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Username: achander
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Subject: Auctioning Domain Names for the Common Good

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July 10, 2000

Auctioning Domain Names for the Common Good


Public Comment
on
ICANN Yokohama Meeting Topic--Introduction of New Top-Level Domains

by

Anupam Chander

ICANN At-Large Member and
Acting Professor of Law*
University of California at Davis
School of Law


achander@ucdavis.edu


* The views expressed herein do not necessarily represent those of the University of California or its Regents.

The following comment responds to Question 9 in the ICANN report on the Yokohama Meeting Topic: Introduction of New Top-Level Domains (posted 13 June 2000).  The author expresses his appreciation for the right to submit comments to be considered by the ICANN Board of Directors in its important meeting in Yokohama.


1.0. Domain Names as Public Lands

The oft-used metaphor of cyberspace as a new frontier serves usefully to recall the young American republic’s experience with the disposition of its public lands.  That experience offers guidance as to the distribution of domain names that become available with the introduction of a new top level domain.  (An excellent history of the disposition of public lands in the United States, from which this Comment draws, can be found in George C. Coggins, Charles F. Wilkinson, and John D. Leshy, Federal Public Land and Resources Law (3d ed., 1993).)

The inquiry into the history of public land disposition is prompted by the recognition that domain names serve a role in cyberspace similar to that of real property in the terrestrial world.  Three basic similarities can be identified to support the analogy of domain names to real property: first, websites are founded on the domain name, much like buildings are founded on real property; second, like land, a website’s value derives in large part from its location, which for websites is its domain name; and third, like land, domain names—at least mnemonic or otherwise useful ones—represent a finite resource.  Though domain names might be thought to be more closely related to real world addresses, in cyberspace, the address serves as the location on which improvements (read “websites”) are made.  In cyberspace, the only firm foundation, or terra firma, is the domain name itself.

A simple sketch of the early history of the disposition of American public lands follows.

1.1. Public Land Auctions

In 1785, the Congress of Confederation enacted the Land Ordinance, under which surveyed lands were auctioned to the highest bidder with a minimum price of one dollar an acre.  Land sales proved an important revenue source for the early republic, the only other major revenue source being tariffs as income taxes became constitutional only in 1913. 

1.2. Land on Credit

With the Land Act of 1796, Congress required bidders to put five percent of the purchase price down, with the balance due in a year.  The inevitable defaults on the credits resulted not in forfeiture of the land, but rather in numerous Congressional relief acts, which only increased speculation in new land auctions.

1.3. Homesteading

During the Nineteenth Century, land policy became more explicitly directed towards transferring land into the hands of the pioneers, the farming families who would settle the frontier and cultivate the land.  A public crusade in favor of quick land settlement, combined with the legislative shift brought by the secession of the South, led to the adoption in 1862 of the Homesteading Act.  Under this Act, Congress awarded each settler 160 acres of land for free, with title to be issued five years later upon proof of actual settlement and cultivation.


2.0.  Auctioning Domain Names

The varied American experience with the disposition of public land demonstrates the array of possibilities available for distributing a scarce public resource. 

2.1.  Critique of First Come/First Served System

The current first come/first served system (modified to respect trademark rights) seems most akin to the homesteading of the latter part of the Nineteenth Century—but without any requirement to show actual development of the awarded space.  But instead of homesteading, the system that better reflects the commercial use of cyberspace is the original land auctions conducted to raise revenue for the young nation.  This Comment proposes that new domain names be auctioned off to raise money to help bring poor people in the world online.

The current system has two main beneficiaries: first, domain name registrars and second, the persons who are first to register valuable domain names and can thus sell or develop these names at great profit. 

2.2. Reasons for Auctioning Domain Names

Domain names, like public lands, constitute a valuable finite resource initially held in the public domain.  The disposition of domain names, therefore, should be designed to benefit the world’s people, rather than to benefit those sophisticated enough to obtain accreditation as a domain name register or crafty enough to pounce on valuable names first.  By auctioning domain names, the value of a domain name would be captured by the public, rather than by private entities that are rewarded too handsomely for their limited insights into the possible value of a name or their work as registrars.  Yet, a domain name auction would not interfere with the exploitation and development of cyberspace, as new names would be allocated by the auction system to those who valued them most highly.  Indeed, it would speed the transfer of a domain name to its highest valued use, short-circuiting the current system that relies on privately negotiated sales to transfer the name from its initial owner to its highest valued user.

By auctioning domain names, rather than doling them out to the first applicant for a nominal sum, the public resource that the domain name system represents works directly in the public interest.  The proceeds of the auctions should be distributed by an international treaty-based body—perhaps the World Bank or the United Nations—to poor people throughout the world to help bridge the digital divide.

To the extent that there are multiple persons who claim trademark rights in a domain name, a simple general rule would award that name to the trademark holder who is willing to pay the most for it.  Since economic strength often translates into public visibility, awarding the name to the entity that is willing to pay the most for it will probably accord with individual web-surfers expectations as to whom they will find at a website with that domain name.

2.3.  Structuring the Domain Name Auction

Because of practical constraints, domain name auctions could not be structured as the simultaneous sale of all lexical combinations of domain names available in the new TLD.  Rather a controlled distribution of names would prove more attractive, both in terms of logistics and revenue.  No particular auction mechanism is suggested here, and open outcry and sealed bid methods should be considered.  As in any auction, it would be important to guard against collusion among the bidders to keep prices low.  The auction, along with notices and dispute settlement, should be conducted, of course, via the Internet.  The auction should proceed as follows:

First, two letter and then three and four letter combinations should be auctioned off to the highest bidder.  Single letter domain names should be reserved for future use.

Second, all the words in the dictionaries of major languages should be auctioned.

Third, individuals should be permitted to propose the auction of any other domain name.  The domain name management authority should issue a public notice of its intention to auction the proposed name.  Trademark holders claiming a trademark in the proposed name (or illegitimate dilution of their trademark) would have a short period of time within which to object to the regular auction of the name.  No trademark holders would be able to object to the auction of a generic term, regardless of any secondary meaning acquired by such generic term (instead, the trademark holder would be required to purchase that domain name in the open market, where other legitimate uses for the generic term might exist).

Fourth, if a trademark holder registered an objection, then the name would be pulled from the general auction and consigned to a special auction open only to persons claiming a trademark in that name. 

Fifth, if no trademark holder objected, the name should be sold through a general auction to the highest bidder.  In order to compensate the individual who recognized the possible value of the unallocated domain name and initially proposed the sale of the name, that individual should receive a certain percentage (between five and ten percent) of the winning bid amount (note that that individual would not be compensated for “discovering” the value of a name sold through the trademark holders-only auction). 

Sixth, the proceeds of the auctions should be disbursed by an international treaty-based fund (perhaps organized through the World Bank or the United Nations) that seeks to bridge the digital divide between the poor and rich in the world.  In this way, the rich resource that domain names represent would be harnessed to bring the benefits of the World Wide Web to the poor communities of the world.


Respectfully submitted,

Anupam Chander
Davis, California
July 10, 2000

     
 


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