Are blockchain domains really immutable and what does this mean for brands?

Blockchain domains are making waves in the world of decentralization. According to their biggest proponents, this new type of web address will make our online lives more secure, more transparent, and more usable than ever before.
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Blockchain domains are making waves in the world of decentralization. According to their biggest proponents, this new type of web address will make our online lives more secure, more transparent, and more usable than ever before.

According to many, one of their major advantages lies in their immutability — in other words, once a domain name is registered, only the owner may transfer or deactivate it.

And while this may be great for the domain’s new owner, what if the address infringes on the copyright of another organization?

In situations like this, just how immutable is the domain and what options does the wronged party have?

Protos spoke to Andrea Calvaruso and Matthew Luzadder, partners from US law firm Kelley Drye, to get the inside track on exactly how immutable blockchain domains really are. We also asked how authorities and brands can tackle them.

“This depends,” says Calvaruso. “Usually, major naming services do not allow ownership or control of the blockchain domain name to be changed without the owner’s consent after it is initially distributed.”

“However, some organizations, such as ENS, do require periodic renewals, which we can presume means that the smart contract allows for cancellation or pullback of the domain name at least in the event that the renewal fee isn’t paid within the prescribed time.”

Calvaruso also points out that certain other naming services, like Unstoppable Domains, do not require renewals to maintain ownership of the domain name. However, there may still be some recourse open to brands who feel their trademark is being infringed.

“If a domain name is infringing the trademark rights of a third party, the Lanham Act’s Anti-Cybersquatting Consumer Protection Act (ACCPA) may provide some recourse to a brand owner if the naming service that distributed the blockchain domain name is located within the US,” she says.

“In that case, the trademark owner may seek a court order directing a naming service to disable the link to the infringing domain. This applies even if the naming service is not able to transfer ownership of the domain to the trademark owner.”

Immutability isn’t always a good thing for blockchain domains

Interestingly, according to Luzadder, the potential immutability of websites may actually be one of their biggest weaknesses.

“Websites linked to blockchain domains are largely inaccessible without specific browsers and settings,” he says.

“As of right now, large tech companies aren’t providing native support for accessing these domains. Most consumers are uncomfortable switching to a new browser or changing their browser settings. This could make their computer vulnerable to malware, including ransomware.”

So, if somebody wanted to run a Silk Road-style marketplace on an Unstoppable domain rather than Tor, who would take the rap if authorities did attempt some kind of crackdown?

According to Calvaruso, it depends on the particular scenario.

“First, it’s important to distinguish the ownership of an infringing domain name (for example, one that includes a trademark like hermes.crypto) from ownership of a domain name that isn’t infringing but is being used as an address for a website that sells infringing or counterfeit items,” she says.

“While a website selling infringing product may use an infringing domain name, it may be that the domain name itself isn’t infringing. It may, however, use an address for a website that sells infringing products.”

“For example, a party may use the non-infringing domain name designerbags.crypto as the address for a website selling counterfeit bags.”

Authorities often let marketplaces slide 

Obtaining a transfer of ownership or disabling a blockchain domain name is difficult. But it is separate from stopping the sale of infringing products on a website.

Even without consideration of blockchain technology and peer-to-peer-based internet, courts in the US have been reluctant to hold marketplaces responsible for the sale of infringing products by third-parties on their platforms.

This is except in circumstances such as where there is evidence the marketplace is somehow involved in the infringing activity.

Therefore, the owner would have to target the seller who is offering the infringing merchandise rather than the marketplace itself.

Some of the primary NFT marketplaces, like OpenSea, Rarible, and Nifty Gateway also offer takedown procedures for rights owners to stop the sale of infringing items.

But If a website full of pirated content is discovered, exactly what recourse does a brand have?

“A rights owner has the same recourse it has always had to enforce its intellectual property rights with respect to the sale of an infringing product,” says Calvaruso.

“For example, a few brands, including Hermes and Nike, have recently brought lawsuits to enforce their rights where others are making unauthorized use of their intellectual property in connection with the sale of NFTs.”

Calvaruso also explains that there are new enforcement challenges when a website is located on a decentralized web and/or is related to a blockchain domain name. In particular:

  • The identity of the entity that is selling the infringing product is often unknown and not easy to obtain.
  • If the content is hosted on a peer-to-peer network, it is more difficult for a court to order the content removed than it is to shut down the website by ordering one server to delete the content.
  • The identity of those hosting the content on a decentralized web will be difficult to obtain.

“Brand owners may use forensic investigations to attempt to track the identity of a blockchain domain owner from blockchain wallet information,” she continues.

“But this can be prohibitively expensive and there’s no guarantee that the investigation will ultimately identify the owner.” 

Blockchain domain companies could be doing much more

So exactly how much responsibility lies with domain name companies? And what, if anything, can we do in the future to place more responsibility on them?

Calvaruso says that some blockchain domain naming companies have taken steps to reserve domain names that include names and marks that the organizations have deemed to be well-known.

For example, Unstoppable Domains has reserved domain names reflecting words it deems to be “closely associated with well-known entities, products, or individuals” so that the rightful owner may purchase the domain name itself.

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Similarly, Handshake has “reserved” the top one hundred thousand Alexa ranked websites for brands to buy. 

In addition, the company has offered limited-time periods where trademark owners may pre-reserve certain domain names that are not on this Alexa ranked list.

However, these systems are dependent upon the name services’ own determination of which words warrant protection.

“So far, there appears to be no method via which a rights owner may request that its name or mark be protected from use in a blockchain domain name via a “reserved list” or otherwise,’ says Calvaruso. 

There is also, she says, more that domain naming services could do to guard against the use of unauthorized domain names.

“First and foremost, they could program smart contracts to allow for the domain naming service to pull back ownership of blockchain domains that are found to be infringing upon third-party rights,” she explains.

“They could also create mechanisms for rights owners to provide trademark registrations or other proof of ownership, or may demand some sort of dispute resolution procedure via which a brand owner could challenge ownership or use of an allegedly infringing domain name.”

“Lastly, they could provide mechanisms for the release of contact information to brand owners in certain enforcement situations.”

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Out now: the first four episodes of our ongoing investigative podcast series Innovated: Blockchain City.