For an increasing number of startup ventures—particularly ventures with an integral online presence—protecting the intellectual property of the entity extends beyond agreements and legal filings. Protecting the assets of a venture may require a preemptive domain strategy against cybersquatters.

Cybersquatters are individuals who register domain names that are similar to a legitimate company’s domain and frequently use the similar domain name to profit from the goodwill of the company’s name or trademark.

Since the World Intellectual Property Organization (WIPO) began tracking cybersquatting disputes in 2000, the number of disputes has risen by 155%. WIPO Arbitration and Mediation Center, Total Number of Cases per Year.

Startup ventures, with limited capital and strained resources, are particularly vulnerable to cybersquatters.  This vulnerability was recently highlighted in Pinterest, Inc. v. Qian Jin, 2013 BL 267308, September 30, 2013.

Pinterest, launched in 2010, currently ranks number 28th on Alexa Internet’s web traffic data. Alexa.com.

This rapid growth has been matched with rapid increases in valuation. In October 2011, the company was valued at $200 million; by October 2013, the company was valued at $3.8 billion. Michael J. De La Merced, Pinterest Raises $225 Million as Valuation Jumps to $3.8 Billion, The New York Times, October 23, 2013.

During Pinterest’s meteoric rise in web traffic and business value, an individual identified as Qian Jin began registering scores of domain names such as “Pinterests.com”, “Pimterest.com” and “Pinterost.com”—directing users away from Pinterest.com and toward advertisements for casinos and lists of advertising links. Lisa Gannes, Pinterest Wins $7.2M and Injunction Against Cybersquatter, All Things D, September 30, 2013.

Pinterest sued Qian Jin in federal court, alleging that Pinterest lost internet traffic from the confusingly similar names, and claiming that Qian Jin committed trademark infringement, trademark dilution and false advertising. After a year of litigation, Pinterest won a default judgment for $7.2 million and an injunction.

Preemptive action can help mitigate a company’s exposure, avoiding lost revenue and traffic, and reducing potential litigation expenses. A startup venture looking for ways to decrease these risks should consider some or all of the following steps:

  • Purchase the generic top-level domains. Buying every permutation of a domain name is not a reasonable approach, but it is wise to purchase all the generic top-level domains (com, net, org) of the domain name the startup anticipates using.
  • Purchase the obvious misspellings.  By the time a startup is ready to launch, the company should be aware of common misspellings of the company’s name.  For example, Google owns gogle.com.
  • Engage a backorder service.  If the company identifies domain names that are currently owned by someone else but are relevant to the company’s site, consider setting up an order with a backorder or snapback service to purchase those domains if they become available.
  • Keep the company’s domain registration information current.  Every year valuable domains are lost due to expired credit cards and outdated contact information.  Protecting the domains the company owns is a key part of keeping cybersquatters away.

Jay Greathouse (jay.greathouse@nortonrosefulbright.com / +1 210 270 7155) is a lawyer in Norton Rose Fulbright’s San Antonio Corporate, M&A and securities practice.