On January 12, 2012, the Internet Corporation for Assigned Names and Numbers (“ICANN”), a government-sponsored, non-profit corporation responsible for coordinating the Internet’s systems of unique identifiers, will begin accepting applications for new top-level domain (“TLD”) names. In the past, only a limited set of TLDs have been allowed, including the familiar .com, .org, and .gov extensions. Under the new proposal, companies and individuals may register, name and operate their own TLDs with few limitations. The fee for a new TLD will be $185,000, with an additional annual maintenance fee of $25,000.

Various industries, including the International Franchise Association, have lobbied against the expansion of TLD options, citing fears of cyber-squatting, trademark abuse and fraud. Opponents argue that companies will have to spend enormous sums of money to defensively register TLDs in order to protect their brands. Members of Congress from both sides of the aisle have criticized the proposal, calling for the program to be delayed.

Proponents of the proposal have argued that opening the Internet address system will help foster innovation, creativity and marketing possibilities. ICANN also argues that, because the new guidelines will allow the use of non-Latin characters, the proposal has the potential to attract Internet users who speak languages such as Cyrillic, Arabic and Chinese.

As the January 12th deadline looms, franchisors should carefully consider the benefits and drawbacks that might accompany the opening of the Internet address system and should consult legal counsel to develop appropriate responses to these changes.