Commercial law collides with cyberspace: The trouble with perfection - insecurity interests in the new corporate asset

Washington and Lee Law Review, Winter 2002 by Nguyen, Xuan-Thao N

B. Domain Names Valuation

the market.138 Even well-established brick and mortar companies such as Proctor and Gamble are in the speculation market for domain names.139 The secondary market for domain names often has been compared to real estate speculation.140 Many web sites in this industry offer a broad range of services, including sales, purchase, and valuation of domain names.141 Auctioning is the common sale method employed by these web sites.142

domain name is rated on the first three criteria from a scale of zero to four stars.147 Higher star ratings indicate more valuable domain names.148 Great Domains.corn then compares this preliminary rating to those of previously purchased domain names to determine the final Value.149 This last step represents the fourth criteria of the valuation model.150

Regarding the Characters criteria, short domain names generate higher ratings than long domain names because the former are generally easier to remember and to spell and have more impact.151 A domain name with fewer than five characters receives four stars, while one over twenty characters long is substantially less valuable.152 The sliding scale of the rating system gives a domain name with six to ten characters three stars, one with eleven to fifteen characters two stars, one with sixteen to twenty characters one star, and one beyond twenty characters no stars.153

Domain names having the potential to attract traffic to websites and thereby generate revenue are highly valued under the Commerce criteria.154 In other words, these domain names are highly marketable.155 Like most brand names, domain names that are "based on well-known phrases, or are closely associated with a business opportunity with a sizable market share enjoy a favorable position."156

Domain names registered in the .Com top-level domain earn a four-star rating.157 GreatDomains.com bases this criteria on the belief that .Com conveys a sense of exclusivity equivalent to residing in New York, Paris, or Singapore.158 Thus, owning a domain name in the top-level domain .Com is an instant branding that generates premium ratings.159

Recently, GreatDomains.com sold Loans.com to Bank of America for $3 million.163 That sale is among the highest prices ever paid for a domain name.164 Other high profile domain name acquisitions include Business.com for $7.5 million and Wine.com for $3.5 million.165 At least one expert in the domain name resale industry believes that "it's a sign the domain business is maturing that its assets - the names - are being resold to those who have the highest-value use for them."166 Furthermore, that same expert does not expect the million-dollar name sales to vanish after the dot-com fever has subsided because domain names identify companies on the Internet, and valuable domain names may significantly reduce advertising costs.167

The commercialization of domain names in the open market is a current phenomenon, unexpected before the arrival of e-commerce on the World Wide Web. The fact that individuals are treating domain names as commodities begs the question of whether domain names are or should be property in the eyes of the law.