Dominic Walsh and Alicia Kaupp-Roberts recently wrote about blockchain domain names and relevant considerations for brands protecting their intellectual property for Lexis Nexis.
This article first appeared on Lexis®PSL.
Web 3.0 provides brands with a fresh opportunity to engage with existing consumers, and to reach new audiences and sectors. However, the potential for widespread infringement means that brands must ensure their intellectual property portfolios are fit for purpose to preserve their position in this environment.
One area for consideration is the registration of blockchain domains.
What are blockchain domains?
Blockchain domains are domain names that operate and are stored in a decentralised network or a block-chain. The two main providers of blockchain domains are ‘Unstoppable Domains’ and ‘Ethereum Name Ser-vices’. Examples include: .eth, .nft, .dao, crypto, .bitcoin and .wallet. While blockchain domains are currently used most frequently to replace the long addresses used to send and receive crypto, they can also be used to link to a decentralised website.
How do they differ from traditional domains?
Blockchain domains differ from traditional domains in the following respects:
- they are independent from The Internet Corporation for Assigned Names and Numbers (ICANN) meaning there is no need for the owner to provide WHOIS data
- they are independent from the Uniform Domain Name Dispute Resolution Policy (UDRP) meaning UDRP complaints cannot be brought
- they are held on publicly accessible blockchains rather than on a server - thus improving transparency
What are the risks around infringement and how can a brand owner look to enforce its rights against ‘ethersquatting’ on the blockchain?
Blockchain domains are assigned using an automated smart contact that allows the registration of the domain provided certain conditions are met. Verification checks to confirm the applicant’s legitimate right to use the required name are not usually conducted at the time of registration (and in the limited instances in which checks are conducted, they are narrow in scope). This therefore enables ‘ethersquatting’ to occur ie where a third party obtains a blockchain domain for a trade marked sign prior to the legitimate owner. The ethersquatter is able to enter into transactions and receive payments using the acquired blockchain domain.
Being proactive and registering for such domains is advisable from a defensive perspective to prevent ethersquatting. It is recommended to take a comprehensive approach to registering blockchain domains for all key trade marks and their variants. Blockchain domains can never be deleted from the blockchain but ownership can be transferred or they can be burned, taking the domain out of circulation. While it is possible to file takedown requests in relation to infringing blockchain domains at marketplaces such as OpenSea, there is no guarantee that doing so will open up a dialogue or lead to recovery of the blockchain domain. Also, while OpenSea may take down the blockchain domain, this does not prevent the owner from selling it on another marketplace (eg Rarible). It is therefore possible to end up incurring significant fees on several takedown actions, without truly seeing a positive result. This means it can often be tactically better to make an anonymous approach to the owner to bid for the infringing domain.
As noted above, blockchain domains are independent from UDRP and therefore UDRP complaints cannot be brought. There is no formal procedure currently in place to allow for complaints to be made to the blockchain domain providers. However, some blockchain domain providers are taking steps themselves to attempt to limit the possibility for infringement by their customers, as they recognise that infringement risk could inhibit blockchain domains from being adopted widely. For example, Unstoppable Domains has implemented a ‘Protected Brands Policy’. Per its policy, if a blockchain domain is protected by a registered US trade mark, then any person wishing to purchase the domain must demonstrate that they are eligible to do so. However, not all blockchain domain providers have implemented policies such as this, and there are clearly limitations to the policies that are in place at present.
It is also yet to be seen whether a court would be willing to hold a blockchain domain provider liable (and require them to arrange the burn of the infringing blockchain domain), particularly in situations where the complaint is brought to their attention and they fail to respond.
Risks for brand owners may also be compounded if two top-level domains are able to coexist, with different providers selling identical blockchain domain names. Currently a dispute is ongoing in the US between two blockchain domain providers, Unstoppable Domains and Gateway Registry (a company linked with Handshake), over the rights to sell .wallet domains. A decision in this case is awaited.
What should brand owners be considering now in terms of registering blockchain domains?
Brands should consider looking into purchasing blockchain domains from a defensive perspective. It is likely to be cheaper in the long run to acquire these domains now, rather than to purchase them from third parties in the future.