If you invest in domain names, a recent UDRP decision should scare you

As someone who has been investing in domain names for over ten years now, I have tried to keep a close eye on UDRP decisions. Many people liken the domain name world to the Wild West but it’s important to remember that there are defined rules and regulations which, uh, the Wild West didn’t exactly have.

The UDRP process, and the decisions that are made through this process sets the standard by which all of us, as investors need to know, and well, to avoid losing domains that we buy as investments. In general the UDRP process is designed to prevent people from buying domains in bad faith to essentially extort trademark holders. While occasionally there are decisions that seemed to be biased on one side or the other, this process has generally done a decent job of protecting businesses and trademark holders and domain investors all at the same time.

That being said, like many legal decisions, future outcomes are heavily impacted by prior actions. Just like we’ve seen major court decisions set the standard for hundreds or thousands of cases to follow, the same is true of the UDRP process.

A recent UDRP decision was brought to my attention by the ICA, and honestly, it’s a scary one. If this sets a precedent it honestly could make it very challenging to invest in domain names going forward. Elliot Silver, author of popular Domaining blog DomainInvesting.com covered this controversial decision, here’s the gist of it:

“Respondent’s apparent belief at the time it registered <devex.org> that someone, at some time in the future, might cultivate trademark rights in DEVEX which Respondent could then exploit obviates any requirement that to succeed under the UDRP the respondent must have contemplated a particular trademark holder and/or a particular trademark.” (Source – DomainInvesting.com)

What this decision essentially said is that if you buy a domain name and years later someone decides, “hey I want to use that domain for my business but I don’t want to pay you for it” they could just get a Trademark and – poof – the UDRP process would give them the name. This is scary, really scary. 

The ICA has issued a statement on CircleID that’s definitely worth reading and hopefully will help prevent this specific UDRP decision from setting a new standard. Still, the fact that this happened could send ripples through the domain investing world for years to come and honestly could change the dynamics of the entire industry forever.

Yes, I know what you’re thinking now. Morgan – you’re being overly dramatic, it’s just one lousy decision. To which I would say, think how you would feel if you invested in a name, maybe you bought it in a NamesCon auction for $50,000. You get offers on it over the years but nothing that matches what you think it’s worth.

Then one day, someone spends a few thousand dollars to a secure a trademark, files a UDRP, and now the domain is theirs. We can’t let that happen, and I am incredibly thankful to the ICA for speaking up and making sure that a decision like this doesn’t happen without bringing to light how massively the UDRP process has failed in this specific case.

Now only time will tell if this is remembered as one bad decision, or used as a basis for thousands of future decisions…

{ 8 comments… add one }

  • John December 16, 2017, 9:00 pm

    You appear to be completely misunderstanding this, and what is being said is plain in black and white. However, nonetheless a correct understanding of what is plainly being said is just as disturbing and perverse as your misunderstanding (as well as that of anyone else who shares this view). And if you weren’t the type of person who has never responded to me for anything, perhaps because I’m “anonymous,” I wouldn’t put it so bluntly here. But no matter how one puts it, it’s still the same.

    Reply
  • John M December 17, 2017, 3:20 am

    Obviously going forward if one buys or even already owns a costly domain part of the “cost basis” will be or should be to file a trademark on the name. Happy Holidays!

    Reply
    • John December 17, 2017, 6:55 am

      No, still missing it.

      Reply
  • Steve December 17, 2017, 12:11 pm

    Kangaroo system. At least put a basic website on your premium names and set up an email address for the domain as well. Show some use.

    Reply
  • Mike Ortiz December 17, 2017, 12:23 pm

    John is correct in that the quoted language addresses the intent of the registrant when registering the domain. This is far from the implication that anyone can win a UDRP solely because they own the trademark of the same word. The registrant should never have admitted that it registered the domain with the intent to profit on the potential of another party owning a trademark of the same in the future. It is still a horrible decision, however, and an improper analysis by the arbitration tribunal.

    Reply
    • John December 20, 2017, 9:21 pm

      Exactly

      Reply
  • Rick Schwartz December 18, 2017, 2:57 am

    They lost but they did not lose because of the domain or anything related to the domain.

    They lost because they had a ONE MEMBER PANEL. That is the KISS OF DEATH if you are SERIOUSLY defending ANY domain name. DUMB! DUMB! DUMB! It’s all about being CHEAP! Domainers will NEVER EVER learn and I have a tough time feeling sorry for STUPID!

    Reply
    • Morgan December 18, 2017, 8:03 pm

      @Rick – that is a great point, a one member panel is definitely a bad idea and as you said, the kiss of death.

      @John – not a bad point, still I wonder if that’s the answer, for someone with a few good domains that might be fine but for larger portfolio holders there should be a better way to protect their names without having to file a Trademark…feels like this is what the UDRP process is intended to protect against right?

      Reply

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