We Have Your Web Site: Despite tougher cyber squatting laws domain names ar e still being held for ransom

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Since trademark law is designed to protect brand owners, she said, a threatening letter can often settle things quickly for a few thousand dollars. Or they can pursue the matter in court and, if victorious, earn up to $100,000 in damages.

“You can really spank people with that,” Frisby said.

WIPO reports that, last year, 9,389 cybersquatting disputes, or 97 percent, were resolved, with 84 percent resulting in transfer of the domain name to the complainant.

But the legal path assumes the cybersquatter can be found. As companies increasingly do business overseas, that’s not always the case. In China, for example, e-commerce sites often end with the relatively new designation-.cu. International intellectual property law isn’t always well-enforced there. And Frisby said there’s a common shakedown originating from China.

A domain registrar from China will contact a legitimate U.S. business to report that a third party has requested the rights to a particular Web site. Would the U.S. business like to offer more money to acquire it instead? But the third party isn’t real, Frisby said.

“They act like they’re doing you a big, huge favor, and it’s actually a total hoax. The third party doesn’t exist,” she said. “It’s still a little bit of the Wild West in China.”

Nancy Tinsley, a partner and intellectual property expert at locally based law firm Baker & Daniels, noted that cybersquatting law is complicated, and there are legitimate reasons a company might not be able to maintain complete control of its trademark online.

For example, she said, individuals’ right to free speech can trump a trademark. If protesters want to set up a Web site filled with complaints about Wal-Mart’s business practices like www.hatewalmart.com, there’s not much Wal-Mart can do about it.

Similarly, original ownership isn’t enough to legally prevent reuse of a brand name online. If a used car dealer sets up a domain with the word “Corvette” in it, that dealer doesn’t need permission from General Motors.

Tinsley counsels managers to keep a sharp eye on their companies’ online reputations. Her firm represented local clients in more than 100 domain name disputes last year, she said. Monitoring automatic Internet tools and search engines are not expensive, she said. But getting into a lengthy dispute can be.

“You can only do something about it if you know what’s going on,” she said. “The good news is that domain name disputes are [usually] fairly quick and easy to resolve.”

Eric Johnson, an information technology professor at the Indiana University Kelley School of Business at Indianapolis, said cybersquatting is an area in which the cost of carefully pre-empting problems is low, but the potential for expense from neglect is high. And the direct costs that can result from the cost of a dispute aren’t the only damage. A company’s reputation can suffer if a disreputable third party owns a part of its online identity. And that can lead to lost sales.

“You could find yourself in a situation where, even if it’s resolved in your favor, [there is] potential damage to your reputation. By allowing a site out there to exist making derogatory comments, [customers will] give up looking for your [real] company. You may miss out on potential business,” he said. “You need to take care of your storefront, so to speak.”

But for all the worry, cybersquatting isn’t the issue it was when Internet usage exploded in the 1990s, said Ron Brumbarger, chairman of Techpoint and the CEO of Carmel-based Web developer Bitwise Solutions Inc.

Brumbarger said disputes were common a decade ago, but he couldn’t remember the last time one of his clients ended up in a tussle with a cybersquatter. Bitwise takes precautionary measures for all its clients to shore up ownership of all relevant domain names. Brumbarger said that’s standard practice these days. The service is bundled into monthly bills.

“We don’t wait for them to do it [on their own], because they wouldn’t do it on time. And it would be forever tracking it down,” he said. “That said, it is critical. You can’t be losing the domain name. That’s just not a choice.”