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Verisign sues .xyz and Negari for “false advertising”

Kevin Murphy, February 24, 2015, 08:41:40 (UTC), Domain Registries

Handbags at dawn!

Verisign, the $7.5 billion .com domain gorilla, has sued upstart XYZ.com and CEO Daniel Negari for disparaging .com and allegedly misrepresenting how well .xyz is doing.

It’s the biggest legacy gTLD versus the biggest (allegedly) new gTLD.

The lawsuit focuses on some registrars’ habit of giving .xyz names to registrants of .com and other domains without their consent, enabling XYZ.com and Negari to use inflated numbers as a marketing tool.

The Lanham Act false advertising lawsuit was filed in Virginia last December, but I don’t believe it’s been reported before now.

Verisign’s beef is first with this video, which is published on the front page of xyz.com:

Verisign said that the claim that it’s “impossible” to find a .com domain (which isn’t quite what the ad says) is false.

The complaint goes on to say that interviews Negari did with NPR and VentureBeat last year have been twisted to characterize .xyz as “the next .com”, whereas neither outlet made such an endorsement. It states:

XYZ’s promotional statements, when viewed together and in context, reflect a strategy to create a deceptive message to the public that companies and individuals cannot get the .COM domain names they want from Verisign, and that XYZ is quickly becoming the preferred alternative.

As regular readers will be aware, .xyz’s zone file, which had almost 785,000 names in it yesterday, has been massively inflated by a campaign last year by Network Solutions to push free .xyz domains into customers’ accounts without their consent.

It turns out Verisign became the unwilling recipient of gtld-servers.xyz, due to it owning the equivalent .com.

According to Verisign, Negari has used these inflated numbers to falsely make it look like .xyz is a viable and thriving alternative to .com. The company claims:

Verisign is being injured as a result of XYZ and Negari’s false and/or misleading statements of fact including because XYZ and Negari’s statements undermine the equity and good will Verisign has developed in the .COM registry.

XYZ and Negari should be ordered to disgorge their profits and other ill-gotten gains received as a result of this deception on the consuming public.

The complaint makes reference to typosquatting lawsuits Negari’s old company, Cyber2Media, settled with Facebook and Goodwill Industries a few years ago, presumably just in order to frame Negari as a bad guy.

Verisign wants not only for XYZ to pay up, but also for the court to force the company to disclose its robo-registration numbers whenever it makes a claim about how successful .xyz is.

XYZ denies everything. Answering Verisign’s complaint in January, it also makes nine affirmative defenses citing among other things its first amendment rights and Verisign’s “unclean hands”.

While many of Verisign’s allegations appear to be factually true, I of course cannot comment on whether its legal case holds water.

But I do think the lawsuit makes the company looks rather petty — a former monopolist running to the courts on trivial grounds as soon as it sees a little competition.

I also wonder how the company is going to demonstrate harm, given that by its own admission .com continues to sell millions of new domains every quarter.

But the lesson here is for all new gTLD registries — if you’re going to compare yourselves to .com, you might want to get your facts straight first if you want to keep your legal fees down.

And perhaps that’s the point.

Read the complaint here and the answer here, both in PDF format.

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Comments (13)

  1. Rubens Kuhl says:

    More examples of VRSN being petty can be found at http://newgtlds.icann.org/en/program-status/odr/determination , where VRSN picked a good number of gTLD applications and filed string confusion objections on them. Although none of them was really warranted, the worse was .NEC, a Japanese brand TLD.

  2. Is it petty, probably, but if you don’t keep people in line then it grows and then everyone is making claims. So they are nipping the problem in the bud.

    I’d also love to see how many customers actually paid for a .xyz domain.

  3. I wouldn’t characterize Verisign’s lawsuit as “running to the courts on trivial grounds as soon as it sees a little competition.”

    Negari’s ongoing use of the inflated .XYZ registration numbers as a sales pitch to consumers is misleading and (I would insist) grotesquely unethical.

    Also, the XYZ registry seems to be putting words in the mouths of respected media outlets such as NPR and VentureBeat, citing them as if they had endorsed .XYZ as the heir to .COM when they apparently voiced no such opinion.

    Sure sounds like deceptive advertising to me.

    The issue of the car ad and whether or not it’s literally impossible to find available .COMs is silly. That complaint ought to be drop-kicked out of court. But the other complaints are much more serious.

    From my perspective, Verisign is doing the industry a huge favor by defending consumers. We lack the ability to organize and frame class action lawsuits. Consequently, registrants are frequently left unprotected against deceptive advertising and bad faith on the part of major domain-industry companies.

    I regularly run across novice domainers who have purchased .XYZ domains unaware of the scandal surrounding robo-registrations. People in developing countries who can ill afford a wasted registration fee were seduced by Negari’s arguably disingenuous statements and by frequent references to .XYZ numbers

    It isn’t out of the question to see consumers as having been cheated. And money spent on .XYZ might otherwise have gone to .COM or .NET. However small the number of real .XYZ registrations has been, Verisign has a legitimate grievance against XYZ if it is poaching customers using deceptive advertising.

    Going after XYZ isn’t petty. On the contrary, it’s important to police misleading claims. And in this largely unregulated domain industry where registrants are too scattered and disorganized to fund any lawsuit, the only actions to be taken beyond a few negative blog articles will be taken by a competing company.

    Verisign could legitimately view XYZ as nothing more than a mosquito, but they are going after the registry because mosquitos spread malaria.

    If registries thought they might face litigation, they’d swindle us less often. And I’m not referring to XYZ only.

    Domainers shouldn’t see Verisign as a touchy bully. Verisign is not the wrongdoer here. Domainers ought to look closely at XYZ’s pattern of behavior, Negari’s non-answers and misleading sales pitches, and what that would cost consumers who accept such statements at face value. Domainers ought to see Verisign as championing the right of registrants to be protected from egregiously deceptive advertising. Verisign didn’t need to swat this mosquito; but someone ought to do something, and we weren’t going to pay for a legal team, were we?

  4. h4ck3r says:

    This whole things is a farce. I almost thought .xyz made this up to get attention. I love how the claim is filed with the underlying reason:”unfair competition in interstate commerce.”

    Because .com wasn’t ever a no-bid contract for Verisign? That sounds like fair competition to me.

    “It’s important to police misleading claims”
    In the lawsuit:

    “The claim that “it’s impossible to find the domain name that you want” using .COM (emphasis added) is literally false.”

    Literally false? I’m pretty sure it’s impossible for me to find the domain I want! How about you? There a name you want that you want that is literally available?

    But that’s not what makes me laugh:

    “.COM added over 30 million domain names to the base in 2013”

    We’re going to complain about .xyz inflating numbers by 700K or so? I think Verisign just claimed that a jump from about 140million to 146 million is 30 million!

    “millions of customers find the .COM domain name they want every quarter”
    In 2014 the number of domains went up under 3 million. Accounting for drops we could perhaps say that a million were registered a quarter – but a millions (PLURAL) of customers?

    Who’s the biggest liar here?
    .XYZ inventing 700K domains in advertising
    or
    Verisign inventing 100Ks of customers in a legal document?

    Verisign look like idiots unless I’m missing something.

  5. @h4ck3r

    “unless I’m missing something” … It’s good that you recognize that as a possibility.

    Since 2010, Verisign has reported the number of gross new .COM + .NET registrations. During that time, the volume has ranged between a 7.5 million and 8.9 million per quarter.

    Before sneering at their numbers and calling them liars, it would be prudent to look this up online.

    • h4ck3r says:

      What am I missing? The lawsuit says:

      “.COM added over 30 million domain names to the base in 2013″

      You refute that with numbers that add a gTLD by having a tally .COM+.NET and with volume of gross registrations which is not what I call adding “to the base”.

      Just like in the stock market – a company doesn’t increase shout through trading volume.

      If I take your numbers ..

      2010-2014 that is 5 years.

      Each year has 4 quarters, I think so that would be..tap tap tap… 20 quarters.

      Using an average of 8 million which is on the lower side of your range.. that would yield…tap tap tap 160 million domains.

      So since 2010 there have been 160 million .coms added to their base? That’s overstating it somewhat, don’t you think?

      Maybe you can find better numbers?

      • Those are the correct numbers.

        Think about it. XYZ says all the good .COMs are taken. Verisign wants to argue against this. What number is relevant? Bingo! The number of actual hand-registrations from the previous year.

        Gross adds indicate the number of hand-registrations. The number you’re looking at deducts the drops. But we’re not concerned here with the how the total number of .COMs is growing. We’re only interested in how many .COMs people found available and registered from scratch.

        That’s the number. Verisign isn’t lying.

        • h4ck3r says:

          So their argument is that they are ultra successful and that .xyz is ultra un-successful and lying?

          Hardly the case on which to say your business has been damaged.

          “.COM added over 30 million domain names to the base in 2013″

          I’m not sure how you can interpret “to the base” in any way shape or form in your numerical analysis. If I said to you I was going to add $1,000,000 to your banks base.. you’d be pretty disappointed if I put $500,000 in and took $500,000 out.

          Just the same with blogs. Can you imagine selling advertising? How many readers did you add to your base this year?

          Well I had 5,000 in January 2013 and I had 6,000 in January 2014 so I added 10,000 because some left and some came back.

          As for concerns? I’m not concerned with Gross or Drops. I’m concerned with what VeriSign CLAIMED in their law suit. The actual number that should concern anyone in opining on this lawsuit is how many registrations they LOST year on year to .xyz… which through their claims, they feel is not much!

  6. Tony says:

    Remember “Verisign is a bad company” that guy was proting the video – because Verisign did goof up and still does today.
    Web.com / Network Solutions / and other fake small companies manipulating

  7. MJ Kirtley says:

    I applaud Verisign for taking action. This is far from petty. False advertising by inflating the numbers is bad enough, but it is the invasion of one’s privacy, for lack of a better term, that is most egregious.

    I am a small business owner who registered a .com domain with Network Solutions several years ago. I receive emails from them almost daily, so I don’t pay much attention until it’s time for renewal each year.

    Ignoring the constant renewal reminders, which begin months in advance of the actual renewal date, I received a “deactivation” notice from NS yesterday. To my surprise, there was an additional website in my product renewal list – my domain name with “.xyz” at the end.

    My first thought was that my account had been hacked, because I had no idea how, when or why this extra website had been added. After signing into my NS account, I discovered that the website in question had been added in June 2014.

    Perplexed, I called Network Solutions to find out what was going on. The first person I spoke with explained that it was a free website given to me by NS. She told me there was no obligation to keep the website, that I was not being charged for it, and that I could choose not to renew it. I explained to her that I did not request an additional domain, and that I felt it rather underhanded that NS took it upon themselves to add it to my account without my permission.

    Until this point I thought my account was secure.

    Because the NS rep was unable to address these concerns to my satisfaction, she turned me over to a customer service rep, who was equally unconcerned with the matter. I was then told that a supervisor would call me back within 2 hours, but I have yet to hear from anyone at NS.

    I own only one domain, but if I were a larger business with multiple domains in my account, I might have unwittingly renewed all the domains in the list without even noticing the .xyz.

    As far as I am concerned, this is a scam, pure an simple.

    If Network Solutions is allowed to get away with this, then it could pave the way for a variety of other businesses, say, a bank or credit card company, to easily issue free “products” to their account holders without the customer’s request or permission.

    We must protect our rights as consumers. If anyone knows of a class action lawsuit concerning this breach by NS, I will gladly join.

  8. The xyz extension is idiotic. Really? And now because Google has a .xyz people think that’s going to convince people this is the next big thing move out of the way dot com? I’m a supporter of several new extensions, but this isn’t one of them. Google WILL probably change their minds eventually and trash that domain. If they don’t; guess what, it’s not going to help legitimate end user sales anyway.

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