Many brands are rethinking their Internet identity strategies. – Are they contemplating is boycotting the defensive registration all together?

Companies looking to protect their brand identity on the Internet from phishers and cybersquatters will soon be faced with a dot-com identity crisis.

“We’re hostage to the situation,” said Bob Liodice, president and CEO of the Association of National Advertisers, which has been fighting hard to convince Icann to put into place better trademark protections. “Icann takes our concerns seriously, but they don’t act on them.”

Right now, for example, in a universe of 22 Internet TLDs, Facebook has 2,000 defensive registrations across the major domains, such as .info, .biz, .com, .net and .org. But with hundreds of generic TLDs on the horizon, Facebook will probably have to abandon that defensive business model, resorting to legal takedowns as they happen, it said in comments filed with Icann.

“We routinely have tens of thousands of enforcement targets. These infringing domain names are frequently used in efforts to defraud our users. With the impending launch of over 1,400 new gTLDs, we face enormous challenges in protecting our users and our brand,” wrote Susan Kawaguchi, Facebook’s domain name manager.

Icann has put certain trademark protections in place, but major brand owners—many with tens of thousands of names to protect, such as Coca-Cola, Verizon, Procter & Gamble, Microsoft, Facebook and Nestlé, led by the Association of National Advertisers—say there simply aren’t enough.

“This is one case where it’s not clear that more is better,” Federal Trade Commissioner Julie Brill told attendees recently at the Association of National Advertisers annual policy conference in Washington. “I remained concerned—as I have been since Icann first announced its plans—that the expansion could create opportunities for scammers to defraud consumers online, shrink law enforcement’s ability to catch scam artists and divert the resources of legitimate businesses into litigating and protecting their own good names.”

The first level of Icann’s protections to record trademarks in a “Trademark Clearinghouse” opened last Tuesday (March 26). But the Clearinghouse does not mean that trademarks will be protected; it only gives brands a right of first refusal to defensively register their trademark with the new TLD registries. Depending on how many trademarks a company wants to record and defensively register, the process could add up to millions of dollars in cost. If brands opt not to register, there is a notice system, letting applicants know they have applied for a trademarked name, leaving brands to police their trademarks on the Web.

“It’s not a fair system,” said Brad Newberg, a partner with Reed Smith, who represents a number of large brand owners. “The protections that were put into place are extremely costly, put all the burden on the trademark owner and may not be effective at all.”

With the costs of defensive registrations sure to skyrocket into the tens of millions, many brands are rethinking their Internet identity strategies.

“There is no way this fortress mentality can be continued going forward,” said Bill Smith, a senior policy advisor for PayPal, said at the ANA last week.

“Companies aren’t sure they should defensively register,” said Amy Mushahwar, an attorney with Ballard Spahr, which represents advertisers. “What they are contemplating is boycotting the defensive registration all together.”

Brand owners may have one more chance to try to convince Icann to put stronger protections in place when Icann holds its April 7-11 meeting in Beijing. But because advertisers and marketers have been under-represented and registrars and registries over-represented, the cards are stacked against them.

“We have distant, faded hope. But the odds of material change is very, very small,” said the ANA’s Liodice. “Nothing is elevating our confidence.”

“It would take several Icann meetings to get the voting representation corrected. But brands still have to show up and call [Icann] out. The best thing they could do is try and buy more time,” said Mushahwar. “If we undermine trust in major brands online, we are damaging consumer trust in the Internet.”

As for next steps, brand owners don’t have a lot of options left to pursue if they want to protect their brands on the Internet.

“We have to sit back, watch and pray for the best,” an exasperated Liodice said. “There’s not much marketers can do except defensive registrations. Icann hasn’t given us anything else. We’ll see dozens and dozens of lawsuits popping up. If this thing goes bananas, we’ll all be in tough shape, and it will be hard to unravel.”

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