Hidden Cost of a UDRP
I’ve spent a considerable amount of time writing about UDRP filings. Most of my attention is paid to valuable domain names such as LLL.com or one word .com domain names that seem like they should be less risky to own. UDRP risk is something domain investors need to consider with every purchase.
The greatest and most obvious risk a UDRP poses is a loss of ownership of a domain name. A domain owner may have spent thousands of dollars to acquire a domain name only to see a UDRP panel award it to a complainant, rightly or wrongly. In addition, a domain owner can spend thousands of dollars on a good domain lawyer to defend the right to own this domain name, win or lose.
There is at least one other less visible risk of the UDRP that harms a domain name owner, even if the domain name is not lost.
When it comes to domain name acquisitions, UDRP risk is one of the things I consider. I don’t want to buy a domain name that has a high potential for a UDRP filing. Some UDRPs are unavoidable for various reasons, and many domain names are defensible. However, if there seems to be a good chance that I will have to defend a domain name in a UDRP, I would likely pass on the opportunity to buy it.
If in evaluating a prospective domain name purchase, I saw that a domain name was previously the subject of a UDRP proceeding, it is likely that I would pass on this acquisition opportunity. A complainant that lost a UDRP would likely continue to monitor the status of the domain name, and a change of ownership could trigger them to file a new UDRP on the domain name. They may even skip the UDRP and opt to litigate instead.
There is nothing to stop a company from filing multiple UDRP proceedings. This is especially the case after a change of ownership. If a company was aggressive about filing a UDRP one time, it is probably more likely that the company would file again if given the opportunity. Further, because I feel this way, I am quite sure others would, too, and this would hamper my ability to profitably sell this domain name if I opted to buy it.
Essentially, if active domain buyers are unwilling to pay market value for a domain name because of the previous UDRP, the value of that domain name decreases. I am not going to take a guess at how much the value would be harmed, but it could be substantial. For me to buy a domain name that is below value, it would need to be aggressively priced and I would need to be confident I could also defend the domain name at a cost that would still make the purchase a good deal. I would also have to price in an increased risk of losing the domain name.
It’s always good to see a domain owner successfully defend a UDRP on a descriptive domain name. Unfortunately, even winning a UDRP can’t eliminate this hidden cost.
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