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Lawyer asks: how the hell did Demand Media pass the new gTLD cybersquatting test?

Kevin Murphy, April 18, 2013, 19:07:00 (UTC), Domain Registries

A lawyer apparently representing a rival new gTLD applicant has questioned ICANN’s background screening processes after Demand Media managed to get a pass despite its history of cybersquatting.
Jeffrey Stoler, now with the law firm Holland & Knight, last July said ICANN should ban Demand Media and its partner Donuts from applying for new gTLDs under the rules of the program.
This month, he’s written to ICANN, the GAC and the US government to express “alarm” that both companies have managed to pass their background checks. Stoler wrote:

This alarm arises from the overwhelming evidence, as referenced below, that: (a) Donuts is a “front” for Demand Media, Inc. (“Demand Media”), and (b) Demand Media’s status as precisely the kind of proven cybersquatter that ICANN’s rules were designed to weed-out of the gTLD application process.
How ICANN’s background screening panel could — in the teeth of that evidence — approve the continued participation of Donuts in the new gTLD program (the “Donuts Decision”) requires justification. This letter formally requests that ICANN, pursuant to its obligations of accountability and transparency, provide an explanation of how, and on what basis, the Donuts Decision was made.

Both Donuts and Demand Media responded with anger and disdain.
CEO Paul Stahura told ICANN that Donuts has discovered that Stoler, who has still not disclosed which client he’s representing in this matter, is actually on the payroll of a rival.

Donuts suspected his client was a competing applicant seeking to gain commercial advantage, and we have since confirmed this in fact is the case.
Not only do the letters intentionally misrepresent facts, they are a preposterous, extra-­procedural tactic that is a regrettable waste of time and community resources.

David Panos, director of Demand’s applying subsidiary, United TLD Holdco, was similarly dismissive:

Clearly, Mr. Stoler’s client has a substantial commercial interest in the new gTLD program and is seeking to eliminate its competition by mischaracterizing the relationships of other competing applicants and by restating factually inaccurate statements

What’s notable from both the Stahura and Panos letters is that neither company actually addresses Stoler’s allegations directly, resorting instead to mainly fudging and ad hominem arguments.
Stoler probably is seeking a competitive advantage for his mystery client, and his claims about Donuts being a “front” for Demand do come across as a bit of a stretch even for a lawyer, but that doesn’t mean that all of his arguments are wrong.
ICANN’s Applicant Guidebook for the new gTLD program is pretty clear: if you’ve had more than three adverse UDRP decisions, with at least one in the last four years, you’re “automatically disqualified” from the program.
Demand Media, as Stoler alleges and the public record supports, has lost about three dozen UDRP cases through subsidiaries such as Demand Domains, the most recent of which was in 2011.
So how did Demand pass its ICANN background screening?
The Guidebook does say “exceptional circumstances” are enough to get an applicant off the hook, but it’s hard to see how that would apply to Demand’s over 30 UDRP losses.
And Demand doesn’t want to talk about it.
None of its responses to ICANN that have been published to date even attempt to say why Stoler is wrong, and the company declined to comment when we asked for clarification today.
Donuts, which is using Demand as its back-end registry and has given the company the right to acquire interests in over 100 of its new gTLDs (should they be approved) didn’t want to comment either.
Which, some might say, plays right into Stoler’s hands.
If there’s a simple, straightforward explanation for why the background screening rules apparently didn’t apply to Demand Media, is it unreasonable to ask what that explanation is?

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Comments (4)

  1. Andrew says:
    April 18, 2013 at 7:13 pm

    I think the idea of Donuts as a front is a bit of a stretch.
    But the Demand issue is pretty cut and dried. Unless you argue it was a different subsidiary, it has 3+ losses.
    Should the arbitrary 3 UDRP rule have been in the guidebook? I don’t think so. But it was. So ICANN will eventually need to answer the question.

    Reply
  2. RaTHeaD says:
    April 18, 2013 at 7:39 pm

    i don’t like to give out insider information for free but perhaps they could use my best argument. “i was drunk at the time and i really don’t remember much about it.” just my opinion… other opinions may differ.

    Reply
  3. Martin Smith says:
    April 18, 2013 at 8:38 pm

    You should also ask why so many companies passed the IE background check. Many of them have lost antitrust actions and payed millions of fine or have been reprimanded by other governmental actions. See for more details: http://www.circleid.com/posts/implications_of_icanns_new_tld_disqualification_policies_and_cybersquatting/
    Its clear: if ICANN let’s pass Disney, UBS and Yahoo they also need to blend the rules for Demand Media 😉

    Reply
  4. Johnson says:
    April 19, 2013 at 10:38 am

    So, who did the dirty on Donuts?

    Reply

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