FRANK PROSNITZ: Thank you all for coming and welcome to E-Day. And we begin with what is really the fourth of Providence Business News Summits that we’ve held on a variety of topics. This year we started with health care, we talked about employment issues, telecommunications and now into what really is all of our futures, and that is E-commerce. First of all, let me thank the sponsors of the program today. Besides Providence Business News, our sponsors are OSO.com, Cox Business Services, KPMG, Newfangled Graphics, Hinkley, Allen, Snyder and Bryant College.
Graham Allen is going to be our first speaker. Graham is the Director of Digital Strategy for Textron, a relative newcomer to Textron. He comes with a great deal of experience after a number of years at Timken, where he headed up much of their program. He’s at Textron pretty much to direct their e-commerce program. Also on our panel this morning is Ruby Dholakia, who is a Professor at the University of Rhode Island. She is the founder of the Research Institute of Telecommunications and Information Marketing at URI and actually has traveled the world in dealing with e-commerce. She is the author of a couple of books and a soon-to-be released publication on electronic commerce. Ann Driscoll is the Director of Internet Marketing for Ross-Simons and of the many companies in Rhode Island this is one that certainly has made its mark in e-commerce. From the store to the catalog to a great presence on e-commerce, has been Ross-Simons. Then to deal with all the issues of privacy and access and all those things, we’re very fortunate to have William R. Grimm, who is a partner of Hinkley, Allen and Snyder and Chairman of their business litigation practice group. He will give us a little different perspective on the issue. You’ve heard enough from me, now let’s hear from some of our experts.
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Graham Allen: Good morning ladies and gentlemen. Again, by way of introduction, my name is Graham Allen and I am responsible, most of the time, for the definition of digital strategy for Textron. Said differently, I’m responsible for that definition and execution of digital strategy in the company. What I’d like to talk about a little bit this morning is net readiness. Said differently, how we as business people should be preparing our organizations to compete in the digital economy. Reminds me of a story of a student in preparation for a final exam, did some exhaustive research, including the review of past papers, went into the final exam and noted immediately that the paper that had been presented to him was the same paper from the previous year. Felt compelled to advise the professor that the paper was a repeat of the previous year. Put up his hand, the professor came over and he said “Professor, this paper is the same as last year.” The professor responded by saying, “Yes, it is, but the answers have changed.”
I think there’s an analogy there between what is taking place within the business environment and that example. The fundamental questions that we are all faced with, that being, how and where we compete, how we take our products to market, how we service our customers, the value proposition that we offer. Those fundamental questions remain the same. It is the answers to those questions that have changed.
Before one can execute on a strategy, if you wish, or position an organization to compete in a digital environment, there are, we would contend, some fundamental steps that have to take place before you do so. There are four major building blocks that we define in order to determine the net readiness of an organization within the Textron environment. The first is what we broadly define as leadership. There is a fundamental question that I think that all of you in the room have to ask yourself before you embark on any net ready or strategy relating to the digital environment. That fundamentally is, do you believe that the Internet will transform the way you do business? You have to answer that question fundamentally first. You can’t simply go out to the people that make up your organization and say, what do you think we should do? As leadership, you actually have to take the challenge of transforming your organization, but only if you believe that it will radically transform the way you do business. I would argue passionately that it does, and I can argue case by case about how it has not only transformed Textron, but also several other businesses.
Let me expand a little bit more on what I mean by leadership. I’ll pose some questions. Of the people in your organizations that are responsible for leading and defining the futures of your companies, how many of them do you truly believe understand and are aware of the implications of the Internet? If they are not, how are you going to build their awareness of those changes that are taking place? I’ll give you a case in point, an example of what we did at Textron. Textron, a $12 billion conglomerate, competing in multiple industries.
At the beginning of this year we initiated a program called JumpSmart. JumpSmart was an intensive effort to make the leadership of the organization more net aware. Let me give some more definition to that. We took thirty of the top executives from across the enterprise and took them out to their existing functions, and we located everybody on a weekly basis in Chicago for five weeks. We explored the implications of the Internet, related technologies and how it would change our business. In addition to that, we had an on-going JumpSmart program at every one of the segments and divisions across the enterprise, world-wide, two to three day sessions focusing on the implications and how the Internet is changing the way we need to do business. That is the building of awareness and establishing leadership.
The other one that I would raise is that most of us, to some lesser or greater extent, have a business strategy defining how and where we will compete. Many of us also have what I call tactical initiatives to do something on the Web. Build something quickly, make it happen. I would argue that if your answer to the first question in terms of leadership and specifically, do I believe this will change my business, I would contend that core to your business strategy should be your e-business strategy. The two are not mutually exclusive. I often deal with companies that say, this is our business strategy, but here’s our e-business strategy. I would contend that there is no difference between them. Fundamentally, in fact, your e-business strategy is your business strategy, if you believe in the change that it will bring about.
The second major category that we talk about within our environment, in terms of net readiness is competencies. Do we have the necessary competencies? I’m not talking specifically about people; I’m talking about business competencies in order to be able to compete in that environment. Do we have mentality and business processes that allow for ruthless execution? To make things happen very quickly. Do we have an environment where we have the skill sets among the teams that make up our companies to be able to manage a broad portfolio of highly diverse initiatives running concurrently? Do we have a funding process that supports those? Do we have a decision-making process that supports those? I would argue in most large companies that I could raise capital faster outside the organization than I could inside it. If I had the right level of contact and made the assumption I have a viable business model, a defined value proposition that is unique and sustainable, I could raise capital outside an organization faster than I can internally. That leads to the argument that there is something fundamentally wrong with some of the traditional business processes internally to allow us to be able to compete in that environment.
The other area that we look to in terms of net readiness is governance. Do we have a portfolio management mechanism in place within our organizations that enable us to make decisions? Some fundamental questions. Who makes decisions? How are those decisions made? How is funding driven? Et cetera. Those mechanisms have to be put in place and allow for those competencies to come forward. The ruthless execution and the ability to execute those.
The final one, which I think is critical, which is somewhat of a given, is technology. Do you have the infrastructure in place to be able to support your business? I would argue that in order to be able to compete in a purely theoretical sense, in the new economy, or the digital economy, you would have to have in place a solid network centric global infrastructure based on open standards and supporting Internet technologies. You fundamentally have to drive toward that being in place before you can support doing business with your customers and your suppliers and your partners in a digital environment. I want to highlight that one key point here is open standards. Those of you that are from more of a business background are probably totally overwhelmed with the array of companies that have started the various technologies that you receive.
I receive on average, 12 to 18 phone calls a day from different vendors. What is surprising to me is that they are all the worldwide leader. It is a dead heat. I have this image of all these vendors running forward and ending the race in a dead heat. How do I choose one versus the other? I’d like to give you a couple of guidelines there. One of the critical opportunities that we have is that the advent of the Internet has brought about a series of open standards that are independent of platforms and are not dependent on any particular vendor. I’m not going to mention any vendors, but if you need to explore the openness of those standards, because it is critical to what the future probably holds, I would argue for a traditional manufacturing company like ours, that the issue is how you manage the demand and supply chains, extended. Not just within your own organizations, but with your partners, suppliers and customers. Going back to the technology component, if your infrastructure and your technologies are based on open standards, the ability to integrate with the supply chain becomes relatively much easier to do. It provides a much easier environment to share information and the extended network of the enterprise, the net market concepts that are coming to the fore, if you’re based on open standards and platform independence, you are in a stronger strategic position to be able to compete in those environments. Those four things are what we fundamentally focus on in order to make sure that the enterprises that make up the Textron environment are ready to be able to compete in their environment.
I’ll give you some examples. There have been cases where, in fact not within the Textron environment, but from previous lives, where we’ve gone out and we’ve Web-enabled a particular business process. I’ll give you an example. An order entry process. A simple private net-market environment, an extranet environment where we enabled our customers to be able to view inventory, availability and to place an order. We made it available, orders came rushing in. One of the customers had a question relative to the order. They decided to phone their customer service representative to review the order. Our customer service representative could not see the order that had been placed on line. So, the customer said it must not have been placed then, and replaced the order. They did that five times. Now, sales looked particularly good that month; however, returns the following month were higher than average. The point I’m driving at is that you have to have a cohesive e-business strategy, looking at the business processes, the implications on your existing business processes, before you can simply jump out there and place something on the Web.
There are also some fundamental changes taking place that I think, if you’re a small to medium size business, you need to take into consideration. If I go back in time, and I as a consumer wish to buy a computer, I used to go out to DEL.com, IBM.com to be able to go to those company sites to be able to source a computer. The advent of what is being broadly termed as net-market environments, I no longer go there because I can’t compare the pricing and the features and benefits of each of those products, but I can go to net-market environments and start to compare them. There may be a shift from the traditional companies positioning themselves on the market to the more exchange driven concepts where I can compare features and benefits of any particular product or solution. A question that you fundamentally have to ask yourself in that sense is, do I build it, or do I participate in another? There are multiple strategic paths that you can follow.
Ruby Delechia: Good morning. Thank you very much. I am a professor of marketing and at the University in the College of Business we have the Research Institute which really has been a pioneer in researching issues related to new technologies. What I thought today I would do, and it’s kind of, I guess, coincidental that I am being placed between a speaker who primarily deals with business to business e-commerce and the next speaker, Ann, who will primarily speak about business to consumer e-commerce. I think the perspective I can provide is some sort of an analysis as a systematic observer of what is going on in the marketplace and sharing some of the research that we are doing about the marketing and the market acceptance of e-commerce.
I will try and phrase my comments in two parts. First, to bring the perspective of the buyer, or the user, or the consumer, who is actually going to participate in e-commerce, who is going to be the ultimate objective of all the strategies various organizations will develop. I’ll relate two very recent experiences that I had as a consumer. Then you can ask, is my purchasing behavior typical, and what does it portend for organizations that want a share of that market?
The first one took place because there is a wedding in the extended friend network, and I had to buy a wedding gift. There was a bridal registry in a store that is not located in Rhode Island. If it was in Rhode Island, I had the choice of going to the store, looking at the merchandise, and seeing if I liked a particular item and then placing the order. Given that the store was out of state, obviously it made sense for me to go on the Internet, look at the bridal registry and order the item. This particular store is a very well known, national store, and I’m not going to name specific names, but I was really quite amazed as to how poor the site was and how difficult it was for me to navigate the site. What was most interesting was that even though I did execute the order, there was no opportunity made available to me to actually visit other locations within that site. That particular e-tailer was able to get a new customer who came purely because there was this wedding in the situation. They did not take advantage of that opportunity to sell me other goods that they had. So, I could sit as a marketing professor and analyze the site, but I think the speakers we have today, when they present their company’s point of view, that’s what they will do, so I will not spend a lot of time analyzing the site.
I think I’d like to share with you some data about what the average consumer in the U.S., but more particularly in Rhode Island is doing, and what are some of the necessary conditions. In the enterprise world, you have to have net readiness at the organizational level as an intraorganization variable; of course the same concept can be applied of net readiness in the market level. So the question is, for e-commerce to work, for it to become a larger, growing viable part of our buying environment, what is the net readiness of this country. I’m not going to look at this globally because there are obviously lots of differences in different markets. What is the level of net readiness? Well, the first thing in order to have net readiness is to have access to the devices and the connectivity to the net. If you look at the statistics in the U.S., and every year at URI we do a phone survey of Rhode Island residents to determine their net readiness. We just finished the phone survey of the year 2000. It just took place last week, so I don’t have the numbers, but we’ve been doing this since 1996.
We’ve been able to track the net readiness of the Rhode Island market, and I think what’s going on in the Rhode Island market is kind of typical of what’s going on in the national market. We are really not that atypical in this front, and roughly about 50 percent of the U.S. households have a computer. That’s been leveling off. If you look at the nationwide statistics, the numbers vary between 48 and 52 percent, depending on what state you are looking at. So, roughly about 50 percent of the households are capable. Are they ready? Well the next level after having computers is, of course, you have a connection to the net and the speed of the connection is also appropriate for engaging in the net activities. We have seen a very, very healthy growth in connectivity, but even the 50 percent of U.S. households that have a computer, not 100 percent of those computer households have net connections. The last statistics we have, about 75 percent of computer-owning households have connections to the net. When you start estimating the net readiness of the marketplace, it’s less than 50 percent of the household population that have connections. What is the next variable that you must have in order to make available all these users?
Of course, the speed of the connection and whether or not other demands are being made on the connections, do determine who uses the net, when do they use it, and how long do they use it? This is where the cable modem offered by Cox tends to help. In my family, for example, I have a teenage girl. You’ve all heard of stereotyped behavior of teenagers, particularly girl teenagers in the household. Phone companies love girl teenagers in the household. We basically decided to address that issue by having a cable modem, which gives us this fast speed always available. Everything that Cox says does happen. We are able to download these pages very fast, or these graphic intensive sites which are sometimes necessary for some kinds of merchandise works very well on our system. From a hardware, software capability, we are net ready.
The second component is time. Do we have the time as household members to avail ourselves of this technological capability? Of course, people who are supporting e-commerce initiatives to the consumer, basically point out the advantage of the ability to save time, so you don’t have to make a trip to the store, you can go on the net, and you can buy that item. Of course, that is why I was able to order the item from that national retailer, I didn’t have to make a long trip. How I was able to buy the item from the ethnic retailer. How I was just able to buy some books from an on-line book retailer is a fact. It saved me time to buy it on-line. There is still some research that indicates that the average number of minutes that people spend on-line. Those minutes are allocated to shopping activities, which is what e-commerce is interested in. That’s growing, but not growing as fast as people would like. The biggest application that people use on the net is of course, e-mail and chat applications. So, when you look at the number of minutes people spend on the net, it’s not shopping that is the dominant activity. Of course, e-mail has become a major communication tool, not only for interpersonal communication, but in terms of an advertising sense for direct marketing and so e-mail alerts for various shopping activities has grown because people have recognized this as a means of communicating to the audience.
Ann Driscoll: Hi, I’m Ann Driscoll, the Internet Marketing Director at Ross-Simons. I’m sure most of you know Ross-Simons, but I’m going to talk a little bit about Ross-Simons using it as an example for multi-channel marketing. I’ll talk about two things with respect to Internet marketing today. For those of you that have an off-line presence, I’ll talk about the importance of having an on-line presence for servicing your customers, as well as the importance of tying each of those channels together.
As Frank has indicated, Ross-Simons has retail outlets. We have 11 stores, as well as a mail order business and since 1996, Ross-Simons.com.
First I’ll explain a little about Ross-Simons for those of you who aren’t familiar, those of you who aren’t from Rhode Island. Ross-Simons is a luxury retailer of a variety of products, predominantly jewelry, tableware, gifts, collectibles, furniture, etc. It was founded in 1952. Catalog comprises about 70 percent of our business, stores about 20 percent and the Internet is about 10 percent. As I said, we started our Internet web site in 1996, and we’ve seen triple digit growth over the past few years. This year it will be about a twenty million-dollar business, and next year we’re looking again, hopefully, to double that, but you never know. It’s very volatile on the Internet. Our customer base is about 80 percent women, high income, $75,000 plus for household income, married, homeowners, 35 plus, and typically college educated. So those are the people that we’re servicing.
We see on the Internet, as Ruby and I were talking about earlier, just before we came up here, on the Internet we actually do see a difference between the customers we’ve got off-line versus on-line. We’re seeing more men come in over the past few months and we do see a higher income. So, that being said, as I said 75 percent of them are on-line today. Why in 1996 would Ross-Simons have chosen to develop an Internet site? The Internet was in its infancy, or at least a toddler at that point, and it was a big risk to invest a lot of money into developing a Web site, not knowing if it would cannibalize the mail order industry, or hurt our stores. There’s traditionally been the question about whether the Internet does take away from people walking into your stores. What we’ve found is that about 50 percent of the people that we get on our Web site are new.
Fifty percent of them are coming from our catalog. There’s a benefit there. That’s one of the points that I wanted to make today. It’s important to have an on-line presence for your customers. Really, it doesn’t matter where the customers come from, as long as they come to you. However they decide to make it, you want to make available to everybody any channel that would bring them into your business. Now we offer all three channels, and we’ve found that 50 percent of the people have chosen the Internet versus our mail order catalogs as a much more convenient way for them to shop with us. We also have the 50 percent who are brand new, all incremental business for us.
The second point that I want to make about that is, that cannibalization actually has a bottom line benefit for us. It’s much cheaper for us to accept orders coming in on the Internet versus the catalog. We don’t have the calls coming into the call center, as well as the cost of a catalog versus the cost of just having an Internet site up there. It’s pennies versus say sixty cents to a dollar depending on the cost of the catalog, e-mails versus catalogs. If you can take a look at your data base and identify correctly the people who are coming in and ordering on the Internet versus the people who have received a catalog but still chose to come in on the Internet An e-mail again costs pennies a piece for that contact with the customer who has already expressed that they are interested in shopping with you via the Internet.
So, again just to reiterate what I’d said about wanting to be involved in 1996. Ross-Simons saw the opportunity, which is the point that I want to stress, to provide a cost-effective way to reach new customers as well as to enhance the customer service experience that our already existing customers had. We offered them another channel to reach Ross-Simons and help the bottom line. For us, it really makes no difference how they come to us, as long as they come to us and they have a good customer experience.
Well, the second part of that is, OK, now we’ve got the three channels. The important part, which Graham touched on a little bit, is tying all of those channels together. We’ve now got customers coming in from the Internet. We’ve got customers coming in from our mail order catalog, phoning us up on the 800 number, and we’ve got the customers in the store. This is what’s called a multi-channel approach, the big buzzword in the industry. How to tie all of those together and make sure you have a good strategy for customer relationship management, and that’s tying together various databases, making sure that you cross promote correctly, that you’re really bring the customer what they want. There are benefits and there are also some significant challenges to that multi-channel approach. Benefits, I’ll just point out a couple of the benefits that Ross-Simons has seen. We now offer the ability for customers, particularly at Christmas, this is very important, to track the status of their orders on-line. That is for mail order and for Internet orders.
We have separate 800 numbers on the Web sites so we can track the reference that are coming in from the Web site to our call center, which is shared between both the catalog and the Internet, but we have the same customer service representatives. So, we have people who are knowledgeable about the products. On the Web site, the people who have come to us from the Web site to service our customers via e-mail, came from the mail order catalog side, so they are very knowledgeable about the company, the products, and in particular, the Web site.
So, we’re using the ability of the Internet to drive people into our brick and mortar stores. Again, using each of the channels to support each other. Some specific ways that we’re doing that as well, other than the e-mail. We offer signing up for a free catalog on-line, offering the customer a choice of which channel they would prefer. We’re not going to try to drive them to the one that’s the most cost effective to us. We might gently push, but we’re allowing the customer to choose which way to come to us. We ink jet on the catalog, to let people know about Ross-Simons.com, specials that are going on. We’ve got the sign up for the free catalog. We’ve got the Internet URL on all of our marketing communications; the store bags, the letterhead, all print advertising. We also have Internet kiosks that we’re testing right now in the stores, to allow for the bridal registry, on-line. We have on the Web site itself, if you’ve never been to Ross-Simons.com, we actually digitize our current catalog, knowing we’ve got 50 percent of the customers have been cannibalized from the catalog.
We digitize the catalog. We put it up on the Web. Again, it’s all about the customer experience and making it easier for them, regardless of which channel they’re on. Some of the drawbacks, or I shouldn’t say drawbacks, I should say challenges that we’ve experienced with this multi-channel approach is, we’ve been in business since 1952. We’ve had our catalog business since the ’80’s and we’ve got a Legacy system. The catalog was built on its own database. The database feeds the Web. The two are tied together to offer the customer again, a good customer experience.
Tying together when you’ve already got an existing system, this is the infrastructure that Graham was talking about earlier. You have to make sure that you have a good infrastructure. It’s very costly to after the fact, tie together all of these different channels. Customer service, as I had said earlier, customer relationship management is the benefit, tying together each of these for consistent service across all channels. The challenge that goes along with that is, as I said, our Internet customer service representatives came from our mail order side, but we now have to train them on the Internet. They’re not necessarily Web savvy people. You have to keep them up to speed, Internet speed with what’s going on, how the Web site is changing. We’re constantly changing it, much faster than the catalog changes.
Bill Grimm: As you all know, there is no such thing as free legal advice. The title of this morning’s program is “The Good, The Bad and The Ugly.” Frank was concerned that certain aspects of the program would not be covered, and so as a trial lawyer he asked me to cover both the bad and the ugly. I hope to try and do that for you this morning. I want to talk to you a little bit about cyber squatting and domain name disputes, which is an issue which all of you should keep at the forefront as you approach consumers and other businesses with your Web sites and your domain names. There has been over the last few years a lot of litigation generated over disputes between trademark owners and persons who have registered domain names. In the last three months, I have handled ten such disputes. It’s a real growth area in my particular business. The problem is occurring as a result of a real collision between historic trademark law and the domain name registration process. I just want to give you some quick comparisons between trademark law and the domain name process so you understand why this collision is taking place.
First of all, a trademark right arises out of using a trademark in connection with a good or a service. You can register it with the state; you can register it with the United States Trademark and Patent Office. You can register it in the EU, in Canada, and you can obtain ownership rights arising out of your use and your registration in a trademark, and preempt others from using that same trademark on similar goods and services. Internet domain name registration, on the other hand, is totally on a first come, first serve basis. You go down to one of the registrars and you want to register Nike.com, and if Nike.com is not registered, they’ll give it to you. Now, in the early days, after Al Gore invented the Internet, there was a lot of disputes arising from just that. Registrants would go to the registrations areas and register Nike.com, or Timex.com, and then sell it back to Nike, sell it back to Timex at significant profit. That’s not going on as much today as it did then, but it’s still a problem.
Another contrast between trademark rights and Internet domain names is that the more valuable trademarks are the ones that are arbitrary, fanciful. A lot of made up names become very valuable trademarks as a result of the advertising associated with them over the years. Xerox is a good example, a made up name that has tremendous value today. In the Internet however, because of the intuitive nature of people’s searches and the way that search engines work, descriptive and generic terms have value. For example, Computer.com was recently sold for $500,000, Drugs.com sold for $825,000, Wall Street.com sold for $1.3 million, Wine.com $3.3 million, and I believe the record to date is Business.com, the domain name sold for $7.5 million. Now, in typical trademark law, you could not register wine to sell wine. The trademark office would look at you and say you cannot register that name to do that. The other way that is generic and descriptive, domain names are being used on the Internet is to direct traffic to particular sites. If you put Toothpaste.com onto your Web browser, surprise! surprise! You will end up at Procter and Gamble’s home page. Similarly, if you put Drugstore.com onto your Web browser, unfortunately you don’t land at CVS; you land at a RiteAid site. Of course, Bush Sucks.com takes you directly to George W. Bush’s campaign Web site. He had the foresight to make sure that that particular domain name was not available to his competitor or to anyone else who wanted to interfere with his election prospects. So, on the Internet, these descriptive terms have value, whereas in the trademark sense, they really don’t have any value at all.
The other thing about trademark rights is that they can coexist across different product lines. For example, Delta is Delta airlines, Delta faucets, Delta dental, and all of those businesses, because they involve different products, different services can exist in the trademark sense because there is no consumer confusion between Delta Airlines and Delta Dental. On the Internet, however, there is only one company that can own Delta.com. A few months ago, it wasn’t any of those three, but Delta Airlines has now purchased Delta.com, and if you enter Delta Airlines or Delta.com, you will go directly to the Delta Airlines Web site. The other thing about the Internet that is different from trademark law is that in trademark law if you have a trade name or a trademark which is unique, a person cannot prey off your good will just by changing a letter or a dot or a hyphen. On the Internet however, if you put a period or a hyphen, it’s a brand new, different address and it goes to a different Web site. So www dot Fleet.com will take you to the Fleet homepage, but www no dot Fleet.com might take you somewhere else.
The final point I’d like to make in terms of the difference between trademark and domain name are that in order for a trademark to have any significance to the consumer, they have to see it, or they have to hear it. The Internet’s a little different. There is a concept that’s known as megatags, and megatags are inserted into the code of a Web site, and search engines search for megatags. For example, if you wanted to Fleet and put the word Fleet into your Web browser, the Web browser would search and the search engine would look for Fleet in Web sites around the country. If Fleet showed up in the megatags, which you can’t see, you can’t hear, the search engine would direct you to the site where Fleet appeared the most. So, competitors of different companies have been inserting their competitors’ names and trademarks in the megatags on their Web sites, so that when the consumer puts in Fleet, for example, a different competitor appears on the search engine. So, as you can imagine, given these conflicts, there has been all sorts of litigation arising out of the various disputes between trademark owners and domain name users and registrants. Cyber squatting, cyber piracy is a new term of art.
You’ve probably heard it before, but essentially it refers to those individuals or companies that have registered domain names in bad faith, for the purpose of preying on the good will of the trademark owner, or for the purpose of selling that particular domain name address back to the trademark owner.
The cyber squatters and the cyber pirates work in a number of different ways. One, they’ll register as domain names famous trademarks, or slight variations of famous trademarks and then try and sell them back. They will register those marks and those domain names and then warehouse them, hoping that someone at some point in time will find the need to give them something of value for those particular domain name addresses. Some are engaged in the object of misdirecting consumers to a particular site, so if you go to a particular domain name thinking you’re at Fleet.com, you might be somewhere else, purposely done by the cyber squatter. Finally, there’s some outright fraud going on in the domain name area. Consumers are misdirected to sites which they think are legitimate, but they’re really pirate sites which do not provide the same goods and services that you might expect to find there had the domain name in fact corresponded with the trademark with which you’re dealing. Up until last year about this time, the trademark owners didn’t have a lot of weapons in their arsenal to fight this type of abuse.
Last year Congress passed a law called the Anti Cyber Squatting Consumer Protection
Act, which was really designed to help trademark owners protect themselves from
the type of cyber squatting and cyber piracy that was going on. At about the same
time, the icon agency adopted some dispute resolution mechanisms, which become
part of everyone’s contract when you register a domain name. You agree to these
dispute mechanisms, and it provides for an arbitration process whereby trademark
owners can seek to recover from the cyber squatter the domain name that was improperly
registered. The purpose of Congress in adopting that act was really to protect
consumers, and to make sure that consumers had confidence in the e-commerce that
all of you are about to or are involved in. To the extent that consumers go to
sites and they wind up in the wrong place, or they get hoodwinked with someone
who’s not associated with the real trademark owner, all businesses are suffering
in terms of the impression that e-commerce is a safe, reliable forum within which
to do business. Congress acted really in response to a consumer protection issue,
as well as to the legitimate interest of trademark owners throughout the United
States.
I want to tell you about one case I recently handled because I think it
illustrates a number of the points I’m making today and it give you an idea of
the kinds of things you need to look out for as you go forward in cyberspace in
your businesses.
