The following domain names are for sale, among thousands more:
They are called “blockchain domain names”, “Web3 domain names”, “crypto domains”, “NFT domain names” and “decentralized domain names“. Given the legal focus of this article, “decentralized domain names” will be preferred. Indeed, the adjective “decentralized” rightly evokes the disruption with the legal order which has been institutionalized since the birth of the Internet Corporation for Assigned Names and Numbers (ICANN).
Patents are filed, “top-level domains” are active (including .888, BITCOIN, .BIT, .COIN, .CRYPTO, .ETH, .NFT, .WALLET or .X), operators issue decentralized domain names (eg. : Unstoppable Domains, Ethereum Naming Service, RIF Name Service and Stacks) and secondary market platforms act as matchmakers (OpenSea, Rarible, and RIFOS, among others). An ecosystem is born.
The historic domain name system is administered by the ICANN and the Internet Assigned Numbers Authority (IANA). Without going into details, one should bear in mind that a legal architecture corresponds to the technical architecture. Pyramidal and centralized, this “icannocentric” legal system provides the ICANN with the legitimate power to impose, through a top-down approach, harmonized and predictable contractual conditions on gTLD registries and registrars (given their connection with a sovereign territory, ccTLD registries have more freedom). Among the numerous and complex contractual terms, it is worth recalling two principles. First, every domain name holder must provide the data necessary for their identification (these are the WhoIs data). Second, every domain name holder accepts the jurisdiction of a third-party decision maker who is provided with the power to rule on the ownership of a domain name, the execution of the said decision being quasi-automatic. This ingenious (although imperfect: iptwins.com, 2022-06-29) legal system is an effective alternative to state justice.
What about decentralized domain names? Remember that these do not belong to the naming system administered by the ICANN. Therefore, they escape the legal order of the latter and form, at best, a nebula of heterogeneous contractual elements. In short, ICANN offers intellectual property rights owners legal predictability that, at this stage, cannot be found in the developing alternative system.
A common argument among operators of the alternative naming system based on blockchain technology is that decentralized domain names are censorship-proof. Indeed, the issuer delivers to the end user a private key on a proprietary basis (like a house key, a car key, or a safe). In other words, unlike a DNS domain name registrar, the decentralized domain name issuer does not have the power to dispossess the end user of such a domain name. Furthermore, unlike a DNS registrar, the decentralized operator is not accountable to ICANN. It also cannot be subject to a UDRP-type decision that would require the transfer or cancellation of a decentralized domain name.
The proposed system is certainly compassionate towards freedom of expression. We must also welcome this new paradigm which promises everyone secure ownership of their own data. It should also be borne in mind that the issuance of decentralized domain names constitutes, in principle, a lawful and legitimate commercial activity.
However, this legal orientation seems utopian and illusory. Indeed, it would amount to providing end users with the means to commit offenses or infringe the rights of third parties with complete impunity. Tort law, a pillar of democracies, does not flinch in the face of disruptive innovations. In the 1990s, a libertarian ideology advocated that cyberspace, supposedly capable of self-regulation, was and should remain outside state legal systems. However, given the recurrent breaches of the law and the infringement of third-party rights, legislators have continually given judges the means to require operators to identify their contractual partners, perpetrators of wrongdoing in cyberspace, and whatever the era, web1 or web2. How could it be otherwise in web3? Failing to equip themselves with techniques securing the identification and condemnation of wrongdoers, web3 operators will see their liability engaged through the principles of contributory infringement. Moreover, judges do not like companies that, although sitting on “a mountain of resources“, do not devote any of these resources to the protection of the intellectual property of others (iptwins.com, 2018-06-27). Under pressure from intellectual property rights holders, investors, or even insurers, the first judicial decisions against the operators of the first or second market would inevitably push them to rethink their legal models.
One must recognize that a few operators offer solutions to limit infringements of intellectual property rights. However, the players are numerous, and the models are discordant. A harmonization core would be welcome. It would be in the greatest interest of the operators of the metaverse to collaborate loyally with the associations representing the intellectual property rights owners in general since these issues also affect the owners of trademarks, designs, and copyrights. Wouldn’t it be wise for all stakeholders to provide intellectual property rights holders, at the very least, with an immediately visible notification or take-down process and a legal procedure providing for the deletion of domain names or other non-fungible tokens (NFTs) contrary to intellectual property laws? Such a regulation model could be hooked to the “icannian” system. Alternatively, the non-DNS operators could invent a new legal model outside the ICANN one.
