Monopoly Control Could Provide Surprising Benefit to Trademark Owners

On April 12, 2012, the ICM Registry, which operates the .XXX generic top-level domain (gTLD), announced that it submitted applications to the Internet Corporation for Assigned Names and Numbers (ICANN), for three new adult-oriented gTLDs: .SEX, .PORN, and .ADULT.

If awarded, the ICM Registry’s control of all four adult-oriented gTLDs could exacerbate existing concerns over the Registry’s monopoly powers in the adult gTLD market. In fact, the ICM Registry and ICANN are already defendants in a federal lawsuit alleging antitrust violations related to the delegation and operation of the .XXX gTLD. See Manwin Licensing International S.A.R.L. v. ICM Registry, LLC, CV 11-9514-PSG (JCGx) (C.D. Cal. filed Nov. 16, 2011). The Plaintiffs, Manwin Licensing International S.A.R.L. and Digital Playground, Inc., two companies in the adult-entertainment industry, allege that the defendants violated the Sherman Antitrust Act through “monopolistic conduct, price gouging, and anti-competitive and unfair practices” related to the .XXX gTLD.

According to the plaintiffs, the ICM Registry’s Chairman and Chief Executive Officer, Stuart Lawley, previously stated that “he can legally prevent, through the provisions in the ICM/ICANN contract, ICANN’s approval of any TLDs which compete with .XXX by also having names – e.g. .sex or .porn – that connote adult content,” and he also “stated that for a variety of other reasons he does not ever expect any such approval.” If these assertions are true, it appears the ICM Registry has changed tack and is now interested in cornering the .SEX, .PORN, and .ADULT markets for itself, rather than merely preventing others from doing so. As evidenced by Lawley’s own statement, however, it is far from clear whether the new gTLDs will even be approved by ICANN.

In addition to antitrust claims, several entities have also complained about the ICM Registry’s “Premium Generic Names Program” under the .XXX gTLD. Under this program, the Registry removes from general registration domains that it believes are of “high-value,” and offers those domains for sale or public auction, regardless of complaints by trademark owners. Some say such practices, which inject subjective determinations into the delegation process, expose the Registry to liability for trademark infringement and other claims.

Notably, the ICM Registry has announced that if it is awarded the new gTLDs, it will implement a so-called “Grandfathering Clause” that will automatically, and at no cost, reserve corresponding .XXX names in the .SEX, .PORN, and .ADULT gTLDs. According to the Registry’s press release, “this means .XXX domain holders can potentially triple their exposure and value of their holdings, while brand and trademark holders who own .XXX domain names are automatically protected and will not have to register for the new domain names.” Of course, the Registry is not bound by these early statements, and the Grandfathering Clause would not protect against typos of trademarks and other variations that are not exact matches to existing registrations. Nevertheless, the Grandfathering Clause is a welcome bit of good news for trademark owners in the otherwise troubling .XXX debacle.

For more information on the potential launch of .SEX, .PORN, and .ADULT, and for general information on protection your brands and trademarks online, please contact the attorneys listed at left.