.CN Update: Stopgap solution for trademark owners

March 14, 2007 Update: NNIC Abruplty Withdraws One Yuan Pricing to Directly Accredited CNNIC Registrars Outside of China

Perspectives Reader,

The purpose of this email is to post a critical update to FairWinds' March 9, 2007 Flash, Massive Risk Environment Shift in China for Brand Owners.

In the previous Perspectives Flash we disclosed that NeuLevel, which handles registrations from registrars located outside of China (nearly all corporate services domain name vendors interface with CNNIC through NeuLevel), should extend the same one yuan promotion to its registrar partners and implied that their customers should then receive some price benefits to gain similar leverage to potential cybersquatters who will seek to exploit the promotional pricing.

We have learned that CNNIC will first extend the one yuan promotional price for .CN domain registrations to registrars directly accredited with CNNIC. It is expected that the promotional price will later be extended by CNNIC to NeuLevel, which may impart some of those savings to their partners. This creates a gap putting brand owners that do not use a CNNIC accredited registrar at a disadvantage.

One registrar accredited by CNNIC confirmed that the promotion will begin on March 14th, 2007. This means that all potential Chinese registrants will have access to the promotional rate prior to registrants located outside of China. This presents a new challenge for brand owners because they are confronted with a situation where they may not have the same leverage as potential cybersquatters to secure .CN domains at the promotional rate of one yuan (13 US cents).

If a brand owner's decision is to proactively secure additional .CN domain names prior to potential cybersquatters (to take them "off the shelf" when the CNNIC one yuan promotion goes into effect), we recommend the brand owner discuss pricing options with its preferred provider first and find out what options they can offer. While FairWinds supports the single domain registration vendor model approach in nearly all cases, we know that it may be impractical for NeuLevel registrars to lower pricing below cost (and sell at a loss) in order for their clients to regain competitive advantages over registrants applying for domains via CNNIC registrars.

While we have not analyzed any NeuLevel/registrar partner agreements, some have suggested that it is a violation of the agreements for NeuLevel accredited registrars to register domains via CNNIC registrars (that have access to the promotional pricing). In order for IP owners to have an alternative vehicle through which to register and take domains out of the available pool before competing applicants secure them this week, they may need to handle those registrations independently or with the assistance of their registrar.

As a result, registering with a CNNIC accredited registrar directly to deal with this short-term window of potential harm to brand owners could be an attractive option. This might be especially true due to limitations such as the shear cost of registering the volume of .CN domain names a brand owner deems necessary.

However, there are risks associated with using a secondary provider to address this shift in the .CN namespace risk environment. First, after some period of time a brand owner should consolidate any registrations secured outside of its single-vendor policy. There are added complexities in transferring .CN domain names from a CNNIC accredited registrar to a NeuLevel "partner" registrar. Second, not all CNNIC registrars are safe choices. Criminal elements and insolvency issues could exist if the wrong CNNIC registrar is selected. Corporate services domain name providers tend to apply strict vetting standards when they select local registrars to protect their clients from these types of risks.

Both issues (ease of consolidation, and security) can be managed by considering two factors. The reasons to register additional .CN domain names at this time may include the desire to proactively solve a short-term problem. After May 31, 2007 the CNNIC registry will revert to "normal" pricing for new registrations and renewals. This means that any domains that were registered to limit potentially damaging registrations by cybersquatters could be released at expiration when speculators will no longer have the enormous leverage presented by the one yuan promotion. Since it is possible that brand owners will choose to maintain ownership of all or some of the .CN domains they secured during the promotional period, they could make consolidation of these domains with their preferred provider more manageable by selecting a reputable CNNIC accredited registrar to perform the registrations during the promotional pricing period.

Due to time limitations, we found only one CNNIC accredited registrar that meets these criteria. FairWinds normally does not make these recommendations publicly, however given the potential harm posed to brand owners, we can recommend IP Mirror, a registrar in Singapore, that is currently used on an ongoing basis by many corporate services registrars for various other extensions (mainly in Asia). They are a safer choice than many of the CNNIC accredited registrars FairWinds is less familiar with. IP Mirror confirmed that their pricing for one-year .CN domains registered through their Web site will be "less than $3 US" until May 31, 2007 (they could not be more specific about the exact price).

This is only a stopgap measure given the environmental factors that are clearly outside of the control of NeuLevel accredited .CN registrars due to the way in which the .CN registry (CNNIC) phased the promotional price launch. We encourage brand owners to consult their vendors first in case there is a way to circumvent the need to use a third party. However, the promotional pricing will be available from March 14, 2007, so in order for brand owners to take advantage of the opportunity to short-circuit the likely flood of infringing applications, they will need to act quickly.

If you have any questions about this newsflash, please feel free to contact us.

Thank you,

Josh Bourne & Phil Lodico
Managing Partners, FairWinds Partners LLC
Directors, The Coalition Against Domain Name Abuse