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Imagine that you own a company that provides a service to customers who also run a business of some sort. Now, imagine that one of your customers has used your service to benefit their company in some illegal way. Should you have to take some of the blame because your product helped facilitate the illegal transgression? Domain registrars and web hosting companies have long been teetering on the edge of this cliff, mainly because “cybersquatting” techniques continue to grow.
“Cybersquatting” has been in the web hosting lexicon for a while now. Most people familiar with the term probably think of a scam in which a domain name is used to profit off of someone else's trademark. The cybersquatter then offers to sell the domain to the trademark owner at an inflated price, but usually after doing something to negatively affect the business or reputation of the trademark and its owner.
However, a more recent technique allows the squatter to avoid paying for the domain all together. The scam, in a nutshell, is this: registrants use ICANN's (Internet Corporation for Assigned Names and Numbers) five day, money back period for domain name buyers to buy blocks of domain names, publish pay-per-click ad pages, return them before the five day period ends, and then buy them again. Sometimes the registrars and these scammers are in cahoots, but if the scam is successful, ICANN will lose revenue generated from its fees and honest customers can miss out on quality domain names. It is estimated that well over 90% of registered domain names are used for cybersquatting each month.
The most recent cybersquatting news involves Dell and some other rather large Fortune 500 companies. At the end of November 2007, it was announced that Dell had started the process of filing a lawsuit against several domain registrars, alleging they used the same cybersquatting technique mentioned in the previous paragraph to profit from nearly 1,100 domains “similar” to various trademarks owned by Dell.
The alleged scam first involved a form of cybersquatting known as “typosquatting,” in which the accused registered domains that Internet surfers likely would hit if they misspell the URL. A user would then be taken to a pay-per-click ad page that pays commission to the domain owner. The defendants in the case are three registrars: BelgiumDomains, CapitolDomains, and DomainDoorman. Dell also named several Caribbean-based shell companies (e.g. Caribbean Online International, Domain Drop S.A., Domibot, Highlands International Investment, Keyword Marketing Inc., Maison Tropicale, Marketing Total S.A., Click Cons Ltd., Wan-Fu China Ltd. and Web Advertising Corp.), which served as the organizations actually registering the domains.
After typosquatting, Dell alleges that the companies initiated the ICANN scam mentioned above, which can be thought of here as a manipulated version of “domain tasting” or “domain kiting.” They tested the domains to see whether they could drive traffic, and in turn, a profit. But Dell asserts these companies took it to another level by setting up a registrar network through which they cycled the profitable domains every five days.
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