How Big a Problem is Cybersquatting? How often do Domain Owners win UDRP proceedings?

How big a problem is cybersquatting?

We hear from groups like CADNA that it is a billion dollar problem.

And we learn from Andrew Allemann how CADNA inflates their numbers.

To get a sense of the scope of the problem, and to answer the other question about what is the success rate for domain owners in UDRPs, I looked at all the WIPO UDRP decisions from August.  WIPO, based in Geneva, along with the NAF, handles most of the UDRP cases.  Each business day they send out an email with a summary of the decisions decided that day.

This sample of UDRP cases reveals some valuable information.

First, let’s take a look at the numbers.

WIPO issued 207 UDRP decisions in August.  Of these, 135 were for a dot-com domain, or included a dot-com domain among the disputed domains.  The other 72 were for country-code extensions that WIPO handles or for gTLDs like .net, .org, .info, .biz etc.

To ensure a consistent sample, and because most of the commercial value is in dot-com domains, I’ll restrict my analysis to the decisions involving dot-com domains.  All the discussion that follows is limited to only dot-com domains.

Of the dot-com decisions, 119 resulted in a Transfer and in 16 cases the Complaint was Denied.

Zeroing in further, of the 119 decisions, in only 28 cases was a formal Response filed, for a response rate of 24%.  Of these, as best I can tell, 14 were prepared by an attorney and in the other 14 cases the Respondent represented himself/herself.

Of the 14 responses prepared by an attorney, the Respondent prevailed in 11 and lost 3.  Of the other 14 decisions where the Respondent represented himself/herself, the results were a mirror image:  the Respondent won 3 and lost 11.  There were also a couple of decisions where the Panelist denied the complaint even though no response was filed.

Therefore in half the cases where a Response was filed the Complaint was Denied.  In 79% of the cases where the Response was prepared by an attorney, the Complaint was Denied.

This could mean that my friends who are domain attorneys are brilliant, a conclusion with which they would certainly agree.  But it probably more likely means that a domain owner is only likely to hire an attorney to file a response if the domain owner believes he or she has a winning case.

Let’s put these numbers in context.

1.  There are around 95 million dot-com domains.  Out of these 95 million the number of decisions at WIPO during August that found that a dot-com domain registration was abusive was 119.  This doesn’t mean that there were only 119 abusive domain registrations.   But it does mean that out of all the abusive domain name registrations, over the course of a month companies only thought that 119 instances were important enough to make use of the relatively simple and easy UDRP process to secure an abusive domain registration as determined by a WIPO panel.

2.  Let’s estimate that WIPO handles half of all UDRP disputes.  (Their exact share might be public information, but half is probably close to the right answer.)   We can estimate that across all UDRP providers, there were around 240 dot-com domains ordered transferred for being abusive registrations in the month of August.

3.  The number of dot-com domains is roughly equal to the population of the Philippines (94 million) and is half that of Brazil (190 million).  Out of the 95-million dot-com domains, around 8 per day are found to be guilty of bad faith registration and use.  That would be the equivalent of only eight people per day in the Philippines or 16 people per day in the entire country of Brazil, or 26 people across the US being charged with a misdemeanor offense on a given day.  That’s hardly a crime wave.

4.  Over the course of a year, if the August numbers stay consistent, around 2,880 domains will be found to be abusive*, which out of a population of 95 million, is equivalent to a 0.003% rate.  The other 99.997% dot-com domains will not been determined to be abusive registrations.   That’s better than Ivory Soap with its claim of being 99 and 44/100% pure.  🙂

5.  Every abusive domain registration isn’t the subject of a UDRP Complaint.  The vast majority of abusive registrations continue for years without ever facing a UDRP Complaint.  But if the problem is as bad as some claim, and if the economic losses are as high as CADNA claims, then given how easy and inexpensive it is to file a Complaint, and that the Respondent defaults over 75% of the time, one might expect hundreds or thousands of UDRP cases per day instead of less than 10 on average.

6.  12% of all dot-com Complaints are denied.  50% of all dot-com Complaints where there is a Response are denied.  79% of all dot-com Complaints where the Response is prepared by a lawyer are denied.  There were even a couple of Complaints denied when there was no Response submitted.

What conclusions can we draw?

1.  Either companies are willingly accepting huge economic losses when they could easily prevent them by filing UDRP complaints, or the scope of the problem is greatly overblown.

2.  There is pool of abusive registrations where the revenue earned by the domains is greater than the $10 per year that would justify a renewal, but less than the few hundred dollars a year that would make it cost effective for a company to pursue a UDRP action.   Now that UDRP providers are making it easier for companies to bundle many domains into one UDRP action, the cost/benefit breakdown for pursuing a UDRP action drops considerably, yet the majority of UDRP Complaints are still for single domains.

3.  The procedural protections accorded to domain owners are very important and should not be weakened.  Most of the cases that Complainants win are when the Respondent defaults.  When the Respondent takes action to protect his or her domain by filing a formal response, the Respondent wins half the time.  And when a lawyer is involved, the win rate is nearly 80%.  (This win rate is in spite of several procedural biases that favor Complainants, that I will likely discuss in a future post.)

Recommendations

The UDRP procedures can be improved to benefit Complainants and Respondents.  The key to the solution is to focus on whether a Response is filed.

Trademark interests want a speedier, cheaper, procedure called Uniform Rapid Suspension where domains can be deactivated through an administrative proceeding costing only $300.

But a thorough review of disputes by experienced panelists is clearly called for when half of all contested UDRPs find in favor of the Respondent.

An improved UDRP procedure could work as follows:

1.  Complainant submits a bare bones complaint summary directly to ICANN.   The summary would include the domain name, the trademark registration, an example of bad faith use, and one page explanation for why the registration and use of the domain is in bad faith.  Accompanying the summary would be a modest filing fee.

2.  ICANN would then notify the registrant of the complaint and ask whether it agreed to the transfer, or wished to contest the transfer.  The registrant would submit a modest fee if it indicated it wished to contest the transfer.

3 a.  If Registrant agrees to a transfer, then the domain is transferred.

b.  If Registrant does not respond, then the complaint goes to a URS procedure where the Complainant’s evidence is reviewed to ensure it meets the criteria for determining the registration is abusive.

c.  If the Registrant pays the fee to contest the transfer, then a modified version of the current UDRP process is followed as described in step 4 onward.

4.  A UDRP provider is selected.  Either the Complainant and Respondent can mutually agree to a particular UDRP provider, or one is chosen at random (possibly weighted by current market share).  This eliminates the biggest flaw in the current UDRP process which is selection bias.  As the Complainant currently chooses the UDRP provider, and as offering UDRP services is a money-making business, the incentives for the UDRP providers to compete with each other as being the most Complainant-friendly undermines their needed neutrality.  No one would think a system where  Judges are selected by the Plaintiffs would be fair, but ICANN doesn’t seem troubled by a system where Complainants pick the UDRP provider.

5.  The UDRP provider is under contract with ICANN and the dispute procedures are harmonized across UDRP providers so that the Uniform Domain Dispute Resolution Policy is truly ‘Uniform’.  Both parties pay the additional fee for a full UDRP administrative proceeding.  The Complainant puts up an additional bond that it will forfeit if a Reverse Domain Name Hijacking finding is made.

6.  The Complainant submits a full response, as it does under current UDRP procedures.  The Respondent has 30 days to submit its Response.  The Panel decides as they do now.

7.  The Reverse Domain Name Hijacking rules are strengthened.  An RDNH filing will be mandatory by a Panel if certain criteria are met.  Instead of the current meaningless slap on the wrist, a monetary penalty will be assessed.  Currently a UDRP filing is a cheap roll of the dice for the Complainant with the Respondent subject to all the risk and with no further downside for the Complainant beyond the cost of the filing.  The Respondent could face the loss of a valuable domain, even if the independent panel of experts disagrees 2-1 in favor of the Complainant, but the Complainant risks no loss if its filing is found to be abusive.

There are more things that need fixing with the UDRP, but this would be a good start.

*  Some of the UDRP cases involve more than one dot-com domain name, so my numbers are somewhat understated.  But adding in these additional domains wouldn’t be significant enough to change the analysis or the conclusions.