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Architelos files bankruptcy after Afilias lawsuit

Kevin Murphy, March 21, 2016, 19:22:04 (UTC), Domain Services

Afilias has managed to bury domain security software provider Architelos, which filed for bankrupcty today.
Architelos filed Chapter 7, which basically means the company will close and its assets will be liquidated to pay off creditors.
Its only major creditor is Afilias, which won a patent lawsuit against it last August.
The jury in the case set damages at $10 million, finding that Architelos had misappropriated Afilias trade secrets, but the trial judge recently indicated her intention of reducing the award to $2 million.
Even that was a bit too rich for the company, which floated the idea of operating NameSentry on a revenue share with Afilias until its debt was paid.
Clearly, that’s no longer going to happen.
Architelos was founded by Alexa Raad in 2011, to exploit the new gTLD opportunity as a consulting and software tools provider.
It made seven figures in its first year, mainly through gTLD application consulting fees, but saw modest adoption of its subsequent security offering, NameSentry.
The flagship service only made $300,000 in revenue, according to court documents. After the August verdict, Architelos’ sales pipeline dried up.
The software and the US patents covering them are the company’s key assets, though Afilias is expected to be awarded at least partial ownership rights of the patents.
The company had about 10 employees at its peak, but has been operating on a skeleton crew of two or three for the last few months.
Architelos said in a blog post that NameSentry customers will be able to continue to use the service in the short term, but what happens to it in future depends on how the bankruptcy court appointed trustee does with it.
Afilias also has an outstanding lawsuit against Architelos and Raad in Canada.

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Comments (6)

  1. Jacqueline Yau says:

    Very sad that this is the end result. Seems like there should have been a way to come to a reasonable solution. Instead this is a big lose-lose result. From a previous article, “Architelos offered to give full ownership of its patent, along with NameSentry itself, to Afilias in order to settle the suit, but that Afilias refused.” Instead, Architelos is driven into bankruptcy. CEO Alexa Raad has continually demonstrated high integrity and worked hard to keep the internet safe. It was in the public interest that Architelos survived. Too bad that this day has come.

  2. Kevin says:

    Honestly, the gTLD industry is filled with great companies but these small “consulting firms” are terrible for the community at large. They simply come it and manipulate companies into getting help with their applications, yet the aren’t law firms to handle the contracts, they don’t have technical or registrar capabilities, and they can’t help in designing or marketing pages. Afilias and Verisign and others should keep trying to buy these places or, in this case, hold them on a tight leash. As long as companies like this, who don’t bring anything new to the industry, exist we all will suffer

    • R. Funden says:

      I thought their anti-abuse monitoring services did bring something new to the industry. Afilias felt differently.

    • Jean Guillon says:

      Law firms are not the best at taking new gTLD applications. Many then called back-end Registries because they were completely lost. I also had a very good opinion /feed-back about Architelos by the way.

  3. Antony Van Couvering says:

    This is a real shame. I’ve spoken to many of the consultants in the industry. There are a few good ones who add knowledge and perspective and can really help gTLD registries navigate the commercial and regulatory minefields that form the landscape of the domain name industry. Architelos was one of the truly helpful and ethical companies in the space and it’s a loss to the industry, particularly for new entrants, that they’ve been forced to shutter their doors.
    I am really at a loss to understand what Afilias gained from this result. The rest of the industry is poorer for it.

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