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Verisign v XYZ judge confirms both companies suck

Kevin Murphy, November 21, 2015, 00:37:07 (UTC), Domain Registries

Verisign and XYZ.com have both come out of a US lawsuit looking like scumbags.

Explaining his dismissal of Verisign’s false advertising lawsuit against .xyz registry XYZ.com, Virginia judge Claude Hilton today said that XYZ.com’s statements about its registration numbers were “verifiably true”.

At the same time, he confirmed that they came about as a result of a bullshit deal with Network Solutions to bolster .xyz’s launch numbers.

The judge’s ruling confirms for the first time the financial details of the deal between XYZ and Web.com (Network Solutions) that saw .xyz’s registration volume rocket in its first few weeks of general availability. He wrote:

Web.com purchased 375,000 domain names for a price of $8 each totaling $3 million dollars. In exchange, XYZ purchased advertising from Web.com in the form of 1,000 impressions for $10 each, at a total cost of $3 million dollars. Instead of cash exchanging hands, advertising credit was given to XYZ and the .xyz domain names were given to Web.com, who subsequently gave them away as free trials to their subscribers.

In other words, XYZ bought $10,000 of advertising for $3 million and paid for it with $3 million of free .xyz domains — 375,000 of them.

That bogus deal enabled XYZ to report big reg volume numbers without actually, legally, lying,

“The statements regarding Defendants’ revenue and number of registrations are statements of fact that are verifiably true,” the judge wrote.

When the Defendants [XYZ.com] stated they were a market leader in new TLD’s and that they had the most new registrations than any other TLD, they were basing that information off of an accurate zone file. Further, the zone file confirms that there are over 120 million .com registrations and one {1) million .xyz registrations. These statements are also true.

The judge said he was dismissing the suit not just because XYZ wasn’t lying, but also because Verisign couldn’t show that it had been harmed.

The number of .com registrations has actually been going up, he noted.

Much of Verisign’s complaint centered on this ad:

Verisign said the ad lied about the availability of .com domains, which XYZ denied.

The judge said:

The video posted to YouTube is puffery and opinion. It displays no actual domain names, and communicates a subjective measure of value and superiority, not capable of being proven false.

“Puffery” is a term with legal weight in false advertising cases under US law. It basically means that advertisers are allowed to exaggerate. XYZ had in fact used the “puffery” defense.

The judge seems to have relied heavily on zone file analysis to reach his conclusions. He wrote.

according to Plaintiff’s [Verisign’s] own data, .com names are largely unavailable. In a given month, Plaintiff reports that it receives about two (2) billion requests to register <.com> domain names, yet fewer than three (3) million are actually registered.

I believe that “two billion” number refers to how many “attempted adds” Verisign gets every month for .com domains, as reported in its monthly reports with ICANN.

That number would include every automated attempt to register a dropping domain by every registrar.

It’s not a reflection of how many actual human beings attempt and fail to register .com domains and, in my view, it’s worrying that the judge took it to mean that.

In summary, the lawsuit managed to unearth the dirty reality behind XYZ’s launch “success”, whilst also making Verisign look like a petty, petulant, child.

Everybody loses.

Except the lawyers, obviously, who have been paid millions.

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Comments (13)

  1. Michael Seven says:

    Where’s the Beef? There it is.

  2. Zac says:

    Interesting Reading,

    In Australia that sort of transaction would attract GST (Sales Tax/VAT) on both sides; which I believe started being enforced after a Barter card ruling, where companies sometimes avoided paying tax by exchanging goods and serives… It would interesting to see if tax is applicable in the US in such a scenario, and if so, if the tax was accounted for here.

    Anyway, it looks like this case was a win for the lawyers regardless.

  3. Phil Buckingham says:

    Hi Kevin, According to nTLDstats today xzy is showing 1640401 regs of which only 18855/375000 are through Network Solutions . Guess the numbers are legit now
    And yes in the UK the “contra transaction ” would have to be grossed up for VAT/ Tax purposes.

    • Rubens Kuhl says:

      Network Solutions wasn’t the only registrar doing xyz promotions, so if domains not adding revenue are to be removed from the total, there are much more than the NetSol ones.

      The NetSol promotion is indeed different in not having a user request, but from a registry revenue perspective it’s the same.

  4. Zac says:

    Unless, I suppose, the contra-transaction was done across international boundaries… That would presumably mitigate all taxes… There’s probably a business case in that logic. Anyone want to start an international barter card system?

    • Zac says:

      It always makes me a little sad though that VAT/GST/ITX taxes appear to promote international trade over domestic locally sourced goods… It makes me wonder if these types of taxes are a little outdated given the simplicity of sourcing from overseas…

  5. The larger issue here is that the Audi stops in a clearly-marked bicycle lane.

    He’s lucky I didn’t come by with my stainless steel water bottle, which I keep on my bike for the purpose of “educating” drivers about bike lanes.

  6. Howie says:

    Kevin,

    your prejudice against any business aside, but your slang usage is beyond par. I am suspicious of your citing origins.

    None of your links actually cite? but link back to a recent blog of yours.

    How about some real new… from XYZ and the Judges official letter.

    https://gen.xyz/wp-content/themes/xyz/downloads/xyz-opinion-summary-judgment-2015-11-20.pdf

    • Kevin Murphy says:

      Not linking to the actual judgement was an oversight. I definitely should have done that — it’s my usual practice — and am surprised to discover that I did not.

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