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Domain Tasting - A Profiteering Venture

Written by: Jaideep Kharub The author is a law graduate from Faculty of Law, Delhi University and is working as an IP Officer with an International Intellectual Property Firm in Bahrain at present. The author also practiced IP Law in India for more than two years.
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Meaning and Rationale behind Domain Tasting

Domain Name Tasting (usually called as Domain Tasting) is a profit making practice by systematically exploiting add-grace period (refers to a specified number of days during which a domain name registration may be cancelled at no cost) to gain access to domain names at no cost.

The rationale behind introducing an add grace period was innocent. The objective was to help the registrants / registrars who by mistake register a mistyped or misspelled domain name. For example: a person want to register his / her company name Sun Textiles as his / her domain name but mistakenly he / she registers a domain name suntxetiles.com instead of suntextiles.com. In order to rectify such mistake, a grace period was introduced by which a registrant was given a certain time period (usually a five days period) to check his domain name registration and allowed to correct typos or other errors. During such add-grace period the registrant was allowed for cancellation at no-cost. Now this add grace period is converted into a profiteering venture called as Domain Tasting.
How the process works

Domain Tasting is used as a monetization practice by domain tasters to utilize the add-grace period in order to test profitability of a domain name registration. The final registration (i.e. decision to keep the registration) depends on the amount of traffic it receives during the so called add-grace period. During the said grace period, the domain tasters try to assess whether the domain name can generate enough revenue from paid search sites or advertising or identify whether a domain name can be sold at premium prices. If the amount of traffic in 5-days convinces the domain taster that the domain name could fetch revenue more than its registration cost (i.e. currently around $6/per year), the domain taster goes for registration otherwise cancels the registration of the domain name without any cost. Through this cost-benefit analysis, the domain taster put the domain name on his / her domain name portfolio and the registration amount becomes an investment amount for him / her. The intent of the domain tasters at the time of registration is not to keep the registrations but only to taste the domains, if they like the taste then only think of keeping the registrations alive otherwise cancel the registrations. The only motive behind the kept domain names is to earn easy money through refraining honest/interested registrants from registering the said domain names so that they could offer good premium for the said domain names or through paid parking websites.

Improved version of Domain Name Tasting - Domain Kiting

The vicious cycle of repetitious domain tasting is called as Domain Kiting. The non-prohibition on re-registration of a domain name gave birth to another disease known as domain kiting, by which the domain kiter repeats the process of domain tasting continuously (i.e. cancels the registration of domain name on 5th day of the grace period and again registers the same domain with a new grace period). One can say it as an improved version of domain tasting devised in order to access the domain name for a period of more than 5 days without paying the registration fees. During the kiting process, the domain name remains unavailable for the public without its real registration.

Harmful Effects of Domain Tasting

a) Trademark Abuse: The primary critics of the domain tasting practice are trademark owners and registered domain holders for whom the current practice served bane for them. They allege that domain tasting creates a secondary market for their marks / names that might otherwise registered to them and propagates cyber and typo-squatting.

b) Repurposing of Registrations: Another concerned issue comes out of domain tasting is ‘repurposing’ of existing registrations. It occurs when a registrant chooses not to renew a domain registration or simply forgets to renew and another entity then registering the same domain name on expiring of the initial registration period. People who are familiar with the site (for example the persons who have bookmarked it) or who have expectations about the site content on basis of the name might find that the new registrant has created a site with quite different content. It also creates consumer confusion.

c) Facilitation of Criminal Activities: During the period of domain tasting, some of the domain tasters involves in criminal activities such as phishing or pharming. Such activities can not be tracked down by enforcement agencies because the enforcement agencies can not track each domain name to find out which domain name is doing such type of criminal activities. Even during such a short span of period, it is not possible for the enforcement agencies to take actions against the offenders.

d) Impact on Domain Name System (DNS): According to David Steele (an expert in Trademark and Internet Law at Christie, Parker & Hale, United States), 10 to 20 million domain names are tied up in domain name tasting / kiting every day. What will happen when the volume of domain name tasting / kiting transactions increases to 50 million or more? The registry servers may not be able to bear the operational load of the transactions of registrations and deletions made during the add-grace period. Here question arises whether such practice should be allowed to cause damage to the DNS without any cost?

e) Creation of Confusion: The domain names used in the domain tasting are shown to be registered in the WHOIS database, but before completion of their add-grace period most of them are deleted and therefore, available for registration. Domain Tasting creates confusion whether a domain name is available for registration or is being used only for domain tasting / kiting purposes. For an honest registrant, it becomes a rat game.

Further, if an internet user search for a domain name or a webpage; instead of finding the relevant page, he is redirected to a parking/advertising website. How annoying it is to accidentally visit a content-free website which is obviously set up just to encourage the internet users to click on the advertising links and nothing else. This practice degrades the quality and undermines confidence of consumers in the Domain Name System

f) Rise in Costs: With increase in the operational load of the tasting transactions, the maintenance costs of registry may also increase. If the domain tasting is allowed freely, then who is going to bear the maintenance costs? In such a situation, the registry may increase the registration fees and in that situation it will not be fair for the honest registrants to bear the maintenance costs for tasting transactions.

Further, the domain name tasting practice allows registration of typographical permutations and in such case, owners of the trademarks have to get the defensive registrations for protection of their trademarks / names. The defensive registrations only add the unnecessary costs on the owners of the trademarks.

Who is benefiting from Domain Tasting

Most of those involved in the domain name system have little interest in curtailing domain tasting practice because they are earning easy money from it. The registrants make a profit from advertising revenue and the registrars, registries and ICANN make money when domain tasters keep the domain registrations. Advertisers are happy because they get more traffic and sales through their online ads. And search engine companies encourage it because market of online advertising flourishes

Earlier the domain tasters don’t keep many domain names, the establishment of paid search market changed the view of the domain tasters who now keeps more domain names, converts the domains into small parking web-pages and earns from the adverting links on the basis of ‘pay-per-click’. As a result the volumes of registration significantly goes up and this increase in domain registration volume and profits caused the registries to tacitly support the domain tasting.

Paul Sloan in his article Kevin Ham: The Man who owns the Internet in Business 2.0 Magazine on May 22, 2007 (available at http://money.cnn.com/magazines/business2/business2_archive/2007/06/01/100050989/index.htm) excellently demonstrated the height of domain tasting practice. The article refers to a domain taster who is generating an income of approximately $70 million a year by holding a portfolio of roughly 300,000 domain names.

Solution
The best solution of domain tasting practice lies in the original objective of introducing the add-grace period. By implementing a rule that a registrant may request for correction of his mistake (i.e. not a totally different domain name) within the add-grace period and it will be the discretion of the registry to allow the request or not, however no refund will be allowed; the foul game may be controlled.

The practice may also be controlled by retaining some amount while cancellation within the add grace period. The amount may range from 1% to 50% of the registration fee. PIR (.ORG Registry) has recently implemented a scheme from May 26, 2007 where the registry will charge 5 cents per domain if the returned domains are more than 90 % of the total number of domains of a registrant.

Another idea to control the domain tasting practice is that during the add-grace period no DNS entry for a new domain name may exist in the registrar's root DNS records. In other words, unless a domain is properly registered and paid for, no DNS entry is allowed on any root TLD server for that domain. The idea is to completely cut off the domain tasters from doing pay-per-click advertising, which is the core of their tasting effort. Without having access to the Internet the tasters cannot measure the domain name ranking and taste the quality of the name.

It is hard to say anything whether domain tasting is legitimate or illegitimate. Whether it's good for tasters, kiters, registrars, registries, ICANN or not, honest registrants and trademark owners always lose out from it.

The author can be reached at: jaideep@legalserviceindia.com / Print This Article

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