Twitter-squatters

In the early 90’s the term “cybersquatter” was coined for internet profiteers whose sole strategy was to register domains in the name of businesses and sell these domains to the associated businesses for big bucks. This has since become illegal following legislation passed in 1999, which granted trademark users the right to sue cybersquatters. Now in the late 2000’s, businesses are facing a similar hurdle and a new term is soon to be forged. Twittersquatters, perhaps?

The mystifying success of Twitter, a service that essentially sends text messages en masse that updates anyone on what you’re doing, has led to problems for businesses who didn’t register for free Twitter accounts and are now being represented by non-associated people with accounts in their names. Soon everything will be sorted out, new legislation will be passed, and that will be the end of the issue until the next networking site springs up that provides a similar opportunity for _______squatters.

But maybe instead of waiting for the next opportunity to arise, we could create a universal solution in the form of a tied-ownership clause for businesses.

Tied ownership is a property right used to distinguish ownership of fugitive property; property that is not stationary or intangible, i.e. wild animals, ideas, etc. Tied ownership is the granting of a right based on the associated entity. The other type of fugitive property right is the right of first possessor – what is currently being used in most cyber related areas. The right of first possessor is axiomatic; the right is defaulted to the first one to claim ownership. What would happen if property such as twitter, facebook, and myspace accounts were defaulted to the tied owner – the entity associated with that name.

Right now the rule of first possessor is used because transaction costs are low; it is easy to determine who is granted the right to the account (the first one to register that account). But we are seeing the same sort of deadweight loss that occurred with cybersquatters in the 90’s, in addition to negative externalities in the form of defamation.

The deadweight loss comes from zero-sum activities, essentially inefficiency caused by over-investment of time and energy by squatters to acquire first possession of the account for the purpose of transfer, rather than production and creation of surplus value.

Sarah Needleman, from the WSJ, reports that unauthorized Twitter-ers have been representing certain businesses and in some cases, advocating their competitors and/or making false claims about the company. Cases such as this cause inefficiency that could otherwise be avoided by implementing a rule to tied ownership.

Unfortunately, the rule of tied ownership is difficult to implement and would cause much confusion. For example, which company would get the Twitter account “Aldo”? Would it be Aldo Shoes? Or Aldo Software Systems? And who would be the governing body that would regulate such matters? Trademark registration could automatically register the associated Twitter account; with any other Twitter similar accounts having to be manually registered by the company. If the company chooses not to register Twitter accounts that represent their trademark (such as Aldo Shoes and AldoShoes) then they forfeit any right to sue the owners of those accounts. This would create large incentives for companies to take care of the registration to avoid any inefficiencies in the system.