At Internetrix we have a problem. Yes a problem. Let me tell you about it. We have domain squatters sitting on www.internetrix.com.

Domain squatting is when somebody registers a domain name and just sits on it until someone else wants it. Squatters don’t have any intention of creating a site related to the domain name, rather just wait for the money to roll in—it’s a modern form of extortion.

Since the internet is a platform for doing business, domain names are often as valuable as a trademark or business name.

Some people (or businesses) register hundreds of domain names in the hopes of selling them for thousands or even millions; www.business.com sold for almost US$8 million when it really only cost US$70 to register. It’s a free market economy. People are motivated by profit. However, it’s also against the rules to play this way—but I’ll get to that soon.

The market for buying big names and selling them for an exorbitant amount of cash is evolving. Many of today’s domain squatters aim more at cashing in through online advertising. Companies buy up generic names such as mutualfunds.com and load them up with pay-per-click advertisements using Google or Yahoo. Visitors to these sites see no more than some text advertisements.

This is what has happened www.internetrix.com. Have a look for yourself.

Regardless of the form it takes, cyber squatting is not illegal—perhaps unethical, but not illegal. A recent report by the US Government’s General Accountability Office found that 3.89 million domain names—8.6 percent of all domain names—are registered with false or incomplete information. The report also showed that 2.31 million domain names are registered with information that is what they call “obviously and intentionally false”.

Businesses who feel their trademark has been infringed are really the only ones to have a case against the squatters. ICANN (Internet Corporation for Assigned Names and Numbers) is a non-profit organisation responsible for IP address space allocation, protocol assignment and DNS management. It undertakes dispute resolution using online arbitration. The arbitration process lasts 45 days, takes place online and costs about US$1000.

As a result, the economics of squatting are fairly simply. A domain name can be bought for less than $10 a year, and with a complainant having to spend $1000 on arbitration, not to mention international trade marking, a squatter only needs to set their price at US$800 or so and they only need one domain in 80—just over one percent—for their scams to pay off.

Whether a future effort to clamp down on squatters will result in more squatters having their domain names taken away has yet to be seen. The truth for many businesses, however, is that squatting is as much a malaise of the internet as spam; just ask one of our clients whose domain lapsed, and who then had to pay a squatter hundreds to get their site back online using a domain name they owned free and clear just months before.

For the time being, it looks like there’s only one way for Internetrix to solve the problem of the pesky domain squatter on www.internetrix.com – pay up! On principal, however, we think we’d rather sue…