Domain squatting (occasionally still called cybersquatting) typically happens for one of two reasons.
The owner could be holding the domain for a period of time to build up interest, then offer it for public sale in hopes of a bidding war. The owner could also be squatting to profit from the domain more immediately. This could be done by running a bunch of ads on a parking page, by offering the domain for rent to another entity (so you could use the domain and put up a site, but wouldn't own it), or by attempting to quickly sell the domain for much more than was paid for it.
Another domain squatting tactic is to buy expired domain names in the hopes that the owners let them expire by accident and will want them back, and are willing to pay a premium for them.
Domain squatting can also be done accidentally by someone with good intentions, e.g. a big fan of a particular celebrity, character or sports team. That person could register the domain, e.g. "batman.com" and set up a fan site dedicated to all things Batman. But that site isn't actually owned by DC Comics, who own the rights to the Batman character.
As noted, the person who set up the site might just be a huge Batman fan, but the person could also be hoping that DC will offer them a lot of money for the domain to avoid legal wrangling (though in this case the squatter doesn't have much of a case).
Legally, resolving domain squatting requires determining several things. Is the domain name part of someone's trademark? Is the domain name part of a well-known brand, even if not trademarked? (Like a celebrity's identity, e.g. it's unlikely anyone's going to assume "georgeclooney.com" is about anyone other than the actor.) Was the person who bought the domain acting in "good faith" (e.g. big fan) or "bad faith" (i.e. hoping to profit from identity assumptions or sale).
Bad faith domain squatting is illegal, but can still be expensive to resolve by legal channels.
What is the difference between domain speculation and squatting?
There's no single, definitive (i.e. legally binding) definition, but generally squatting implies "bad faith" intent on the part of the person or company that has registered the domain.
That means that they have no interest in or intentions of creating a website for the domain or otherwise using it (like it becoming the main web presence for their business). That person just bought it to sell it for more than they paid for it (ideally much more).
Often squatters will intentionally target a company, product or prominent person in registering domain names. By doing this, squatters are gambling that the company or person targeted will just pay what the squatter wants to avoid expensive legal proceedings and the risk of being denied the rights to that domain name.
For example, a registrant might register "thisismycompany.ca" in hopes that the company, which is based in New Zealand, for example, would start doing a lot of business in Canada and want to buy that domain. Or if a company was launching a new product called SuperNamer, and a registrant who didn't represent the company registered "supernamer.com" specifically to try and make the company pay them to get that domain so they could launch their new product with the most recognizable domain name.
Domain speculation, on the other hand, involves registering domains that might be useful or of interest, but which don't block an existing trademark or brand. For example, instead of registering a variant of an existing company's domain, registering something more general, like "weselldomains.com" in hopes that some domain registrar might want it.
Speculators are often more open about the fact that the domains in their portfolio are for sale, as well. Whereas squatters might set up a basic page to make it marginally look like the domain is in use. Or create a parking page full of ads to try and get click traffic for extra revenue until they can sell the domain.
Some squatters own many domains, though some will only target a few, since the more domains you own that haven't sold yet, the more money you've invested without return. Speculators often own a large portfolio of domains, targeting various industries with a selection of relevant terms.
Domain squatting, if a person's or company's actions are deemed to be that, is illegal. Some countries have specific laws against squatting that are more specific than standard trademark law. However, since the internet is a global entity, issues of jurisdiction can arise.
Disputes are generally resolved using ICANN's Uniform Domain Name Resolution Policy (UDRP). There has been some criticism that UDRP favours large corporations in its rulings. Some domain name disputes are also resolved in court via lawsuits.
This is part four of a six-part series to help you find your ideal domain name. Continue on to the next part or jump to another part in the series:
- Someone has registered the domain I want. Help!
- How do I pick a domain that people will remember?
- Why it's important to have you own domain and web presence
- What is domain squatting/cybersquatting?
- Someone has registered a domain with my trademark. What do I do?
- How do I find out if the domain I want becomes available?