The Free Market 18, no. 10 (October 2000)
On the Internet, a war between government-backed trademark holders and small web entrepreneurs is heating up. Thanks to the current managers of the Internet and a little-known agency of the United Nations, the trademark holders are winning.
This past July, Tarek Ahmed of Brooklyn, New York, found himself evicted from his Internet domain, microsof.com. Ahmed, a user, developer, and supporter of Microsoft products, perceived that the resemblance of his Internet address to the Microsoft name might be valuable, as a way to attract clients to his website. Microsoft thought the address would confuse customers, and pressured Ahmed to relinquish the domain name. Ahmed adamantly refused. A switch in domain names would have hurt his business, just as any other business might be hurt by a sudden change in its phone number.
So Microsoft appealed to the World Intellectual Property Organization (WIPO), an agency of the United Nations. WIPO promptly ruled in favor of Microsoft, despite Ahmed’ s prior claim to the domain name. Rather than acquire Ahmed’ s homesteaded resource through voluntary contract, Microsoft chose force. As Ahmed put it, “What happened to free trade?”
The answer is that free trade on the Internet is in danger of succumbing to the immense, state-sanctioned power of the Internet Corporation for Assigned Names and Numbers (ICANN) and associated tribunals like WIPO. Ahmed and those like him, who perceive valuable resources on the Internet before anyone else, are branded “cybersquatters” or “cyberpirates” and are usually forced to hand the resources over to trademark holders.
Since the transfer of critical parts of the Internet to the private sector in the early 1990s, most aspects of the Internet have been a tribute to the benefits of free markets. Indeed, ICANN is purportedly an attempt by the US Department of Commerce to further privatize the management of the Internet. Yet ICANN’s relationship with governments worldwide is unclear and subject to massive abuses.
By request of the Department of Commerce, the UN’ s WIPO drew up the dispute resolution policy mandated by ICANN for cases like Tarek Ahmed’ s. Other governmental influences cast doubt on the extent of ICANN’ s independence from politicians. Just as the secretive Federal Reserve System, as a government-created private corporation, is not truly independent from the US government, ICANN is also influenced by a “Government Advisory Committee” made up of representatives of several national governments. As the Internet grows exponentially in reach and importance, ICANN could begin to approach the Federal Reserve System in its power.
Understanding how ICANN can serve as a tool for governments seeking inroads on the Internet, and how Tarek Ahmed’ s eviction fits into the picture, requires an understanding of what the disputed property actually is. The Internet addresses that we type into web browsers, like mises.org, are easily remembered substitutes for long strings of numbers (for example, one of mises.org’ s servers is designated 208.245.24.2).
For years, a man named Jon Postel used a $250,000 annual budget and three assistants to quietly carry out the task of assigning the numbers to individual computers. Before ICANN s creation in 1998, the so-called top-level domains, or TLDs, like .com, .org, .net, were allocated by Network Solutions, Inc. (NSI) under contract with the federal government. Among NSI s responsibilities was the maintenance of a critical “root server” that helps computers hooked to the Internet find one another.
If NSI s possession of a government-granted monopoly on domain names was far from ideal, it was a significantly better arrangement than ICANN. ICANN has already moved far beyond its original conception as a central technical manager and coordinator, and has entered the realm of policymaking for the entire Internet. Despite nods to rank-and-file Internet professionals, ICANN shows every sign of being in the pockets of national governments and international tribunals.
ICANN has toyed with the idea of handing over a vast chunk of the existing Internet real estate to individual national governments. If authority over country-code TLDs, like .uk, .jp, .fr, and so on, were granted to governments, politicians would have an incentive to maximize the value of their space by discouraging further expansion of the available cyberspace.
Technically, the Internet real estate is expandable infinitely, as TLDs could be added without limit. ICANN, however, has shown reluctance to add to the existing generic (non-national) TLD space, maintaining an artificial scarcity in cyberspace. Some have even suggested phasing out TLDs like .com and .net in favor of mandatory country-code TLDs.
Even with limited TLDs, the Internet can expand indefinitely, as the possible combinations of letters for each TLD are practically limitless. However, there are considerably fewer attractive combinations -combinations of letters that form an easily remembered word or phrase. In other words, the domain name computers.com is likely to be much more desirable than the chaotic a7yoezzlk.com.
One name is a potential bonanza for web commerce; setting up shop at the other would be the Net equivalent of building a store in Greenland. In that limited fertile space, the conflicts between trademark owners and domain name speculators are likely to intensify. Governments interested in maintaining the value of their own space could be expected to side with trademark owners, who have similar incentives to keep Internet space limited.
Web entrepreneurs can homestead domain names by registering them with NSI or another registrar for a modest fee. Some, like Ahmed, perceive that an address similar to an established trademark might generate more traffic due to the misspellings and typos that customers might make. Small retailers follow a similar strategy when they locate next door to a large, well-known store in order to pick up passersby on their way to the larger store.
Some web users have made the mistake of assuming that the misspelled address they typed in was the actual site of the trademark holder. This generated some headaches for AT&T when customers visiting attt.com began wondering why AT&T was supporting pornography (AT&T has since acquired the rights to attt.com).
Trademark holders who fail to anticipate these accidents run the risk that a web entrepreneur will register similar-looking addresses first and offer to resell them - for a considerably higher price than the registration fee. The dispute resolution policy developed by WIPO specifically declares this kind of profit evidence of “bad faith” and grounds for transferring the domain name to the trademark holder.
The assault on cybersquatters is problematic on several counts. First, as explained above, the conflicts over the scarce high-quality domain names are partly due to the reluctance of ICANN to expand TLDs. There is no technical reason why Internet space could not be expanded to include .biz, .per, .eco, .fam, .child, .bank, or a thousand other TLDs that remain outside the control of national governments.
Just as there is no confusion or legal conflict among the names or trademarks for United Van Lines, United Airlines, or the United Methodist Church, there would be no confusion among united.biz, united.travel, or united.church. As Milton Mueller of Syracuse University has pointed out, domain names are not brand names and need not be accorded the same legal status. The only reason for the association of microsof.com with Microsoft the corporation is that .com has been the only game in town for commercial enterprises. A greater diversity of TLDs would significantly reduce the occasion for conflict.
Second, unlike phone numbers or street addresses, domain names can be a form of speech (e.g., ihatebarney.com), and as such should be protected under the First Amendment.
Third, entrepreneurs seeking legitimate profits are robbed of their homesteaded property. Their profits result from the morally pure activity of discovering valuable resources before anyone else and claiming it for themselves. So what if they purchased it only to resell it? Isn’t it a bit hypocritical for ICANN to evict these homesteaders while ICANN itself uses its power (which it gained not through purchase or discovery but through political maneuvering) to impose a fee of $1 for each new domain name they grant? In some cases entrepreneurs are merely doing what amounts to setting up shop near a prominent individual or firm. Even if they are doing so for less than admirable purposes, their domain name is their property alone. Though my street address is similar to those of my neighbors, no one would propose that I be evicted if it were discovered that I mischievously open the mail misdirected to me.
ICANN s tight relationship with various governments worldwide should be disturbing to advocates of freedom. Trademark interests, national governments, and the UN all have an interest in seeing that ICANN restricts the available Internet space. Given the immense power of ICANN, governments could use their new creation to overcome the practically insurmountable difficulties posed by a free Internet: taxing and regulating Internet transactions, probing into private communications, or shutting down politically incorrect web sites.
Let’ s root for a divorce between ICANN and government, and maintain the Internet as a true free trade zone for the new millennium.
Timothy D. Terrell, an adjunct scholar and former Mises scholarship student, teaches economics at Wofford College. He can be contacted at terrelltd@wofford.edu. Further Readings: Ludwig von Mises, Human Action, Scholar’ s Edition (Auburn, Ala.:Mises Institute, 1998), pp. 255, 333; Milton L. Mueller, “Internet Domain Names: Privatization, Competition, and Freedom of Expression,” Cato Institute Briefing Paper No. 33 (1997); David G. Post, “The Great Internet Giveaway?” (1999); Solveig Singleton, ” The Internet Needs an Independence Day,” Journal of Commerce, July 2, 1999.
