Domain name disputes arise largely from the practice of intentional cybersquatting or unintentional usage of domain names, which involves the pre-emptive registration of trademarks by third parties as domain names. Cybersquatters exploit the first-come, first-served nature of the domain name registration system to register names of trademarks, famous people or businesses with which they have no connection. Since registration of domain names is relatively simple and inexpensive - less than US$20 in most cases - cybersquatters normally often register hundreds of such names as domain names.

As the holders of these registrations, cybersquatters often then put the domain names up for auction, or offer them for sale directly to the company or person involved, at prices far beyond the cost of registration. Alternatively, they often keep the registration and use the good name of the person or business associated with that domain name to attract business for their own sites.

There is no agreement within the Internet community that would allow organizations that register domain names to pre-screen the filing of potentially problematic names. The reasons vary, ranging from allowing easy registrations to stimulate business, to the practical difficulties involved in determining who holds the rights to a name, to the principle of freedom of expression. Furthermore, the increasing business value of domain names on the Internet has led to more cybersquatting, which results in more disputes and litigation between the cybersquatters and the businesses or individuals whose names have been registered in bad faith.