The Internet's emergence as a medium for advertising and commerce has led to the development of new branding nomenclature. Not only are net- and web-formative words such as Netscape and WebTV popular, but Internet addresses, or domain names, have taken center stage as brands in many companies' marketing efforts.
Amazon.com is perhaps the best known of the new domain-name brands. Numerous others, however, have joined the ranks of dot-com brands: examples include priceline.com, florist.com, and home.com. Domain-name brands can have an important role in a company's marketing efforts, but they must be wisely managed to avoid a number of serious legal and practical perils.
The Allure of Domain-name Brands
Brands that are also domain names have an immediate allure for companies active on the Internet. They immediately signal that the Internet is the principal platform for the commercial activities related to the brand, and they specify the electronic address where the commercial activities occur. Thus, for example, "cnn.com" tells the viewer that CNN is active on the Web, and it directs the viewer to the Web site located at cnn.com. In addition, for many companies, a domain name brand (or a domain-name trade name) conveys a modern, Web-savvy impression especially popular with investors.
Despite the allure, domain name branding poses significant legal and business challenges. Companies are well advised to consider those challenges along with the benefits, and to pause before leaping headlong into the brand strategy.
Legal Considerations
Liability risks
Many companies, while making brand use of domain names, forget that the brands must be cleared by traditional trademark clearance methods. Obtaining the domain name isn't sufficient clearance! The domain name registration process doesn't involve checking for trademark law conflicts. Significant infringement and dilution liability can attach to use of any brand, including domain name brands.
In addition, domain name brands are subject to a peculiar type of liability under private dispute rules administered by Network Solutions. Under NSI's current rules, //2// a domain name may be suspended by it at the request of any party that holds a national registration -- anywhere in the world -- for a trademark identical to the second level domain, unless the domain name holder also holds a national trademark registration for the same second level domain. //3(
Ownership issues
Ownership of domain names is very unclear. Holders of the generic top level domains have obtained their names from Network Solutions. That private company has asserted intellectual property rights to elements of the domain name system, including the database of domain names. It does not appear to have conceded "ownership" of domain names to holders of domain name registrations. Other companies have acquired registrations of numerous domain names for the purpose of leasing them out at a profit.
Any company that builds a brand around a domain name, where other companies are claiming ownership rights to the domain name, may face substantial risks later when the domain name registrar, or a third-party registrant, presses its ownership claims. A company now paying $50 or $200 per year for a domain name may find that, in several years when the domain name brand has become successful, the other party (whether Network Solutions or an intermediary) now wants $100,000 per year. Avenues for legal recourse in those cases are not clear, and very long-term agreements over domain names are not available.
Protection
From a trademark law perspective, a frequently encountered problem is the failure to use a domain name properly as a brand. The Patent and Trademark Office routinely rejects applications for domain names where it is not clear that the domain name is properly being used as a brand. //4(Brands in commerce are much like brands on cattle: placed on something, they indicate source or ownership. An address may signify location, but it doesn't necessarily identify a source. To function as brands, domain names must be used in a way that the viewer infers source significance, not merely address significance. Moreover, technical trademark use or service mark use involves specific affixation rules. In the case of trademarks for products, this usually means a physical association between the brand and the product marketed under the brand. (For some products, including software sold and delivered electronically, "point of sale displays" may qualify as correct use.) For services, the standard is easier: placement of the brand on advertising materials (printed or electronic) suffices.
A major obstacle faces holders of domain names where the second-level domain is a generic word. Books.com, as a domain name for a bookstore, would be such an example. The PTO takes the position that two-level domain name marks containing a generic word second- level domain are generic and therefore unregistrable on either the Principal or Supplemental Register.
One may question whether the PTO's approach is correct. An alternative is to consider the mark as a whole not as generic, but as merely geographically descriptive (in the electronic "geography" of the Internet) for which a showing of secondary meaning would entitle the holder to protection. Nevertheless, although a court may disagree with the PTO in a litigated matter, the PTO applies its rule vigorously to trademark applications.
Another issue is that a domain name brand, such as "acme.com," is not identical to a mark consisting only of the second level domain, such as ACME. This means that in a battle of "acme.com" against ACME, the challenger cannot argue that identical marks are being used by the parties. The addition of the top level domain adds a distinguishing feature to the brand as a whole that must be taken into account in infringement decisions. (The same is true, for example, whenever color or a design is claimed as an element of a mark.) Similarly, "acme.com" and "acme.net" may not count as identical marks for infringement analysis.
A final protection issue relates to marketing issues discussed below. Trademark rights depend fundamentally upon actual use. If a trademark evolves over time, there may come a point when the original trademark is no longer considered to be in use, and the later trademark may not draw on the rights pertaining to the original. A federal registration may get canceled if the evolved uses do not match the mark as shown in the registration. Thus, if today's "acme.com" becomes "acme.us.com" or "acme.sport" because of changes in the domain name structure, the rights and registrations for acme.com may be lost. Similarly, if the marketplace insists on calling Acme.com simply "Acme," the owner would best be advised to migrate the brand to Acme so that there is a match between the legal rights and the marketplace experience.
Business/Marketing Considerations
One frequent mistake of companies engaged in domain name branding is the loss of focus on brands themselves as opposed to domain names. Particularly for technology companies, and companies active on the Internet, domain names have had a great deal of attention. Reports abound about high prices paid for domain names, domain name disputes, and domain name policy changes. When once an entrepreneur thought first of a company name, now she often thinks first of a domain name and has acquired it even before consulting an attorney about business formation.
In this climate it is possible for domain names to distract companies from a proper focus on brands. Domain names can be useful tools to support a company's brands and overall marketing activities, but they should be only part of an overall strategy and not the driving force.
An overall branding strategy should consider the long term, even though some brands or advertising campaigns may have short-term or transitional purposes. It is risky to build a long- term strategy around domains, for reasons discussed above: a domain name holder may not succeed in preserving ownership of the domain name, and the domain name structure itself is subject to revision. //5// Domain-name brands can indeed have value, but the value should be assessed with clear-eyed realism, not blind, cheerleading optimism.
A good brand strategy builds brands that aren't dependent on the domain name (or telephone numbering) system. Prudent brand management allows the creative use of domain names and telephone numbers to support brands through advertising but again, putting advertising to the service of a domain name, or a telephone number, or an address, puts the cart before the horse.
Generic domain name brands, though popular, may not justify some costs paid to acquire them in the secondary market. A good brand should be memorable and distinctive: YAHOO! is such an example. Generic domain names fail that test: books.com isn't very memorable or distinctive when placed next to books.net, books.org, books.web, book.com, book.net, book.org, books.shop, book.shop, bookshop.com, bookstore.com, and so forth. This means that traffic to the site generated by advertising might fall away to one of the similarly named sites by accident. On the other hand, the Internet equivalent of "walk-up traffic" -- users who simply type in a domain name to discover a site without knowing what's there, which likely has maximum value for generic domain names -- may not be particularly valuable. While some sites may have substantial patronage from walk-up traffic (sex.com may be such a site), others like toothpaste.com may not have much walk-up value.
Brands are tools by which the memory bridges some earlier experience (earlier patronage, advertising, editorial reviews, or word of mouth) and some later marketplace action (recognizing an item on a shelf, asking for an item at a store, or a purchase). The more successfully a brand links experiences and actions, the more powerful it is. Domain name brands so clearly identify a single channel of trade that it may be awkward to use the brands in other channels. By analogy, although one would think of placing a telephone order through 1-800-FLOWERS, one may not consider the brand to have strong value for a neighborhood florist. Similarly, "amazon.com" may not be as portable to physical bookstores as AMAZON BOOKS. To be sure, domain name brands may work as sub-brands in conjunction with house brands, to identify a specifically Web- based channel of trade. Thus, Barnes and Noble brands its Web site sales under "barnesandnoble.com." This is an instance of porting a house brand to a domain name brand, not vice versa.
Another practical risk of domain name brands is that they can be unwieldy. Depending on the particular domain name, consumers may shorten the name in ordinary conversation. In a recent example of a trademark thrust upon a company by marketplace resistance to a longer name, Federal Express Corporation changed its core brand from Federal Express to Fedex. Although the Internet bookseller's formal name is Amazon.com, Inc., many news articles shorten the company name to just "Amazon," and it is conceivable that the formal company name and branding will eventually have to follow suit. Marketplace renaming of brands and company names carries a variety of risks, including unintended infringement liability, the direct cost of replacing brands, and the possible need to undertake a second global trademark registration effort to protect the brand actually used by the public.
Conclusion
Several important principles must guide domain-name branding. First, domain names must serve a company's overall branding strategy, not vice versa. Second, investments in generic domain names should be made with caution. Third, domain name brands must be cleared, used, and protected just like other brands. Finally, domain name brand strategy must take into account the vulnerability of domain names in general. Mindful of these considerations, companies can integrate their Web-based branding into an efficient and valuable cornerstone of their overall marketing and communication strategy.
1 Mr. Bridges is a partner in the intellectual property and litigation practices at Wilson Sonsini Goodrich & Rosati in Palo Alto, California.
2 The current rules may be found on the Web at http://rs.internic.net/domain-info/internic-domain-6.html.
3 An earlier version of this rule accounted for a huge wave of trademark applications in Tunisia, which had a reputation for immediate trademark registration. Under the old rules, a trademark registration obtained after the challenge was begun could be used to thwart the challenge. Now, the registration must have been obtained before the domain name holder was first notified of the dispute.
4 For U.S. Patent and Trademark Office comments on trademark applications involving domain names, see http://www.uspto.gov/web/offices/tac/domain/tmdomain.htm.
5 In the analogous field of telephony, no business has a right to retain its full telephone number in a context where area codes change: 415-555-1000 of a decade ago may have become first 510-555-1000 and then 925-555-1000 in intervening years as area codes have been divided and the numbers in them reassigned. It would have been unwise to build a brand around a telephone number complete with its area code! Even 800-number brands, such as 1-800-FLOWERS, may be in jeopardy if the telephone system moves to four-digit area codes.