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Unrest remains despite new new gTLD contract

Kevin Murphy, April 30, 2013, 08:47:54 (UTC), Domain Registries

ICANN has proposed big changes to how it will handle premium domain names, dot-brands, mergers and acquisitions and mandatory fees in new gTLDs.

It published a new version of the proposed Registry Agreement for new gTLD operators this morning, saying that it is the product of months of “negotiations” with applicants and registries.

But some applicants and back-end providers disagree with this characterization, saying that while some registries helped ICANN with the text they have no authority to speak for all applicants.

The agreement was posted for 42 days of public comment this morning. Before it is approved by the ICANN board of directors, no new gTLD applicants will be able to sign contracts and begin to go live.

There are several major changes compared to the version in the Applicant Guidebook.

Premium domains not dead after all

In what could prove to be the most significant and controversial changes, ICANN has given registries the ability to run Founders Programs and premium name schemes without interference from trademark owners.

New text in the contract will let them self-register up to 100 names “necessary for the operation or the promotion of the TLD” and release those names to third parties if they want.

This appears to be a way around the fear that mandatory Sunrise periods could thwart registries’ plans to sign up anchor tenants to the gTLDs, a crucial launch marketing tactic for many.

The new RA also appears to give broad powers to the registry to allocate premium domain names at will.

Registry Operator may withhold from registration or allocate to Registry Operator names (including their IDN variants, where applicable) at All Levels in accordance with Section 2.6 of the Agreement. Such names may not be activated in the DNS, but may be released for registration to another person or entity at Registry Operator’s discretion.

There does not appear to be a numerical limit on how many domains can be reserved in this way.

Hypothetically, this might allow a registry to reserve the entire dictionary (or dictionaries) at launch, preventing holders of trademarks on generic terms grabbing the matching names during Sunrise.

The still-draft Trademark Clearinghouse rules will also play a part here, but from the RA it looks like registries have just been handed a massively flexible reservation tool.

If my initial interpretation is correct, I expect the trademark lobby will have strong view here.

Concessions for dot-brands

New text in the agreement makes it clearer that ICANN has no plans to redelegate dot-brand gTLDs to third parties after the Registry Agreement expires or is terminated.

This means, for example, that if L’Oreal decides to stop using .loreal at some point in future, ICANN very probably won’t give .loreal to a competitor. The new text is:

(i) ICANN will take into consideration any intellectual property rights of Registry Operator (as communicated to ICANN by Registry Operator) in determining whether to transition operation of the TLD to a successor registry operator

It’s probably not rigid enough language to satisfy some lawyers’ wishes, but I think it does enough to convey the spirit of ICANN’s intentions.

ICANN is of course mainly concerned that dead gTLDs don’t leave registrants with dead domain names, but if there are no registrants I can’t imagine why it would want to redelegate.

Lower fees for registries

Newly added text in the RA specifies that registries must pay ICANN a $5,000 one-off fee (per TLD) to use the new Trademark Clearinghouse, plus with $0.25 per domain that uses its services.

Domains registered under Sunrise periods or which trigger Trademark Claims alerts would incur this one-time fee, which appears to have been reduced from the $0.30 previously discussed.

These fees will actually be passed on to the Trademark Clearinghouse operators (Deloitte and IBM), for which ICANN has agreed to manage billing in order to keep costs down.

In addition, the RA now clarifies that the registry operator’s regular fixed fees to ICANN of $6,250 a quarter only kick in from the date that the gTLD hits the DNS root, not the date of contract signing. That could save registries up to a year’s worth of fees, if they’re late to delegation.

M&A approvals

There are also changes to the way ICANN plans to approve of mergers and acquisitions among registries.

First, it will be much easier for the contract to be passed around within a corporate holding group. The RA now states:

Registry Operator may assign this Agreement without the consent of ICANN directly to a wholly-owned subsidiary of Registry Operator, or, if Registry Operator is a wholly-owned subsidiary, to its direct parent or to another wholly-owned subsidiary of its direct parent, upon such subsidiary’s or parent’s, as applicable, express assumption of the terms and conditions of this Agreement

This change would seem to enable portfolio applicants that have applied for many gTLDs each under separate shell company names (Donuts, for example) to consolidate their contracts under a single parent.

What I don’t think it does is allow for contention set resolution based on joint ventures (which are obviously not “wholly owned”), such as what Uniregistry and Top Level Domain Holdings announced they had agreed to yesterday.

The new RA also states that ICANN must approve subcontracting deals the registry inks for any of the five “critical functions” (EPP, DNS, DNSSEC, Whois and escrow).

Unilateral amendments are gone

The controversial “unilateral right to amend” that ICANN wanted to grant itself — essentially an emergency power to change the contract almost at whim and over the objections of registries — is gone.

It’s been replaced with a convoluted series of procures almost identical to those found in the proposed final version of the 2013 Registrar Accreditation Agreement currently open for comment.

Registries would get the ability to punt the changes to a GNSO Policy Development Process, submit alternative amendments, take ICANN to arbitration or request exemptions, under the new rules.

While the new provisions still give ICANN the ability to force through unpopular changes under certain circumstances, a lot more engagement by registries is envisaged so “unilateral” is probably not a good word to use any more.

So is the deal final or not?

ICANN said in a blog post: “The proposed agreement is the result of several months of negotiations, formal community feedback, and meetings with various stakeholders and communities.”

It added:

We have come a long way since February 2013 when we posted a proposed Revised New gTLD Registry Agreement for public comment. A new and highly spirited sense of mutual trust has catapulted us into a fresh atmosphere of collaboration, which in turn has led to a consistently more productive environment. The spirit of teamwork, productive dialogue and partnership that has underpinned this negotiation process is tremendously heartwarming, as it has allowed us to bring to fruition a robust contractual framework for the New gTLD Program.

But some are worried that ICANN seems to be portraying the RA as equivalent to the Registrar Accreditation Agreement, which was subject to 18 months of talks with a negotiating team representing registrars.

The registries’ Registry Agreement Negotiating Team (RA-NT), on the other hand, was formed less than three weeks ago during ICANN’s meeting in Beijing, and did not have the authority to speak for all applicants.

The RA-NT said in a statement published by ICANN:

The RA-NT agreed to review the new gTLD Registry Agreement with ICANN staff in an effort to minimize some of the more controversial aspects of the Agreement for applicants as a whole. While participants reflected a variety of perspectives, the team did not “represent” or have any authority to “speak for” new gTLD applicants generally, or any group of applicants.

ARI Registry Services CEO Adrian Kinderis told DI:

My fears (and frustrations) come from the fact that ICANN staff have made it sound like they have reached the same point in the process. “It is done”. It most certainly isn’t “done”. They need to understand that the negotiation is actually still very much active and all of the community should feel like their opinions and feedback will be considered in the development of the “final draft”.

The draft RA is now open for public comment until June 11.

That would give ICANN about a month to synthesize all the comments, make any changes, and put the deal to its board of directors for approval during the meeting in Durban, South Africa, this July.

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Comments (3)

  1. Thanks Kevin.

    Are you suggesting they should wait for Durban!? Given we are now faced with further delays I would certainly be an advocate of ICANN moving VERY quickly on this and scheduling a Board session as soon as practical after they have “synthesized all the comments”. I do not see that they should punt for the convenience of Durban. At this point, every day is important.

    • Kevin Murphy says:

      I’m not suggesting ICANN should do anything, just speculating about what it might do.

      I guess it depends on how final the draft is and how many changes, if any, need to be made before it goes fully final.

  2. Jim Prendergast says:

    ICANN really needs to post a red-lined version of the June 2012 agreement as opposed to only the February version.

    The June 2012 agreement is the version that most closely resembles the agreement that was in place when people submitted applications and fees.

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