There’s at least one downside to Web3. Cybersquatters have arrived.
Cybersquatting is the practice of buying variations of a domain name and selling them to brand owners, sometimes for a hefty profit. In 2014, when ICANN introduced hundreds of new generic top-level domain names (gTLDs), cybersquatters jumped in and snagged the domain names of thousands of brands in an effort to profit off of top brand names.
Since the advent of the World Wide Web, however, a whole new area of law has developed around cybersquatting.
Never underestimate the mind of an intellectual property thief. If there’s a way to make money off someone else’s reputation, scammers will come up with it. Why should Web3 be any different to Web2?
How Web3 Cybersquatters Exploit Decentralized Domain Names
In 1999, the U.S. Anti-Cybersquatting Consumer Protection Act was passed to curb the practice of cybersquatting. ICANN also introduced its own policy to resolve disputes over domain names. Unfortunately, the ICANN policy does not address up-and-coming decentralized Web3 domain names.
Most Web3 domain names exist on the Ethereum blockchain and end with .eth rather than .com or .org. And these web addresses are not issued or controlled by ICANN. In fact, ICANN has absolutely nothing to do with them.
Ethereum Name Service (ENS) is a blockchain protocol on the Ethereum blockchain that allows Web3 participants to own a unique wallet address that they can use to receive crypto payments and build decentralized websites upon. Instead of a long string of characters like most crypto wallet addresses, ENS domain names are simpler and easier to remember for humans. Unstoppable Domains has a similar service.
Unlike ENS, Unstoppable Domains allows customers to mint their NFT domains on the Polygon blockchain. It’s likely that more Web3 and decentralized domain name services will make their way to other blockchains as Web3 adoption gathers speed.
Is There a Remedy Against Web3 Cybersquatters?
The law is the law. In the U.S., courts have upheld intellectual property (IP) rights for domain name owners. But that’s of little consolation if a brand’s Web3 domain name is squatted by a party in remote parts of the world where U.S. law isn’t recognized. That reality may make it difficult for brands to defend their IP rights.
Today, cybersquatters are buying up domain names like nike.eth and amazon.eth and listing them for sale on popular NFT platforms like OpenSea. Branded domain names are selling for thousands of dollars. Since the domain names are not issued by ICANN, they fall outside of ICANN’s jurisdiction. If they find that their trademarks are being used by cybersquatters, trademark owners can send a takedown notice to OpenSea or any other NFT marketplace where domain names are being sold. There’s no guarantee the platform will honor your request, but this administrative option is available.
If you do manage to get a Web3 domain name delisted, you can then contact the domain name owner and leverage its status with the platform to negotiate better terms for buying the domain name.
Until better laws are in place to handle Web3 domain name cybersquatting issues, it will be an uphill climb to protect brand IP rights, but let’s not consider a lost cause.