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The Internet originated with research funding provided by the Defense Advanced Research Projects Agency (DARPA) to establish a military network. As its use expanded, a civilian segment evolved with support from the National Science Foundation (NSF) and other science agencies. No formal statutory authorities or international agreements govern the management and operation of the Internet and the Domain Name System (DNS).

Prior to 1993, the NSF was responsible for registration of nonmilitary generic top-level domains (gTLDs) such as .com, .org, .net, .edu and .gov. In 1993, the NSF entered into a five-year cooperative agreement with Network Solutions, Inc. (NSI) to operate Internet domain name registration services for the .com, .net, .org, .edu, and .gov domains. The contract with NSF allowed NSI to charge $100 for an initial two-year registration and $50 annually starting in the third year. During that time period, NSI registered approximately 100,000 Internet domain names per month. Registration applications were made via e-mail and in more than 90% of registrations no human intervention took place. On average, a new registration occurred approximately once every 20 seconds.

At that time, NSI performed two functions in the domain name system. First, it screened domain name applications against its registry to prevent duplicate registrations of the same name. Second, it maintained a directory linking domain names with the IP numbers of domain name servers. The domain name servers, which are outside of NSI's control, connect domain names with websites and e-mail systems.

NSI did not make an independent determination of an applicant's right to use a domain name. Nor did NSI assign domain names; users could choose any available second-level domain name. NSI assigned domain names on a first-come, first served system. Since the second-level domain name must be exclusive, and only one specific second-level domain name can be registered for each top-level domain, there were numerous disputes over who has the right to a specific second-level domain name. NSI implemented a Dispute Resolution Policy, in an attempt to resolve domain name disputes without litigation.

When NSI began registering domain names in 1993, many enterprising individuals and companies registered large numbers of domain names, expecting to be able to sell these domain names to various companies who would eventually decide to establish a web presence. Many of these domain names were simply generic, but potentially valuable names, such as; however, others contained the trademarks owned by third parties. These latter registrants (who have been referred to variously as cybersquatters and cyberpirates), have caused most of the domain name disputes that have been filed in courts in the United States and elsewhere.

With the cooperative agreement between NSI and NSF due to expire in 1998, the Clinton Administration, through the Department of Commerce (DOC), began exploring ways to transfer administration of the DNS to the private sector.

NSI’s Dispute Resolution Policy[]

Faced with complaints from trademark owners that others were registering domain names containing their registered trademarks, NSI developed a “dispute resolution policy” to deal with these problems. The policy, which was revised repeated, was drafted primarily to keep NSI out of litigation over domain name disputes, not to resolve disputes regarding domain name usage in a fair manner protecting the due process rights of the conflicting parties.

The biggest problems with NSI’s policy were:

  • NSI favored the owner of a registered trademark, even if the other party has equal or greater right to the mark.
  • A party who has been using the domain name for a long period of time could have its investment in the domain name lost without a trial.
  • NSI did not apply traditional trademark infringement law to the dispute.
  • NSI did not actually resolve the dispute, but at most would place the domain name on “hold,” so that no one could use it, forcing the parties to go to court to get a final resolution of the issue.

While some parties used the NSI dispute resolution process successfully, many had to go to court to obtain relief.

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