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LEGAL CLINIC: Catchy Internet names have their catches

LEGAL CLINIC: Catchy Internet names have their catches

One of the many things to fall out from the tech stock meltdown has been "dot-com" domain names. But just because an IT company falls upon hard financial times, it doesn't mean it (or its liquidator) can easily flog off its catchy domain name, in this country, and make some quick cash. For the sake of this article, let's call our domain catchy.com.au operated by Catchy Toys Pty Ltd (both presently fictitious!)You will be aware that a domain name is, technically speaking, intellectual property. It does not however "belong" to the company which uses it. If the company uses catchy.com.au, it merely licenses the use of the name from Internet Names Australia ("INA") - www.ina.com.au. INA would be known to many as Melbourne IT. INA is the Domain Administrator of the top-level domain names in Australia. These were com.au; net.au; and org.au. The Internet Corporation for Assigned Names and Numbers (ICANN) approved the .info and .biz suffixes on 17 November. Also accepted were .name for individuals, .pro for professionals, .coop for business cooperatives, .aero for the aviation industry and .museum (I have no idea why). INA obtained the rights to administer what will be the lucrative .biz domain name. But for the sake of this article, let's just concentrate on the .com.au domains.

The licence granted to the user of catchy.com.au is of itself intellectual property, and may be valuable to someone else. Hence, one would think that the licence should be easily transferred or assigned, right?

There are many sites in the US that do nothing but act as an agency for buying and selling .com domain names. A good example is GreatDomains.com, which is basically acting as an eBay for domain names. A quick scan of their front page will give you an idea of the value of .com domain names at the moment, even after the tech stock market crash. For example, "loans.com" sold recently for $US3 million (or so they say). Sellers list their available .com domain names for prices, or no reserves, and bidders can buy them, or make "unsolicited" offers direct to the owner via the site.

In Australia, it's not so easy to simply "sell" a .com.au domain name. INA lists as one of its .com.au policies that a user cannot sell or transfer the licence to use a .com.au granted by INA. That leaves any purchaser of the business of Catchy Toys with little option but to permit the termination of the registration of catchy.com.au, and immediately reregister the domain name with the new owner as the user. The usual pile of paperwork has to be completed and submitted to INA to accomplish this task. INA's policies further state that the ways in which the licence for the domain name will cease is when the user ceases business or changes its name, or instructs INA to terminate the licence.

Other serious restrictions that apply to the use of "dead" domain names in Australia include:l The user must be a commercial entity registered and trading in Australia before a .com.au domain name is allocated to it.l Individuals require an ABN to prove their trading status. Business names must be registered and companies must have an ACN or ARBN.l Each single commercial entity can only have one domain name. This would prevent the registration of variations such as catchytoys.com.au, cachy.com.au and other names to prevent "typosquatters".l If the name already exists, a second incidence of the name cannot be registered (logically).l The domain name must be a "direct derivation" of the commercial entity's name. A purchaser of the domain name catchy.com.au must therefore comply with these provisions to ensure continued registration of their domain name.

Many of these are far more onerous conditions than those of the open market that exists in the US. Buyers of IT businesses in Australia therefore need to be abundantly aware of the restrictions which INA places upon the transfer, sale and registration of .com.au domain names.

The material contained in this article is no more than general comment. Readers should not act on the basis of this material without professional advice relating to their particular circumstances.

Mark Addison is the IT partner at Barker Gosling Lawyers. Reach him at wma@nsw.bglaw.com.au


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