Brand Protection

The Luxury Watch Market and Trademark Infringement in New gTLDs

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December 12, 2016

By jbourne


trademarkinfringementLuxury brands are typically very aggressive about protecting their brand names against incidences of online trademark infringement. Protecting their brand names from misuse is integral to maintaining their cachet, supporting their high margins, catering to their customers, and protecting against counterfeits. While the luxury watch market has suffered a downturn this year given lower demand from Hong Kong, there are signs of potential rebound, with increased sales in the UK and select areas of East Asia. We have no expectation of this affecting their critical brand protection activities, and the influx of new gTLDs has created a new realm of potential domain name registrations that these brands must take into account.

Given this starting point, we decided to conduct a study of key Swiss luxury watchmakers, with the goals of assessing (i) whether these brands were protecting their trademarks against infringement in new gTLDs to the same degree that they have been in legacy domains, and (ii) if they are not, whether cybersquatters had stepped in to take advantage of this lapse in trademark protection activity. This study looked at .COM and .CH, the country code TLD for Switzerland, to establish a baseline indicator of brand protection activity and extended beyond these two to look at .BOUTIQUE, .LUXURY, and .WATCH.

Luxury Watch Brands On The Defensive Against Trademark Infringement

For the most part, we found that luxury brands’ typically aggressive trademark infringement protection and defense strategies in legacy extensions held true across new gTLDs. Nearly half of the brands included in the study were found to have blocked avenues of third-party registration or registered themselves all relevant names. Thus, out of the 270 domain names we considered, only 6% were cybersquatted domains, while 73% were brand-owned. (The remainder were a mix of reserved by registry, owned by a different, though legitimate, entity, or available for registration.) Just 0.4% of infringement activity took place in .COM and .CH, while 5.6% was found across the new gTLDs considered. The “worst” extension in terms of infringement rate was .WATCH, although even there most brands have done a good job of protecting their names—there were only 10 cybersquatted domains.

New gTLDs and Trademark Infringement Defense Strategies

That said, there were some more concerning findings. Namely, the rate of mark infringement was found to be 14 times greater in the new gTLDs than in the legacy extensions. These infringements were largely benign, that is, did not feature malware or other malicious content; however, given the extent to which trademark rights protection mechanisms have been discussed with reference to new gTLDs, this difference is worth noting.

Why was there greater cybersquatting in new gTLDs? In keeping with our preliminary research questions, cybersquatting rates reflect either (i) ineffective trademark protection strategies on the part of these luxury watchmakers or (ii) opportunistic cybersquatters registering in available names. The explanation, at this point, is overdetermined. Certainly, not all mark protection strategies are equal. Top-performing in this regard include Breguet, Chanel, Rolex, and Panerai. Lowest-performing in this regard include Movado, Breitling, Ebel, and Audemars Piguet. Brands have had time to secure most significant names in .COM and .CH. Across the newer extensions considered, .LUXURY had the lowest incidence of cybersquatting and the highest registration prices, with registrars charging $433 at minimum—price is clearly a natural impediment to cybersquatting. In contrast, the new gTLD with the greatest amount of cybersquatting had a minimum registration price of only $20.

A Need for More Robust RPMs?

Luxury brands are clearly well-acquainted with the risk of online trademark infringement and have been generally proactive in protecting their marks in new gTLDs. Yet, cheap new gTLDs, in particular, do feature cybersquatting. Brands cannot register all potentially mark-infringing names—this would be too costly—and those scrutinized here have done a fairly good job, but there appears to be room for more robust rights protection mechanisms to be introduced.  While they are most needed across the cheaper new gTLDs, where registration prices do not pose barriers to cybersquatter registrations, more effective deterrents for cybersquatting are necessary across all TLDs.

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