The loosening of restrictions on internet domain names could lead to a boom in cyber-squatting and increased costs for UK businesses, say legal experts.

Last week the Internet Corporation for Assigned Names and Numbers (Icann) relaxed strict controls on the use of “top-level” domains, such as .com and .co.uk. In theory, this would allow individuals and organisations to create custom suffixes, such as .car or .melon, by becoming a registry for that extension.

Applicants will be required to prove their ability to operate as a registry on a financial and infrastructural level, as well as having to pay an as-yet-undisclosed fee. The first wave of claims will then be made public, allowing other parties to make objections.

Details of how such conflicts will be resolved have yet to be revealed, but the legal community is already voicing concerns about intellectual property disputes.

“To a certain extent the lawyers involved in this area will be delighted, as they get to advise on how to conduct the process, and on any disputes that may arise,” said John Mackenzie, partner at law firm Pinsent Masons.

“But the real winners are the cyber-squatters. There is a battle for traffic, and these additional domains will put up extra signposts that really aren’t helpful.”

Cyber-squatting may be less of a problem than clashes between two legitimate claimants, said Leigh Ellis, partner at Gillhams. The authority overseeing such conflicts is likely to use a system similar to the dispute resolution service operated by Nominet, the registry for .uk domains.

Businesses will also have the riskier option of turning to the courts to protect their brands.

“The advantage of the dispute resolution service is that it’s cheap and it’s quick,” said Ellis. “The disadvantage is that you are not entitled to claim costs, whereas in legal proceedings the successful party is usually awarded them.”

A Nominet spokesman advised businesses to be aware of developments in the sector and to monitor the online presence of their brands.