Web3 Leads to Cybersquatting 2.0: Brands Can Do the Following

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Web3 Leads to Cybersquatting 2.0: Brands Can Do the Following

Web3 Leads to Cybersquatting 2.0: Brands Can Do the Following
Source: Decrypt
1656930001 04 Jul / 10:20

Have you ever wondered why many Web2 company names are vowel-free dictionary words? Think about Flickr, Tumblr, and even Twitter (originally named Twttr).

In certain instances, the modification is simpler to trademark. But in others, startups are hindered by the decades-old practice of cybersquatting, in which speculators register domain names containing simple words or well-known trademarks (such as tiktokcharts.com, secure-wellsfargo.org, and paypal.net) in hopes of profiting by selling the domain to the actual trademark owner (TikTok, Wells Fargo, and PayPal).

The Anti-Cybersquatting Consumer Protection Act (ACPA) in the United States and the Uniform Domain-Name Dispute-Resolution Policy of the Internet Corporation for Assigned Names and Numbers (ICANN) were enacted in 1999 to combat cybersquatting, which was causing headaches for some of the world's largest brands (UDRP). ACPA aimed to prevent cybersquatters from registering Internet domain names containing trademarks to resell them to trademark owners. In contrast, the UDRP gave trademark holders the right to forbid or obtain a transfer of a domain name that incorporates their trademark or could cause confusion.

Cybersquatting stays the same in Web3, however, it now occurs on ENS instead of DNS.

The Ethereum Name Service (ENS), a blockchain-powered service that just registered its one-millionth user, is analogous to the traditional Domain Name Service (DNS) in that it binds seemingly random numerical server addresses to user-friendly names.

You can register an ENS name such as Vivek.eth or PartyParrot.nft that can lead users or transactions to a complicated wallet address, as one crypto wallet user cannot yet send or receive digital assets simply putting in the login or email address of another.

As was the case in the 1990s, cybersquatters are aggressively acquiring .eth domain names that contain well-known trademarks. On OpenSea, for instance, nike.eth and amazon.eth is available to anybody willing to pay seven figures. The market is expansive and quite active: the names Adele.eth and boy.eth recently sold for $6,000 and $65,000, respectively, while lower-priced domains remain unsold for months. Registrations of .eth domains are generally growing quarter over quarter.

The introduction of .eth domains also introduces a legal complication: ENS is an open, decentralized name system backed by the Ethereum blockchain, as opposed to DNS. This places .eth domain names outside of ICANN’s jurisdiction; therefore any standard UDRP dispute would likely fail for lack of jurisdiction.

What should a brand owner do if they learn that their trademark has been claimed as a .eth domain by someone else?

There are two valuable techniques, but none will result in the domain’s compulsory transfer to the trademark owner.

First, trademark owners should issue takedown requests to market selling .eth names that infringe on their rights. OpenSea, Rarible, and Nifty Gateway have systems (with varying degrees of efficiency) in place to address intellectual property breaches.

Once a takedown notice is received from OpenSea, for instance, OpenSea will tell the domain owner that the listing has been deleted owing to a takedown request (i.e., it is no longer for sale to the general public). Since the domain has been delisted, the notification will allow the owner to contact the brand holder, which may lead to more honest discussions. This strategy may result in a more lasting solution.

The ACPA grants in rem jurisdiction over .eth domain names, which refers to jurisdiction over the actual asset and not the alleged cybersquatter.

However, this feature may only be utilized in the registrar’s location that granted the domain name. If these entities are not based in the United States for jurisdictional considerations, their efforts will be in vain. (However, several prominent .eth registrars, such as Unstoppable Domains, are based in the United States.)

If successful, a brand owner would be able to deactivate the domain permanently. This may be more successful than the first method, allowing the .eth domain owner to list the domain on a different marketplace.

However, brand owners, particularly those with renowned trademarks, should use the fast dwindling opportunity to register their .eth domains. Given the increased obstacles, however, the efforts must be deliberate and consistent to avoid harming the brand’s reputation.

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