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Donuts files $10 million lawsuit to stop .web auction

Kevin Murphy, July 24, 2016, 07:42:11 (UTC), Domain Registries

Donuts has sued ICANN in an attempt to block the auction of the .web gTLD this Wednesday.

The gTLD portfolio registry filed a lawsuit in California on Friday, seeking over $10 million in damages and a temporary restraining order to stop the auction going ahead.

The complaint alleges breach of contract, negligence and unfair competition and seeks a court declaration that the covenant not to sue signed by all new gTLD applicants is unenforceable.

According to Donuts, ICANN breached its duties by not fully investigating the allegation that rival .web applicant Nu Dot Co has undergone a change of control and has a new, wealthier owner.

NDC is the only applicant in the eight-strong .web/.webs contention set that refuses to resolve the contest privately.

A private auction would enrich all losing applicants to the tune of many millions of dollars.

By forcing a “last resort” ICANN auction, NDC has ensured that ICANN will be the only party to benefit from the auction proceeds.

Last-resort auction funds are placed in a separate ICANN account, currently worth over $100 million, which will be spent according to a currently undecided policy created by the ICANN community.

But Donuts’ complaint strongly implies that ICANN is forcing the auction to go ahead because it stands to benefit financially.

Donuts repeats the allegation from its recent joint Request for Reconsideration with Radix that NDC should be forced to disclose to ICANN, via a gTLD application change, the names of its alleged new directors.

It cites again a redacted email from NDC director Jose Ignacio Rasco which talks about fellow listed director Nicolai Bezsonoff no longer being involved with the application but that “several” new directors were.

It adds a quote about Rasco talking about “powers that be”, which Donuts takes to mean he is answering to someone else.

NDC is not listed in the lawsuit, which focuses on ICANN’s obligations under the new gTLD program application contract.

Donuts alleges, for example, that ICANN has a duty to fully investigate whether NDC has indeed changed directors.

ICANN’s Board Governance Committee said last week that ICANN staff had talked to and emailed Rasco about the allegations. Donuts says it should have at least talked to Bezsonoff too.

Donuts also claims that ICANN is not allowed to go ahead with a last-resort auction while there are still outstanding “accountability mechanisms” — including the RfR, which has not yet been formally closed out by the full ICANN board.

The lawsuit also reveals that Donuts simultaneously filed a complaint using ICANN’s less legally formal Independent Review Process, though documentation for that is not yet available.

ICANN’s most recent statement on .web, which just confirms that the .web auction will go ahead this coming Wednesday, was also posted on Friday. It’s not clear if that was posted before or after ICANN became aware of the lawsuit.

All new gTLD applicants had to agree not to sue ICANN when they applied, but Donuts argues that this is unfair and unenforceable.

DotConnectAfrica has had some success with this argument, though Donuts does not cite that case in its own complaint.

There’s been some speculation about the motives of Donuts and others in trying to delay the auction.

The lawsuit will not force NDC into a private auction, but it might buy Donuts and the other applicants more time to consider their strategies.

I’m getting into speculative territory here, but if NDC’s strategy is to win the .web auction as a Trojan horse for its alleged new owner, perhaps revealing the identity of that new owner would make it less likely to insist on a last-resort auction.

If NDC’s alleged new owner has a time-sensitive need for the revenue .web could bring (which could be the case if, for example, the owner was Neustar) perhaps the prospect of a long lawsuit and IRP case could make it more likely to accept a private auction.

If the alleged new owner was revealed to be Verisign — a company more likely than most to acquire .web simply in order to bury it — perhaps that revelation could spur remaining applicants into pooling their resources to defeat it.

It it was a big tech firm from outside the domain industry, perhaps that would strengthen Google’s resolve to win the auction.

That’s all just me talking off the top of my head, of course.

I have no idea whether or not NDC even has new backers, though its behavior in avoiding private auction goes against character and certainly raises eyebrows.

The Donuts complaint, filed as its subsidiary Ruby Glen LLC, can be read here (pdf).

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Comments (31)

  1. Anthony says:

    What is the thinking behind winning .web to bury it?

  2. Andrew Brier says:

    Because Verisign views .web as a direct threat to .com?

    • Kevin Murphy says:

      That was my thinking. Verisign has never been particularly interested in promoting its non-com/net TLDs.

      The peak in this chart of .name DUM was the month before Verisign acquired it.

  3. Kevin

    Two things come to mind

    .tech was announced as purchased right after the ICANN last resort auction took place. It was speculated that there was an deal in place before the ICANN auction:

    http://www.thedomains.com/2014/10/09/1st-official-new-gtld-registry-purchase-as-radix-acquires-tech/

    Seems as no party to that auction raised an issue about it before or after the auction

    2nd issue I see off hand

    You state:

    “If the alleged new owner was revealed to be Verisign — a company more likely than most to acquire .web simply in order to bury it — perhaps that revelation could spur remaining applicants into pooling their resources to defeat it.”

    Well that sounds like collusion (actually is the definition of collusion) to me which goes back to the initial arguments that private auctions were “illegal”.

    So I don’t see a court giving anyone more time to “attempt” to break a federal law.

    • Kevin Murphy says:

      I don’t have the legal background to comment on that. I will note as I did above that I was just pulling ideas off the top of my head though.

  4. Mike says:

    Donuts never wanted to be .web registry, but they wanted to be a part of its private auction, to end up as a”looser” with a hefty payout. Now they do whatever it takes to get that money thay had counted on. Rigged system, shame on Donuts, shame on ICANN, shame on all cheaters.

  5. VintCerf.com says:

    ICANN is just as bad as Congress and politicians.

  6. Beelzebub says:

    It’s bad enough that you’re cybersquatting on the vintcerf.com domain. Posting here without context (unless someone clicks your link) is fraudulent, misleading and even scummier. If you’re trying to convince people that there’s a sensible reason to think like Ted Cruz and the hysterical Republican platform, you’re not doing a very good job. On the other hand, if this is a double-agent scenario, you’re doing a great job of making those who hold that position look like a bunch of idiots.

    • Kevin Murphy says:

      If he were posting as “Vint Cerf” I’d be moderating his comments.

      I’ve deleted comments before now when somebody has tried to pass themselves off as a distinctly-named prominent industry participant.

      But posting using “VintCerf.com” just highlights him as somebody probably not worth paying attention to, in my view.

      (BTW, are you the real Beelzebub? Does that deal we made still stand?)

  7. Christopher Ambler says:

    What if I’m my evil twin trying to pass myself off as me?

    Oh, wait, I’m not prominent.

    Never mind 😉

    • Kevin Murphy says:

      Not yet, right?

    • John says:

      Is your case a case of injustice or not?

      I’ve always had some sympathy for your saga. On the other hand, I saw you posting at dnforum some years ago, mentioning something to the effect of how insider cronies already got dibs on .web domains and paid for them, and some remark to the effect that was how the cookie crumbles because you can, and that really turned me off about you and it big time. Made me wonder what was even left to register if it became possible, and I almost even asked for a list of domains already taken or reserved. One or more of these privileged “insiders” was even posting there at dnf about the fate of the thousands of dollars they gave you for that inside scoop on .web domains should something happen. I suppose you eventually refunded them? Seeing how new gTLDs have been implemented since .info, .biz, etc., I really have to wonder if we would all still be much better off when your company “had” .web despite all of that, however. All the reserved, premium pricing, EAP, etc., gone are the days of equality of opportunity and it’s mainly about he or she who has the deepest pockets.

      • Kevin Murphy says:

        If Ambler had anything interesting to say about the current .web situation, he would have said so by now. He hasn’t. He just keeps implying he does.

        • John says:

          I would certainly like to hear what he has to say, but what I’m really more interested in is a full and thorough discussion of the matter by the community at large. I think they are probably too afraid to talk about it the way it really should be.

          Also, is there anyway to receive emails where there are replies here like at other blogs?

          • Kevin Murphy says:

            The option to subscribe looks to have disappeared when the software that handles the function auto-updated itself with a bug.

            I’ve fixed it now. Thanks for alerting me to the problem.

            • John says:

              Glad to be of service…

              And now, a full, frank and earnest discussion about the .web case involving Chris Ambler, and his answers to what I mentioned above…

              Somewhere, someday…

            • John says:

              Oh, okay, I see if I scroll down he has answered some of that…

      • Christopher Ambler says:

        There were no insiders. If I said as much I likely misspoke or was misinterpreted.

        The registry was open for pre-delegation registration when Dr. Postel said we could do so. Once ICANN started their process, they asked us to stop, so we did.

        None of that was “insiders” by any definition. I suppose a couple of my college friends (I was a college student at the time) registered one or two. My friend Adam registered Tholian.web (after the Star Trek episode).

        But no massive insiders.

        Just wanted to clear that up.

        • John says:

          I just noticed your post there. I want to be as open-minded and fair as I can be. In fact, I’d be rather pleased if what you are saying is so, and I’m certainly not going to get bent about it. However…

          I do normally have a very good memory, sometimes even great, as I’m sure so many of us who pursue this part of the world do. But I’m fallible like everyone else, and none of us is a human computer or has total perfect recall like the android Data or anything, so all these years later I can’t exactly quote verbatim everything that was posted at DNF. If the old posts exist, which I imagine they still do, then of course it’s all there somewhere in black and white. I doubt I ever saved any of that, but who knows perhaps I’ll find it on another old computer if I did.

          That said, I do remember posting on DNF in a manner that would have indicated there were far more “early registrations” granted to a privileged few than what you are indicating there. I also specifically recall someone posting in the same thread at DNF about how they had spent $1000’s on that and were a bit concerned about that money spent should something happen. And to paraphrase, I also recall you posting something to the effect that because you had .web, you had the right to allow people to do that and that’s just the way it goes.

          For actually quite a while after that thread at DNF, and because of that thread, I was considering trying to contact you to see if I could get a list of .web domains already taken so that I would not be wasting time working on my pre-release strategy for ones already unobtainable, but I never did.

          So what you’ve just posted there is certainly very different at face value from my version. I’ll reserve judgment on what the reason is, whether you “misspoke” or were “misinterpreted.” It was quite a few years ago now, but it was very memorable to me because I had a keen interest in .web at the time and also hardly ever saw you posting anywhere at all.

          Speaking of which, hardly ever seeing you post anywhere at all that is, did I not also see you mention somewhere years ago that you were interested in Texas Holdem and played it, and that you were heavily involved with NameJet and the development of its backordering system?

          • Christopher Ambler says:

            We opened the registry when Dr. Postel asked us to show “running code.” And yes, a few of my personal college friends registered one or two because they knew what I was working on. If that’s “insiders,” then yes, they were insiders 😉 … but we didn’t have anything that’s I’d call insiders in the usual sense of the word. Some people did find out about what we were doing through the media (we did make plenty of public noise because we thought it was a great business) and there were a few people who registered a block of names that did run in the couple-thousand dollar range (at, if I recall correctly, $35 each, a discount below the $50/year charge from NSI). Were they insiders? Not really – they were early adopters.

            But we’re quibbling over semantics now, I think. Your point is taken, but I just wanted to be clear there was no nefarious plan here.

            I’ve not been posting much other than the occasional snarky remark (much to Kevin’s angst) because there’s not much to say these days that I can say.

            Looks like there will be an auction today, and my 20+ years of hard work will be outright stolen and ICANN will make $40,000,000 or more from that theft. What more can I say about that?

            Even if we had applied the second time and paid $400,000 more, we simply don’t have $40,000,000 to buy what was already done. Even if that was the way of things, this system means only those with deep pockets get to play.

            Screw the pioneers, screw the guy who had the idea in the first place, screw the guy who was told, time and again over two decades to just “keep quiet and play ball” and all would work out.

            Bitter? Me?

            Neah, I’m over it. I like what I’m doing now. I’m available for consulting 😉

            As for your final questions – yes, I play poker. It’s a hobby. I’m not pro by any stretch, but I do love the game. I personally like limit Hold ‘Em, as I like to play the cards, odds and science and not the person. But I’ll gladly play no-limit.

            NameJet – well, I worked at eNom from 2003 until 2012, and yes, I developed the back-end code that ran their drop-catching engine for those years. Those names went to NameJet once it existed, yes. I can only presume they’re still using my code, though I don’t know for sure. I left the company in 2012 and relocated to sunny California (couldn’t take the Seattle weather any more).

            As I’m sure you’ve surmised, I’m a very open guy. Happy to answer questions (though, as I said, sometimes I angst Kevin when my answer is, “I can’t/won’t speak to that.”)

            • John says:

              Appreciate your reply. Don’t think I got an email notification, but I checked anyway.

              Well, despite how perhaps I would not be too happy if I knew what domains were taken by those early buyers now, I do have a strong hunch that you and your company may have simply been screwed. I wonder if anyone else is willing to say that, or too afraid to say it even if they think it.

              Now speaking of being screwed, and speaking of Namejet then, I am wondering if you are familiar with the various allegations about it over time, such as those referred to here in posts from only recently though the thread began in 2013:

              “NameJet Private Auctions: What You Need to Know – With Matt Overman” – http://www.domainsherpa.com/matt-overman-namejet-interview/

              The various allegations and objections involved would begin well before you left in 2012.

              Also note: I am not the “John” who posted there, and don’t know anything about his case beyond what is written there.

              Now from what various people have posted and lamented about here and there over the years, it really does seem that Namejet may have a rather nasty and abundantly practiced habit of “screwing” people as expressed there, which quite frankly and candidly amounts to *defrauding* people. Dirty tricks like claiming there were multiple bidders to force an auction when there was really only one, or canceling winning bids for valuable domains, etc.

              Can or will you shed any light on that?

  8. David Taylor says:

    Posting such comments as at 2.09pm is one thing but using a well known name as a domain name (vintcerf.com) as the messenger is questionable to say the least and definitely not cool (legal term I think :-)). Such an attempt to misleadingly bring traffic to a cause does not in reality help that cause but rather serves to undermine it.

  9. Rubens Kuhl says:

    Donuts also filed an Ex Parte TRO, available at https://www.icann.org/resources/pages/ruby-glen-v-icann-2016-07-23-en

  10. As the .SHOP case has indicated, ICANN was fine violating their own accountability mechanisms to put the .SHOP auction on hold following Commercial Connect’s IRP filing before .SHOP auction. ICANN pocketed nearly $42 million, while the .SHOP is still pending in IRP (https://www.icann.org/resources/pages/irp-commercial-connect-v-icann-2016-02-16-en).

    It makes sense that one of Donuts’ ultimate strategies is to allow ICANN to pocket a similar (or higher) amount that they received with .SHOP (in this case for .WEB) and then settle with ICANN (not sure Donuts will get the full $10m they ask, but that “pay-out” fee may be negotiated with ICANN behind closed doors).

    Such a move would be a win-win for both ICANN and Donuts (and the winner of .WEB). In conclusion, as usual is all about the money and nothing about following established ICANN processes.

    Interestingly, the ICANN BGC took 4 days to determine the Donuts Request for Reconsideration 16-9 (https://www.icann.org/resources/pages/reconsideration-16-9-ruby-glen-radix-request-2016-07-18-en). What is revealing is that ICANN ignored to determine the .CPA Request for Reconsideration 16-8 (which was filed before the Donuts/Radix 16-9 case was submitted) and chose to fast-track 16-9 instead. It is noted that the BGC usually takes 30 days to make a determination, not 4 days. This is the fastest BGC Request for Reconsideration determination in ICANN’s history.

    ICANN did not want to delay the public auction because a simple cost-benefit analysis would conclude that generating tens of millions of dollars is better than not generating them, regardless whether there was a policy violation or not.

    • Rubens Kuhl says:

      I think ICANN has started to react to abuse of accountability mechanisms and started liking it. Although this wasn’t a case of abuse yet, it seems ICANN enjoyed the approach and is moving forward with it. It’s a little late in the game, though, so I would have preferred consistency in this particular case…

      • Rubens,

        Much agreed. Every time a community applicant complained that certain portfolio applicants were using accountability mechanisms to their advantage (without much of a case), ICANN never complained. However, now that there is litigation, ICANN has taken that new stance. I agree with you, it is a bit late in the game. ICANN will use whatever it can use to prevail. The inconsistency though does not serve them well because this round has been riddled with “loopholes” (ooops I mean inconsistencies) to give ICANN the desired results that they want.

      • Dot Advice says:

        Of course. After all one of the main implementation requirements of the IANA transition , come Sept 2016, is the enhancement and consistency of these very same accountability and transparency mechanisms. .

  11. Christopher Ambler says:

    John, appears we’re out of threaded reply slots on your question, so I’ll reply here –

    I cannot comment on those issues from NameJet simply because I have no idea. I was a developer at eNom. I wrote code. NameJet was a separate company with a separate platform and management. I had zero visibility into it.

    Indeed, as anyone at eNom will tell you, I specifically requested NO ACCESS to customer data or auctions when I was in charge of the drop. I had no such access. This was deliberate, so I could always say, without question, that I couldn’t affect customer participation in the drop.

    These days, I consider it one of my smartest moves, ever.

    As for being screwed on .Web, you don’t need to ask, I’ll say it: yes. We were. Unquestionably. But that’s my opinion.

  12. What would the domain industry be without backstabbing?

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