DomainMart Recommendation: Open Up Domain Names, Don't Litigate

February 13, 2007; 01:36 AM

DomainMart, a leading provider of quantitative and analytical domain name services, released today a study recommending that IP owners adopt a cooperative strategy with regard to domain name owners who are potentially infringing on their brand names.

The study points out that companies have adopted two diametrically opposite approaches to dealing with domain name owners infringing on their IP, namely, to either take aggressive legal action or do nothing. It argues that both these approaches destroy shareholder value.

"Due to inefficiencies in the initial domain name allocation mechanism, companies cannot and should not try to acquire all the relevant domain names," says Alex Tajirian, DomainMart CEO.

Instead, the study recommends that companies "open them up" for development. This will create shareholder value through better utilization of scarce resources and improvement of the domain name ecosystem.

The sited sources of shareholder value destruction under the current legal regime are as follows:

(1) The intrinsic value of a domain name can be broken down into two components: captured value and wasted value. The latter occurs when it is not put to its best use, i.e., when visitors' intent is not congruent with the site's content. Thus, decreasing waste increases value.

(2) Legal action is expensive to enforce.

(3) Companies that are not taking any action to enforce their IP are also losing value by relinquishing the revenues that their IP is generating to the owners and by being exposed to brand value dilution through the content of the associated website.

(4) A protectionist strategy by a hub creates an unhealthy ecosystem by reducing diversity, limiting consumer choices, and stifling innovation. On the other hand, a healthy ecosystem benefits the hub.

The study makes the following concluding remarks: no matter what a company's IP enforcement strategy formulation process is, it should be coordinated among the marketing, IP management, and legal departments; and instead of adopting a legal protectionist strategy, IP owners should adopt a cooperative strategy that increases shareholder value and improves the domain name ecosystem.

About DomainMart

DomainMart is an industry leader in providing ecommerce products and consulting services, including appraisal, escrow, private investment management funds, protection, valuation and parking traffic monetization management since 1996.

For more information, please visit http://www.domainmart.com/news/Don't_Litigate_Open_Them_Up.htm or contact: Tom Saitori, Marketing Specialist, DomainMart, Tel: +1 (415) 905-4234