Court rules YouPorn can sue ICANN for alleged .xxx antitrust violations

Kevin Murphy, August 14, 2012, 22:44:59 (UTC), Domain Policy

A California court today ruled that ICANN is subject to US antitrust laws and therefore the lawsuit filed by YouPorn.com owner Manwin Licensing over the .xxx gTLD can proceed.

In a mixed ruling, the Central District of California District Court granted some parts of ICM Registry and ICANN’s motions to dismiss the case and rejected others.

Here’s what it had to say on the subject of antitrust law, which ICANN argued back in January did not apply to it because it “does not engage in trade or commerce”:

The Court finds the transactions between ICANN and ICM described in the First Amended Complaint are commercial transactions.

ICANN established the .XXX TLD. ICANN granted ICM the sole authority to operate the .XXX TLD. In return, ICM agreed to pay ICANN money.

This is “quintessential” commercial activity and it falls within the broad scope of the Sherman Act. Even aside from collecting fees from ICM under the contract, ICANN’s activities would subject it to the antitrust laws.

That’s a pretty definitive knock-back for ICANN’s ballsy opening manoeuvre.

The court is allowing Manwin’s claims against ICANN to proceed. Manwin has until September 9 to amend and re-file its complaint.

As you may recall, Manwin sued ICANN and ICM last November, alleging that they conspired to break competition law by, among other things, forcing companies to defensively register .xxx domains.

ICM and ICANN filed separate motions to dismiss the case on seven grounds, but according to today’s ruling only two of these requests were successful.

What strikes me as particularly interesting on a first read are the definitions of the relevant domain name markets.

Under the Sherman Act, antitrust allegations have to be based on a defined “market”. Manwin’s complaint was based on the markets for “defensive registrations” and “affirmative registrations”.

The court ruled today that the company failed make the case that “affirmative registrations” is a market — because Manwin is happily running hundreds of porn sites in .com:

The Court finds Plaintiffs have failed to adequately plead the affirmative registration market. Plaintiffs have not alleged why other currently operating TLDs are not reasonable substitutes to the .XXX TLD for hosting adult entertainment websites. To the contrary, Plaintiffs allege that Manwin’s own website YouPorn.com is the most popular free adult video website on the internet.

However, the court found that “defensive registrations” is a market for the purposes of this case.

I am not a lawyer, but my sense is that this (pdf) is important stuff.

Lawyers: do feel free to chip in in the comments or via email.

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Comments (13)

  1. Excellent work by Manwin’s legal team. If “defensive registrations” is a market, the entire new TLD program might be in jeopardy, since that is truly the basic business model driving more than one application — i.e. cyberextortion, a protection racket.

  2. Ms Domainer says:

    *

    Let the REAL games begin!

    This ruling is not a surprise.

    *

  3. Brad Mugford says:

    “The Court finds the transactions between ICANN and ICM described in the First Amended Complaint are commercial transactions.

    ICANN established the .XXX TLD. ICANN granted ICM the sole authority to operate the .XXX TLD. In return, ICM agreed to pay ICANN money. ”

    Ouch. Looks like the court was not having ICANN’s BS.

    This ruling will open up the floodgates for potential legal action vs ICANN surrounding the gTLD program.

    They better set aside more money for “legal issues”.

    Brad

  4. what i find interesting is the role that is being defined for ICANN (the corporation) in this lawsuit. right at the top, this ruling says

    “In 1998, the Internet Corporation for Assigned Names and Numbers (“ICANN”) was created to OPERATE THE DNS [caps by Mikey].

    and then a little further in it says

    “Plaintiffs assert ICANN and ICM agreed to the following anticompetitive and predatory conduct: suppression of competition for the initial .XXX registry contract and renewal of that contract; preclusion of other adult content TLDs; setting above market prices and output restrictions; AND DELEGATING ICANN’S SALES AND PRICING AUTHORITY TO ICM [caps by Mikey] for the purpose of allowing ICM to institute even less competitive sales and pricing terms in the future.”

    is that old language that’s withstood the test of prior legal decisions? if it is, the “community” is operating under a set of assumptions that are pretty out of whack — and it might be a good idea to take a look at aligning these. i’m especially thinking of the recent out-for-comments piece on ICANN’s SSR Remit which posits a much narrower and more passive role for ICANN when it comes to assisting with the management of (rather than “operating”) the DNS.

    fascinating. thanks for the heads up, Kevin

  5. dustin says:

    I bet stuff like this is just going to increase the price of domain names. Register while you can, the best no bs price I have seen is at lowregister.com I hate it when registrars advertise $5 domain names, but require hosting charges. This site is the lowest for a domain registration. Good luck everyone.

    • Jil El says:

      Maybe you should check namesilo.com for a lower no BS price. And it is NOT just another GoDaddy reseller account.

  6. Philip Corwin says:

    Since every gTLD can have but a single registry operator and is therefore a natural monopoly, and since all have multiple aspects that recognize potential defensive registrations (e.g., Trademark Clearinghouse and sunrise sales period) this decision may certainly be cited in possible litigation against partcular new gTLDs, with unknown implications for the entire program.

    I noted that the court relied extensivley on the 9th Circuit Court of Appeals ruling that revived the CFIT v. VeriSign case. An ICA amicus brief explaining the secondary domain marketplace played a key role in reviving that lawsuit after an initial dismissal for supposed failure to state an antitrust claim. While the parties eventually agreed to mutual dismissal of the lawsuit, the precedent clearly lives on.

  7. Steve Jones says:

    The irony is strong in this case. Many in the adult industry point at Manwin in particular as being part of the downfall of the industry due to the prevalence and prominence of tube sites which they’ve largely been pioneering.

    But everyone in the industry is cheering them on in this fight since maybe the only thing loathed more than Manwin is .xxx due to fears that the adult industry would eventually be relegated to it.

    I do think they have a strong case with this and how this turns out may really transform the new gTLD space as a whole.

  8. Steve Jones says:

    @Brad: Good thing they have probably $100+ million surplus from the program they can shovel off to lawyers. I bet gTLD applicants will be pleased knowing how much of their fees will be going to attorneys vs. being necessary for infrastructure.

  9. for nothing i spent 400$ for very expensive .xxx domains other than gTLDs basically I am from India here hosting website is prohibited and lost money inspite if I register .com or .co would have earned some money but ultimately I lost it registering .xxx domains and there are millions who lost huge money on .xxx domains with lot of hopes that they get returns but icm ruins their investments.

  10. Joe says:

    In principle, I would have thought that the “monopoly” granted to ICM for .xxx would be no different than that to Verisign for .com, other than one being for an industry and the other being for all businesses.

    Wait a minute – .com is worse!

  11. though nobody really wants .xxx domain name except few stupidatos. now see what happen.

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