According to the press reports, the Florida-based company that bought the .xxx domain last year and reaped millions in registration fees from companies, universities, organizations, and individuals seeking to protect their trademarks and names from being associated with pornography (with no intent of ever using the sites) has applied to own three more—sex, .porn, and .adult. It’s all made possible by the Internet Corporation for Assigned Names and Numbers (ICANN) and its plans to open the Domain Name System (DNS) to all who want to own their very own top level domain (TLD)—the string of letters to the right of the last dot in an Internet address, e.g. .com, .org, and .net—and compete with the 22 existing TLDs and country codes.

ICANN opened the floodgates for applications in January, and was scheduled to close the first round on April 12 (more on that later). According to its website, as of March 25, four days before the close of the system to new applicants, 839 entities had registered as users of the ICANN application system. Since each applicant is entitled to apply for as many as 50 TLDs, that means there could, in theory, be more than 41,950 new TLDs. Certainly, that’s not going to happen. But given the number of applicants and the likelihood that many have applied for multiple TLDs, the number of new TLDs will easily be in the thousands.

Furthermore, ICANN has announced that if the number of applications greatly exceeds 500, it will create batches of applications and review them batch by batch, meaning that certain applicants may have to wait many months before their applications even get looked at. ICANN’s system for deciding which applications will be viewed first is akin to trying to get concert tickets online: Users will have to click a button as close as possible to a set date and time in order to be in a priority batch.

Now back to the April 12 closing date for the first round of applications. In a cryptic but very revealing statement, ICANN posted the following on its site on April 12:

ICANN constantly monitors the performance of the TLD Application System (TAS). Recently, we received a report of unusual behavior with the operation of the TAS system. We then identified a technical issue with the TAS system software. ICANN is taking the most conservative approach possible to protect all applicants and allow adequate time to resolve the issue. Therefore, TAS will be shut down until Tuesday at 23:59 UTC—unless otherwise notified before that time. In order to ensure all applicants have sufficient time to complete their applications during the disruption, the application window will remain open until 23:59 UTC on Friday, 20 April 2012.

So it looks like ICANN simply couldn’t handle the rush and crashed. One cannot help but ask: If ICANN can’t handle the flood of applications, how will it ever deal with the even greater flood of anticipated objections and related filings? Clearly, ICANN is already overwhelmed. The Internet community is owed a better explanation than, “We then identified a technical issue with the TAS system software.”

ICANN had promised to tell the world who applied for which gTLDs on May 1—May Day. But given their server crash, it’s uncertain if that date will be honored. But it’s worth bookmarking—and remaining wary of what that day brings.

Now back to .sex, .porn, and .adult. I have to give credit to the .xxx owner for its smart business move, making it a grand slam with four TLDs, all of which can be sold to the same companies, nonprofits, universities, and individuals who wasted their hard-earned money on .xxx to protect their reputations. I only wish I could find such an easy way to print money and deliver nothing of value.

But there’s more. Why should anyone think that the owner of .xxx is the only smart one filing for new TLDs? I can imagine that others in the adult entertainment business have applied for their share of the Goose that Lays the Golden Egg, too. And smart folks aren’t limited to those who prey on the fears of legitimate enterprises about the consequences of having their names associated with pornography. Surely there are entrepreneurs who hope to duplicate the .xxx model and sell on fear and protectionism under the guise of a legitimate business model. It works. So why not?

The “why not” is that ICANN’s plan is nothing short of a license for holding intellectual property and individual names for ransom across hundreds of new TLDs. Worse, once they’re up and running, the cybersquatting, phishing, typo-squatting, and fraud that will occur at the second level domain (SLD)—the string of letters to the left of the last dot in an Internet address, e.g., “icann” in icann.org—will cost industry and the world’s economy billions. All for something ICANN has never proven is needed or wanted by anyone other than sellers of domain names and a handful of consultants and others who reap massive profits off of this free-for-all.

What does corporate counsel need to do? Here’s a checklist:

1. First and foremost, corporate counsel must be certain its company is prepared for what the future holds in protecting brands. Audit what you have. Appoint a crisis management team. Adopt a comprehensive strategy regarding how you will protect your brands in this new environment. And, when the list of applied-for (or later approved) TLDs comes out, set up a system for monitoring the ones for which cybersquatters will be most able to affect your business.

2. If your company is an applicant for a new TLD, don’t count your eggs too soon. It’s clear ICANN isn’t prepared to deal with what’s ahead, and substantial delays can be expected.

3. Even if your company believes owning a TLD is valuable, the damage that will be caused at the second level could well be irreparable. Proposals have been made to establish a “Do Not Sell” list that would allow brands to protect their trademarks and goodwill through a simple process. So far, ICANN has refused to discuss how it could be implemented. Consider joining the Coalition for Responsible Internet Domain Oversight (CRIDO), the coalition that has championed the rights of brand owners since July and made more inroads into bringing sense to the pending insanity than any other organization. But CRIDO cannot succeed without support. (Full disclosure: I represent CRIDO.)

4. And even if your company isn’t interested in joining a group, speak out to the U.S. Department of Commerce and its National Telecommunications and Information Administration (NTIA). NTIA controls a critical contract with ICANN that is the last leverage anyone has to force ICANN to responsibly address the concerns of Internet stakeholders across virtually every constituency—law enforcement, nonprofits, inter-governmental organizations, consumers, and more. In March, NTIA warned ICANN that it would not renew that contract until it was clear ICANN was addressing those concerns. Brands need to keep the pressure on NTIA to make sure ICANN delivers legitimate responses to those concerns. To date, it has failed to do so.

May Day is approaching and summer is about to begin. For brands, it may be a very short holiday and a very long and hot season.

Law.com