By: Vera Glonina
The development of blockchain technologies is changing the world by introducing new systems and opportunities. In particular, blockchain technologies are a key component of so-called Web 3.0, a new generation of the Internet, which incorporates “the idea of a new, decentralized internet built on blockchains, which are distributed ledgers controlled communally by participants.”[1]
At the heart of Web 3.0 are blockchain domain names (BDNs) that are built using smart contracts and blockchain technology.[2] BDNs link a domain name to a specific smart contract address on a blockchain.[3] For example, the Ethereum Name Service (ENS) creates an Ethereum NFT (ERC-721) that consists of a name along with a ".eth" extension (e.g., amazon.eth or nike.eth). [4] BDNs might be used for different crypto wallets, websites, content hashes, metadata, and website hosting. [5] Use of BDNs is still limited, but the BDN market is continuously growing.
During the Domain Days conference held in Dubai on November 1-2, 2023, Web 3.0 technologies and BDNs were named the future of the Internet, and its worldwide use was actively discussed.[6] Indeed, as of October 2023, there were 2,483,955 active Ethereum-based domain names (ENS).[7] According to the statistics of Unstoppable Domains, the number of purchased or minted Unstoppable BDNs exceeds 3.7 million.[8]
However, BDNs present numerous challenges from a legal perspective, including challenges related to trademark law. Specifically, Web 3.0 providers currently allow users to register BDNs containing designations identical or similar to registered trademarks, including various well-known trademarks. For example, as of October 2023, Unstoppable Domains allows users to buy such BDNs as celine.nft (available for $600), chanelofficial.x (available for $40); hermesofficial.nft (available for $20); harvardlaw.blockchain (available for $10); cardozolaw.go (available for $20).[9] Also, many BDNs are available via online markets such as OpenSea, Rarible, Kraken NFT Marketplace, and Binance NFT Marketplace.[10] For example, in July 2022, the domain "amazon.eth" was offered for sale on OpenSea and received an offer for $1 million from an anonymous wallet address on OpenSea.[11] However, the offer to buy the ENS domain went unanswered, no transaction took place, and this domain name expired.[12]
These Web 3.0 opportunities raise serious trademark protection concerns, specifically, cybersquatting issues. Cybersquatting is a practice when a person registers, uses, or traffics in a domain name that is identical or confusingly similar to a trademark.[13] Cybersquatting involves bad faith domain name registration with the use of trademarks, names of famous people, or businesses with which cybersquatters have no connection.[14] As for the Web 2.0 domain names, there are numerous national laws and international regulations aimed at combatting cybersquatting, including the U.S. Anti-cybersquatting Consumer Protection Act (ACPA) [15] and the international Uniform Domain Name Dispute Resolution Policy (UDRP).[16] However, unlike traditional Web 2.0 domain names, BDNs are decentralized, independent from the Web 2.0 network and regulators, and are not subject to the UDRP procedures.
In this regard, there is a significant challenge for brand owners who face cybersquatting in the BDN systems and struggle with protecting their brands in Web 3.0. As suggested in the White Paper “Trademarks in the Metaverse” drafted by the International Trademark Association, brand owners might consider “secur[ing] blockchain domains as early as possible from blockchain domain name service companies like Unstoppable Domains and ENS” and/or “submitt[ing] take-down requests to NFT marketplaces, such as OpenSea and Rarible, where the blockchain domain is offered for sale.”[17]
Indeed, as for now, the most effective measures are acting proactively in securing Web 3.0 domain names, using various watch services to monitor potential infringements, and sending takedown requests available via certain Web 3.0 marketplaces. For instance, OpenSea IP Takedown Request allows users, brand owners, and their attorneys to address “copyright or trademark infringement, or violation of your publicity or other intellectual property rights.”[18] In practice, takedown requests addressed to marketplaces are helpful instruments for brand owners as speculators usually operate through certain leading NFT marketplaces. However, takedown requests do not result in the transfer of the domain.[19]
Therefore, as we advance, it seems essential to develop certain legal mechanisms to stop the bad-faith registration and use of BDNs worldwide, including developing a legal framework for “minting” BDNs by BDN providers and transferring them between users without marketplaces. It is important to explore and use a combination of various mechanisms, including amending legislation, developing international UDRP-like mechanisms and self-regulatory instruments, considering the interests of different stakeholders. Interestingly, at the beginning of 2023, the Web 3.0 Domain Alliance, a member-led coalition “dedicated to improving the technological and public policy environments for users of blockchain naming services” was formed.[20] As stated the members “will engage on topics including consumer protection, interoperability of blockchain naming systems, [and] fair and open use of intellectual property in the industry.”[21] However, as of December 2023, there was no further information on the particular results of this work.
Overall, it is reasonable to agree that with “the current nascent state of blockchain domain use and its scant regulation, there are limited tools for brand owners to protect their marks against infringing and illegitimate use.”[22] Specifically, with numerous new legal challenges related to trademark protection in Web 3.0, there is a compelling need for further debate and development of legal solutions, in combination with other industry-specific self-regulatory mechanisms, which would help brand owners protect their rights in the new Web 3.0 environment without imposing excessive burdens on the Web 3.0 stakeholders. Ideally, brand owners, governments, and Web 3.0 stakeholders should work together on risk mitigation strategies in Web 3.0, including ensuring the proper trademark protection and dispute resolution policies.
Vera Glonina is a Staff Editor at CICLR.
[1] What is Web3?, McKinsey: McKinsey Blog (Oct. 10, 2023), https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-web3 [https://perma.cc/2AUY-28GZ].
[2] The Future of Web3 Domains and Opportunities for Brands, GrowthChain (Jan. 21, 2023), https://www.growthchain.io/blog/web3-domains [https://perma.cc/76WG-8XFY].
[3] Id.
[4] Corwin Smith, ERC-721 Non-Fungible Token Standard, Ethereum (Apr. 7, 2023), https://ethereum.org/en/developers/docs/standards/tokens/erc-721/ [https://perma.cc/K2XB-PLMW].
[5] Zoltan Vardai, What is ENS (Ethereum Name Service) and How Does it Work?, Forkast (Dec. 8, 2021), https://forkast.news/what-is-ens-ethereum-name-service-how-does-it-work/ [https://perma.cc/8WE4-HPNQ].
[6] Domain Days Conference Kicks off Today in Dubai, MENAFN (Nov. 2, 2023), https://menafn.com/1107357177/Domain-Days-conference-kicks-off-today-in-Dubai [https://perma.cc/W3JF-TDUB].
[7] Makoto, @makoto / ENS, Dune Community Discord, https://dune.xyz/makoto/ens [https://perma.cc/GJ5N-KR8U].
[8] Unstoppable domains, https://unstoppabledomains.com/ [https://perma.cc/SB8C-37FQ].
[9] Id.
[10] See, e.g., OpenSea, https://opensea.io/ [https://perma.cc/CLB9-CWJT]; Rarible, https://rarible.com/ [https://perma.cc/KF7J-SET8]; Kraken, https://www.kraken.com [https://perma.cc/CG3D-S9R5]; Binance, https://www.binance.com/ [https://perma.cc/YA99-32AJ] .
[11] Kevin Whitley, Amazon.eth ENS Domain Owner Disregards 1M USDC Buyout Offer on Opensea, Cryptoinsiders24 (Sept. 28, 2022), https://cryptoinsiders24.com/2022/07/20/amazon-eth-ens-domain-owner-disregards-1m-usdc-buyout-offer-on-opensea/ [https://perma.cc/UM4H-E5MD].
[12] Id.
[13] Terese L. Arenth, Trademark Protection in the Digital Age: Protecting Trademarks from Cybersquatting, Business Law Today (June 2019), https://www.jstor.org/stable/27180437 [https://perma.cc/WXJ2-RLU2].
[14] Frequently Asked Questions: Internet Domain Names, WIPO, https://www.wipo.int/amc/en/center/faq/domains.html [https://perma.cc/59JX-KYNW].
[15] James Grimmelmann. Internet law: Cases & Problems, 384 (12th ed. 2022).
[16] Uniform Domain Name Dispute Resolution Policy, ICANN (Oct. 24, 1999), http://archive.icann.org/en/udrp/udrp-policy-24oct99.htm [https://perma.cc/Q7KL-US2F].
[17] Catherine Mateu et al., Int’l Trademark Assoc., Trademarks in the Metaverse 15-16 (2023), https://www.inta.org/wp-content/uploads/public-files/perspectives/industry-research/METAVERSE_REPORT-070323.pdf [https://perma.cc/UR8V-RQRD].
[18] OpenSea Terms of Service, OpenSea (Apr. 4, 2023), https://opensea.io/tos [https://perma.cc/XJ94-DZ5J]; see also OpenSea IP Takedown Request Form, OpenSea, https://support.opensea.io/hc/en-us/requests/new [https://perma.cc/5N7P-VF9K].
[19] See, e.g., Catherine Mateu et al., supra note 17.
[20] See Web 3.0 Domain Alliance, https://www.web3domainalliance.com/ [https://perma.cc/V7FK-X59N].
[21] Web3 Domain Alliance, Web3 Domain Alliance Announces New Members to Protect User-Owned Digital Identities, EQS-News (Feb. 22, 2023), https://www.eqs-news.com/news/corporate/web3-domain-alliance-announces-new-members-to-protect-user-owned-digital-identities/1759225.
[22] Catherine Mateu et al., supra note 17.