Cybersquatting typically involves the registration (and occasionally the use) of a Web 2.0 and Web3 domain name in violation of trademark rights, with the intent to gain a financial benefit, such as by means of paid-per-click advertisements, fraud, or by offering the domain name to a trademark holder for consideration above reasonable costs.
With the exploding demand for Web 3.0 domains, there are no set industry standards yet in place to help keep Cybersquatting issues such as name fraud or collisions from happening in it. Let's analyze the topic further in this article.
Because the legal landscape around Web3 is still emerging, and no central authority controls the registration of domain name ownership on Web3, trademark owners could have limited legal recourse to block cybersquatters who take over Blockchain domains that have trademarks from owners of Web3.
Since there is no official domain reclaim process on Web 3, and the blockchain domain registry is anonymous, issues for brands and trademarks are a lot harder to address. This leave brands left wondering how they can go about negotiating with an owner.
Congress passed the Anti-Cybersquatting Consumer Protection Act (ACPA) in 1999, as a means by which trademark owners could seek damages from cybersquatters.
ACPA was intended to stop cybersquatters from registering Internet domain names that contained trademarks for the purpose of selling these domain names back to the trademark owners.
Whereas Web 2.0 domains are centralized and regulated, Web3 domains (top-level examples include eth,.sol,.nft, and.crypto) are decentralized with no governing overarching authority. The differences in name systems across Web2 and Web3 are important in determining whether the current legislation for DNS domains can be applied to Web3 domains.
To protect their brands and IPs in the web3 era, especially if the space remains unregulated, companies should consider minimizing their losses by registering valuable web3 domains, even if they do not plan on using those names at the moment.
Well-known brands in particular should not sleep on rapidly diminishing opportunities to protect their trademark. In fact, there are some bad actors whose sole purpose from a domain registration perspective is to cash in on somebody else hard work and IP, and launch their malicious schemes.
If brands discover that their trademarks are being used by cybersquatters, the trademark owners can file a Takedown Notice with OpenSea, or any other NFT Marketplace, in which domain names are sold. If anyone other than a trademark holder registers the literal or variations of your business, trademark, or even your personal name as a domain name, with the bad faith intention of making a profit, they are liable for up to $100,000 of legal damages per domain, in addition to attorneys fees. If you are actually successful at getting your Web3 domain name taken off the list, then you may want to reach out to the domain owner and use their status in OpenSea to negotiate better terms to purchase the domain name.
The notification will enable the domain name owner to reach out to trademark holders, who may generate more sensible negotiations because the domain has been delisted.
One of the more popular companies selling Web3 domain names is Ethereum Name Service (ENS), a registry that has seen more than 2 million names created by more than 500,000 users. ENS offers a service powered by blockchain, which like a regular domain name service (DNS) links supposedly random numerical server addresses with names friendly to users.
For instance, it allows you to register an A.etha domain that is readable by humans, such as agitkokrasnov.etha, and maps that readable A.etha domain name to an associated machine-readable wallet address of 0x5F327F5ECD396813577344E6710C0D16626F1aE6.
In addition to hosting websites and acting as payment facilitators of your trademark, Ethereums NFT domain names can be configured as login names, usernames, avatar names, or storage names in any decentralized app, in any blockchain. A decentralized website could be a carbon copy of yours, save for the fact that someone is using your branded name to harvest personal details about your customers. Perhaps someone unknown is hosting the site under the domain name, and using the domain and the site to confuse, fake, or trick your customers -- or worse, to extort you, demanding a high price for buying from them.
Cybersquatting is a practice that has been going on for decades, with registering names of established companies or brands as Internet domains, usually as a means to gain financial gain via resale, but also for use as a tool for fraud.
Brand owners are now facing the novel threat of cybersquatting of their well-known brand names on the blockchain-based Web3.
If you are not able to protect your brands through trademark registration lists, consider registering core brands and heavily-squatted domains in key Web3 domain extensions, such as.crypto,.nft,.wallet,.coin,.bitcoin, and.eth. Brand owners should secure their own.eth domains on platforms such as metaverse.domain.
