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Could ICANN reject Verisign’s $135m .web bid?

Kevin Murphy, September 21, 2016, 11:40:43 (UTC), Domain Registries

ICANN is looking into demands for it to throw out Verisign’s covert $135 million winning bid for the highly prized .web gTLD.

ICANN last week told the judge hearing Donuts’ .web-related lawsuit that it is “currently in the process of investigating certain of the issues raised” by Donuts through its “internal accountability mechanisms”.

Donuts is suing for $22.5 million, claiming ICANN should have forced Nu Dot Co to disclose that its .web bid was being secretly bankrolled by Verisign and alleging that the .com heavyweight used NDC as cover to avoid regulatory scrutiny.

ICANN’s latest filing (pdf), made jointly with Donuts, asked for an extension to October 26 of ICANN’s deadline to file a response to Donuts’ complaint.

It was granted, the second time the deadline has been extended, but the judge warned it was also the final time.

The referenced “internal accountability mechanism” would seem to mean the Cooperative Engagement Process — a low-formality bilateral negotiation — that Donuts and fellow .web bidder Radix initiated against ICANN August 2.

The filing states that the “resolution of certain issues in controversy may be aided by allowing [ICANN] to complete its investigation of [Donuts’] allegations prior to the filing of its responsive pleading.”

In other words, Donuts is either hopeful that ICANN may be able to resolve some of its complaints in the next month, or it’s not particularly impatient about the case progressing.

Meanwhile, fellow .web applicant Afilias has demanded for the second time that ICANN hand over .web to it, as the second-highest bidder, throwing out the NDC/Verisign application.

In a September 9 letter, published last night, Afilias told ICANN to “disqualify and reject” NDC’s application, alleging at least three breaches of ICANN rules.

Afilias says that by refusing to disclose Verisign’s support for its bid, NDC broke the rules and should have its application thrown out.

The company also confirmed on the public record for what I believe is the first time that it was the second-highest bidder in the July 27 auction.

Afilias would pay somewhere between $57.5 million and $71.9 million for the gTLD, depending on what the high bid of the third-placed applicant was.

In its new letter, Afilias says NDC broke the rule from the Applicant Guidebook that does not allow applicants to “resell, assign or transfer any of applicant’s rights or obligations in connection with the application”.

It also says that NDC was obliged by the AGB to notify ICANN of “changes in financial position and changes in ownership or control”, which it did not.

It finally says that Verisign used NDC as a front during the auction, in violation of auction rules.

“In these circumstances, we submit that ICANN should disqualify NDC’s bid and offer to accept the application of Afilias, which placed the second highest exit bid,” Afilias general counsel Scott Hemphill wrote (pdf).

Hemphill told ICANN to defer from signing a Registry Agreement with NDC or Verisign, strongly implying that Afilias intends to invoke ICANN accountability mechanisms (presumably meaning the Request for Reconsideration process and/or Independent Review Process).

While Afilias and Donuts are both taking issue with the secretive nature of Verisign’s acquisition of .web, they’re not necessarily fighting the same corner.

Donuts is looking for $22.5 million because that’s roughly what it would have received if the .web contention set had been resolved via private auction and $135 million had been the winning bid.

But Afilias wants the ICANN auction outcome to stand, albeit with NDC’s top bid rejected. That would mean Donuts, Radix, and the other applicants would still receive nothing.

There’s also the question of other new gTLD applications that have prevailed at auction and been immediately transferred to third-party non-applicants.

The most notable example of this was .blog, which was won by shell company Primer Nivel with secretive backing from WordPress maker Automattic.

Donuts itself regularly wins gTLD auctions and immediately transfers its contracts to Rightside under a pre-existing agreement.

In both of those cases, the reassignment deals predated, but were not disclosed in, the respective applications.

There’s the recipe here for a messy, protracted bun fight over .web, which should come as no surprise to anyone.

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Comments (5)

  1. gTLD.club says:

    .BLOG would have been worth it, not .WEB in my opinion.

  2. Francesco Cetraro says:

    If I am not mistaken, Radix bought .tech after the auction for that TLD (i.e. nobody alleged they bankrolled the winner) and followed the procedure to get the application/RA amended.

    .Blog was resolved through a private auction, so as far as ICANN was concerned there was only one applicant left for it after the others withdrew their applications.

  3. YamadaMedia says:

    Donuts must really need that 22.5 million. 🙂

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