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China Domain Name Scam

How the Chinese Cheat in most aspects of Business

How many of us have traveled to China and encountered someone on the streets trying to sell us a Rolex for about a couple hundred bucks? Copy watches are a major tourist scam in China. So, I guess I shouldn’t be surprise about the domain name scam.

The email came last Friday from a company alleging that it will “register the China domain names ethicssage.cn and ethicssage.com.cn and ethicssage,net.cn and ethicssage.org.cn and internet keyword ‘ethicssage’ and have submitted their application.” They claimed to have been waiting from “Mr. Oliver Liu’s approval and think these CN domain names and internet keyword are very important for their business. It went on to say that: “Even though Mr. Oliver Liu advises us to change another name, we will persist in this name.”

I don’t know how you can register an internet keyword, but leave it to the Chinese to find a way – illegal, I might add. I didn’t find Mr. Oliver Liu on the Net, but up popped a Chinese domain name registrar, Marcaria.com, which claims to have greater than 60 registries worldwide with hosting services.

While taken aback by the emails from a Chinese domain name registry, I’m not surprised that a Chinese company has come up with a new way to scam people into buying something they don’t need, including copies of popular items. You remember when Apple sold its Apple Watch last April starting at about $349? Well it was on sale in China -- a fake product -- about one month earlier for about $40-$80.

Then there is the theft of intellectual property. The conventional way to protect intellectual property is to patent it. This gives an inventor legal protection for her idea: if others want to use it, they must pay her. The snag is that she must publish her idea, making it easy for someone in a less lawful country to steal it.

So a lot of companies are keeping their most valuable ideas under wraps. Alas, this is not foolproof, either. China employs thousands of hackers to steal foreign secrets, as a reported Mandiant, a computer-security firm.

Many companies do not realize when their secrets leak. Richard Bejtlich, the chief security officer of Mandiant, estimated over 90% of firms penetrated by Chinese hackers were unaware of the fact. A survey by ASIS International, a security-industry body, estimated the annual value of stolen corporate intellectual property at $300 billion in America. Another put it at over $1 trillion worldwide.

Digital thieves hail from all countries, but China stands out. In the 16 years since America’s Economic Espionage Act (EEA) made the theft of commercial secrets a federal crime, a third of all EEA prosecutions have involved people born in China or seeking to help its government or businesses. Since 2008, 44% of cases have had a Chinese connection.

One defendant stole secrets relating to military aircraft and the Space Shuttle. Others have spied on firms such as Ford, GM, Dow Chemical, Motorola and DuPont. The Chinese government strenuously denies any involvement. It notes that its firms are victims, too. Somehow, I don’t feel sorry for the Chinese.

Last March, Mike McConnell, former director of national intelligence under President George W. Bush, said that the Chinese government – seeking to steal valuable secrets – has hacked into the computers at every major U.S. company. So, cheating is state-sponsored in China.

Going back to the domain name scam, here are the warning signs and how correspondence is likely to look. A Chinese registrar service offers you a “brand protection” package. The package includes registering a long list of Asia-related domains at a fairly hefty cost per domain.

It is a practice that marketers call “slamming.” Essentially the technique involves some collection of the following tactics:

  • Informing you that some third-party company is trying to register your brand within the Asian domain realm.

  • Advising you that as a courtesy, the registrar is seeking your “permission” for the third-party to register using your brand name.

  • Providing you with first-option to register the Asian domains under your own brand.

  • Good cop/bad cop games between the fictional registrar and the alleged 3rd party attempting to register your branded domain.

  • Registrations can reportedly take place with a third party email account, so you don’t have direct access to the domains.

  • Prices are either abnormally high, limited to 5 to 10 year minimum registrations, or both.

The practice of slamming has increased within the last few months, and should increase even more considering the fact these domains are now accessible to anyone.

Here is my advice. First, as soon as possible, register whatever domains you need to protect your company or brand. Second, if someone has already actually registered a domain name that is important to you and they are now offering to sell it to you, you essentially have three choices. One, let the domain name go. Two, buy it from the company that “took” it from you. Or three, pursue legal action against the company that took it from you.

I chose a fourth path, which is to ignore incoming emails. I figure the cost to register my domain name in China probably would exceed any benefits I derive from it, in part because I don’t advertise or sell any products on my website. In fact, as my readers know, I deal with ideas and use my site to share my expertise on ethics issues and, I hope, help others.

The irony is not lost on me that a Chinese company is threatening to compromise my ethicssage name. Ethics, after all, is an anathema to the Chinese.

Blog posted by Dr. Steven Mintz, aka Ethics Sage, on July 21, 2015. Professor Mintz teaches in the Orfalea College of Business at Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvicecom.

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