ggoogle.com and AdsenceBooks.com are examples of the
two intents respectively. Moreover, for each of these two types,
each type can also exist under other extensions.[10]
A cooperative IP strategy can reduce
the waste and improve the ecosystem. Such a mind set by the companies encourages the creation
of new intermediaries. The new intermediaries act as keystone species.
Although they are a small part to the network, they improve the
overall health of the ecosystem.
Meanwhile, parking service
providers can act as an intermediary for a class of intent domain
names. Coordination with intermediaries also reduces the currently
imbedded cost of the tacit threat of litigation by IP owners.[11]
Concluding Remarks
Whatever a company’s IP enforcement strategy formulation process
is, it should be coordinated among the marketing, IP management,
and legal departments.
Due to inefficiencies in the initial
domain name allocation mechanism, companies cannot and should not
try to acquire all the relevant domain names. However, instead of
adopting a legal protectionist strategy, IP owners should adopt
a cooperative strategy that increases shareholder value and improves
the domain name ecosystem.
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