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Lawyer tries to nuke Donuts and Demand Media’s gTLD bids

Kevin Murphy, August 1, 2012, 10:55:43 (UTC), Domain Registries

A lawyer has called for new gTLD uber-applicants Demand Media and Donuts to be banned from running gTLD registries due to Demand’s history of cybersquatting.
Jeffrey Stoler of Boston law firm McCarter & English has written to ICANN’s leadership, along with the chair of the Governmental Advisory Committee, to allege that Demand Media, Donuts and their key executives:

are, by ICANN’s established eligibility guidelines, unsuited and ineligible to participate in the new gTLD program.

It goes on to state that:

ICANN can and should reject the applications from Donuts and its subsidiaries, Demand Media and its subsidiaries, and their respective affiliated companies.

The two companies have, combined, applied for 333 new gTLDs. Donuts, which was founded by former Demand executives, also plans to use Demand as its back-end registry provider.
Demand Media subsidiaries, however, have a rotten record of losing cybersquatting cases filed under the UDRP, as Stoler’s generally well-researched 24-page letter spells out in some detail.
This, Stoler argues, should cause both companies to fail ICANN’s background checks, which are specified in the Applicant Guidebook.
Companies that have “been involved in a pattern of adverse, final decisions” under the UDRP, defined as more than three losses in the last four years, are supposed to fail the background check.
Demand Media seems to fit that definition, and then some, assuming you include UDRP losses incurred by its subsidiaries.
Donuts, as a brand new company, does not have the same track record, but Stoler reckons there is “strong evidence that Donuts is merely an alter ego of, and working in concert with, Demand Media”.
The letter states:

In June 2009, when ICANN’s rules went into effect and it was widely thought that implementation of the new gTLD program was imminent, the executives of Demand Media Group realized that Demand Media’s sordid history would clearly block its ability to successfully apply for the new gTLDs.
As an initial gambit, Demand Media petitioned ICANN to revise the rules.
When ICANN rejected those revisions, the undersigned believes Demand Media decided it would be necessary to create a new entity to participate in the new gTLD program. As a result, Donuts was formed by Messrs. Stahura and Tindal.
It would make a mockery of ICANN rules, however, if Demand Media Group and its executives could absolve themselves of their record of adverse UDRP decisions merely by forming a new entity.

Donuts founders Paul Stahura and Richard Tindal were both with Demand when it lost a bunch of UDRP cases.
Stoler alleges that they left to form Donuts mainly because they didn’t think Demand would pass ICANN’s background checks.
While Donuts has made no secret of the fact that it’s behind 307 applications — and ICANN’s leadership is certainly already aware of this — each application has been filed by a different shell company.
The trail to Donuts is at least two companies deep in many cases, and it’s not entirely clear how its applications with Demand Media are structured, from a corporate point of view.
Ironically, Stoler’s letter does not disclose his affiliations — which clients he’s working for — either.
The smart money is probably on big trademark interests, but it’s not beyond the bounds of possibility, I suppose, that he could be on the payroll of rival new gTLD applicants.
I’ve reached out to Stoler, Donuts and Demand Media for comment and will provide updates later as appropriate.
Here’s the Stoler letter (pdf)

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Comments (6)

  1. I had pointed out this issue before, and it also applied to GoDaddy.
    Lawyers need only read all the historical comments, in order to find material they need — it’s all there.
    I would wager that it’s a rival new gTLD applicant who funded this letter — they’d be more highly motivated to knock out a competitor.
    To cover their bases, perhaps Stoler will write a followup letter regarding GoDaddy — it would make his concerns seem more neutral, rather than be seen as picking on a single applicant.

  2. Rubens Kuhl says:

    Wasn’t an application comment the proper way to address this ?

    • Scott Pinzon says:

      Comments are limited to 3500 characters, so Mr. Stoler could not fit his recitation under the limit. Also, the letter ends with a question to ICANN’s General Counsel about whether the objection to the qualifications of Donuts and Demand Media must be entered repetitively into each of the 333 applications they’ve applied for.
      I’d guess ICANN will consider the letter without rejecting it as being packaged in the wrong format.
      But Stoler sure stretches the point of “guilt by association.” I expect to see Donuts/Demand Media prevail.

  3. Considering the substantial investment they’ve made, there is no doubt in my mind that this letter will be disregarded by ICANN fairly swiftly.
    George makes a good point. I’m sure many New gTLD applicants have run into UDRP’s before.
    What about prior knowledge? Were that active cyber squats or unintentional conflicts of interest?
    I think all this has to be taken into account.

  4. Martin Warner says:

    I also wonder if ICANN will decide to block an applicant that is registering 75 percent of all the generics. If they actually get all their domains ICANN will have failed in its mission to promote competitiveness and innovation.

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