THE BENEFITS OF RENTING A DOMAIN NAME

Renting a domain name can have numerous benefits including economical profitability. These consequences can be tax benefits, retention of the domain name ownership even despite a bankruptcy filing as well as being able to use the domain name by the original owner. As for individuals that want to rent these domain names, there can be many benefits including the use of a restricted domain name for one.
Although selling a domain name can be profitful, the issues of licensing or renting a domain name can be more valuable in the long term. The domain names have become well sought after and the issue of whether or not to sell the domain name or to license them has raised many concerns. However the benefits of licensing the domain names or in other words the “renting” of a domain name can be profitable. Internet domain names have an intangible value, because of the rising electronic commerce and the fact that more and more businesses are using domain names as their business names. Internet domain names however have a limited shelf value and must be used quickly to maintain their true financial worth.
A company’s determination of whether or not to rent a domain name depends on several considerations. If the domain name will only be used temporarily then it makes more sense to rent the domain name for the required use. The renting of domain name therefore becomes like a real estate agreement when the full ownership of the property is not available or it is not the desired goal.

What are the benefits of licensing a domain name?
The licensing of Internet domain names allows for greater financial flexibility and tax planning. Licensing can provide favorable tax consequences to the amounts of royalties received by an Internet domain name owner-transferor. The licensing income allows a greater amount of control over the royalties than merely for a one-time sales income. The reason for this control is due to the fact that there can be different forms of income include an assignment of the property to a family member or deferral of income by fixed deferred payments, the installment method, or contingent payments.
Licensing also allows a domain name owner to be able to maintain and retain certain enumerated rights. The Internet domain name has the benefit of being able to reuse the name if the e-business that licensed the Internet domain name fails. Since the electronic commerce businesses begin to fail then they can reuse the name if they determine to start a new business. The creator of the domain name should register the name with the U.S. Patent and Trademark Office and should file the licensing agreements as well.

Are there special terms that should be present?
The term of the lease is important. The term of the lease is the length of the lease. The negotiaton of the parties will determine whether the license is a perpetual license, which will likely be expensive, or obtaining options for a certain number of extensions. There is the potential for the right of first refusal term to be negotiated but will undoubtedly will cost more money. This right of first refusal signifies that the lessee would have a chance to match or beat another offer for the domain name when the current lease expires. Other provisions include warranties and indemnities. While typical domain name rental agreements require the lessee to indemnify the domain name registrant or "landlord" against claims or damages either from illegal use or otherwise, lessees should take care to try to achieve some reciprocity here. Even though you've done your due diligence, it's still comforting to obtain written representations and documentation from the registrant that it owns the name and that it has no knowledge of any claims or proceedings, pending or threatened, based upon use or ownership of the name.

Transfer rights should be considered. In these rental agreements, generally rental agreements prohibit the lessee from transferring its rights to the domain name to someone else which can be compared to assigning or subleasing. The business reasons for the possible transfer rights should be considered and also the affect if bankruptcy occurs. The transfer of rights and possible flexibility may demand more resources.

Two important clauses to inspect and negotiate concern cancellation rights and jurisdiction should be evaluated. A cancellation clause describes when and how your lease may be cancelled if there is a breach of the agreement. The types of claimed breaches must be examined and what notification and cure procedures will be incorporated in the lease to make sure that rights are protected. The type of forum that will be used to resolve a dispute must be considered. Also, since any contract's clauses are only as good as the ability to enforce them and which law will apply for the lease as well. The hosting combination terms should be evaluated. Whether or not the domain name landlord will include building hosting services into the rental agreement which usually does not cost extra. However there are strategy reasons to not agree to this type of arrangement since if there is a dispute then the hosting could be shut off easily. However, if a third party who is unbiased is used then there can be benefits. Whether or not a purchase option is important should be contemplated. There may be an "option to purchase" with the vendor before the lease is signed so that it will be in effect.


What about the transfer of the license agreement following a bankruptcy proceeding?
Another element of a favorable licensing domain name agreement is that it will allow the creator of the Internet domain name to quickly unattach himself from the use of this domain name in the event that the licensee faces bankruptcy proceedings. If the sale of the Internet domain name had been performed there would be different consequences. Internet domain names are considered by bankruptcy courts to be intangible and therefore the creator of the domain name would be unable to reclaim the domain name in the bankruptcy proceedings. The sale of an intangible domain name would therefore be equivalent to a bank account in terms of being intangible.