Legal Risk Part of Domain Investing

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When buying a domain name, there are many aspects of the purchase you need to consider. You may think about resale possibility, development potential, traffic and revenue, brandability, and other aspects related to the value of the domain name. Legal risk should also be a consideration that should be priced into your purchase.

For the sake of this discussion, I am going to assume most of you avoid obvious trademark domain names that can lead to UDRP filings and lawsuits. I assume the majority of people who read this blog are wise enough to not buy names with famous trademarks, such as Facebook.Club, MicrosoftsOffice2014.com, or something else along those lines.

Even when you are buying “safe” domain names, you need to understand there is some legal risk involved in the purchase of a domain name. There is always a chance a company will file a frivolous UDRP to try and wrest your domain name. Whether they may have rights to the name or whether they are reverse hijacking, the domain owner will need to pay an attorney to respond to the UDRP, especially if it’s a valuable domain name.

The level of risk varies for each domain acquisition, and the buyer needs to price that risk into his purchase and factor that risk into business decisions. For instance, I believe it is rare for a UDRP filing on a numeric .com domain name, so the risk of having to ever mount a defense is low. However, there are occasional filings even on these – for instance 123.com and 222.com. While the risk is low, it is still there, and the owner of those two domain names will still have to pay a lawyer to protect their domain names.

It doesn’t matter whether your domain name should have little risk or not. The unfortunate fact is that some companies and people may try to abuse the UDRP process because it is less expensive than buying certain domain names, and there aren’t really any penalties for abusing the process. This means that all domain owners need to factor in the potential legal risk on all domain purchases and acquisitions.

One recommendation I have is to know the name of a good domain attorney in case you are ever hit with a UDRP or lawsuit. Having a lawyer who is familiar with the nuances of the domain investment business can help you quite a bit when dealing with legal issues.

8 COMMENTS

  1. Totally agree Elliot – I’m now way more cautious when buying ‘brandables’ like Banana.com, Jellyfish.com etc – they’re high-cost domain names and if you don’t have a direct plan with them, you run the risk of drawing a UDRP from a wannabe owner. Nothing’s safe anymore.

  2. Does a domain name owner receive any damages from the party filing the UDRP if the domain owner wins ? If not, they should . Domain owners have to spend the time and money to defend themselves against these filings and should receive some form of compensation if they win and retain the domain. Some of these filings are large companies with nothing to lose . They need to be accountable.

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