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Intellectual Property Domain Name Issues in Hong Kong

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At present domain names represent virtual identities of companies and businesses on the Internet and help create shareholder values in such areas as marketing, advertisement, sales, and protection of intangible assets, improvement of the company’s competitive position. Logically, the highly increased commercial value of domain names has raised a number of controversial issues with the problem of cyber-squatting being arguably the most important among them. An absolute majority of domain name disputes are the result of cyber-squatting – the practice of pre-emptive registration of existing companies’ trademarks or names of famous people as domain names by the third parties1.
The practice of cyber-squatting rests upon the core principle of the domain names system: the one who claims to register any domain name which has not been registered yet is given this option and obtains exclusive rights for the newly created domain name. The fact that the cyber-squatters do not have any affiliation with the trademark or name they register as the domain name is neglected by the system. Comparatively low cost and simplicity of a domain name registration procedure (normally, not more than the US $50) stimulate the practice of cyber-squatting greatly: one person may sometimes have rights for several hundred domain names featuring names of serious businesses, corporations or celebrities2.
The attractiveness of cyber-squatting rests upon still increasing the commercial value of the Internet. Being aware of the economic importance of domain names in the contemporary global market, cyber-squatters offer the domain names registered by them to the corporation/person/business involved at the much higher price than they paid for registration. In case the offer is not accepted, cyber-squatters may indirectly cause serious economic damage by either attracting customers to their own websites by virtue of the company/person’s reputation and popularity, or by associating the domain name featuring a recognized business or person name with a pornographic site, for example. Such dilution of values seriously damages intangible assets of a company3.