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Centuries-old companies both fail community gTLD test

Kevin Murphy, August 11, 2016, Domain Policy

Two companies called Merck have separately failed ICANN Community Priority Evaluations, meaning the new gTLD .merck could be the first dot-brand to head to ICANN auction.

Merck KGaA applied for .merck for the Merck Group, a German chemicals company founded — staggeringly — in 1668, the same year Newton built the world’s first reflecting telescope.

Merck Registry Holdings Inc applied for the same string on behalf of Merck & Co, which was originally the US subsidiary of the German outfit. The US firm was seized by the US government and subsequently became independent during World War I.

Despite the substantial pedigrees of these multi-billion dollar businesses, neither were able to muster up the required 14/16 points to be considered a “Community” under ICANN CPE standards.

The German firm scored 11 points, the American 9.

The main failing in both evaluations, which were conducted by the Economist Intelligence Unit, was the existence of the other.

Both applicants defined their communities as their own companies and lost points because “.merck” did not uniquely identify all legitimate users of the string.

Both panels marked the applications down for “over-reaching substantially beyond the community” by not including the rival company in its community definition.

The US company also lost a couple of points for failing to come up with a list of registration restrictions.

As neither company has passed CPE, the next step of the ICANN process would have them attempt to resolve the contention set privately. Failing that, they would go to an ICANN last-resort auction.

Another possibility, an increasingly favored choice among CPE losers, would be an interminable series of ICANN process appeals and lawsuits.

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Afilias buys three gTLDs from Starting Dot

Kevin Murphy, August 9, 2016, Domain Registries

Registry upstart StartingDot has sold its small portfolio of new gTLDs to Afilias.

.archi, .bio and .ski are the three components of the package.

While the size of the deal was not disclosed, retail prices and zone file volumes suggest the portfolio probably brings in about $2 million a year in revenue.

The biggest seller of the three is .bio, which was originally intended for farmers but its basically unrestricted and has a variety of use cases.

Given the high ticket price — around $90 a year retail — .bio has a surprisingly impressive 14,000 names under management.

.archi and .ski have fared less well, with 3,500 and 6,200 names in their respective zones. Both have premium fees — retailing at about $100 and $60 a year respectively.

Due to the high prices, Afilias gets to call these TLDs “premium”.

.archi is the only one of the three to have registration restrictions — you need to be an architect to get one.

Both .archi and .bio have been available to buy for a couple of years, while .ski’s first renewal cycle is about a month away.

All three sell predominantly through European registrars. Starting Dot is itself based in Paris and Dublin.

The deal seem to have been struck due to Afilias’ we-buy-any-TLD offer, which executives discussed with us a year ago.

Afilias said that StartingDot execs Godefroy Jordan and Stephane Van Gelder will continue to be employed for a transition period.

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Donuts rolls the dice with $22.5 million .web lawsuit

Kevin Murphy, August 9, 2016, Domain Registries

Donuts is demanding ICANN pay up the $22.5 million it reckons it is owed from the auction of the .web gTLD, which sold late last month for $135 million.

The company yesterday amended its existing California lawsuit against ICANN to allege that Verisign tried to avoid regulatory scrutiny by secretly bankrolling successful bidder Nu Dot Co.

The updated complaint (pdf) reads:

VeriSign’s apparent acquisition of NDC’s application rights was an attempt to avoid allegations of anti-competitive conduct and antitrust violations in applying to operate the .WEB gTLD, which is widely viewed by industry analysts as the strongest competitor to the .COM and .NET gTLDs.

Donuts wants a minimum of $22.5 million, which is roughly what each of the six losing .web applicants would have received if the contention set had been resolved via private auction.

(I previously reported that number as $18.5 million, because I accidentally counted .webs applicant Vistaprint as losing .webs applicant, when in fact it won .webs, paying $1.)

The company’s claims are still based around the allegation that ICANN breached its duties by failing to root out Verisign as the puppet-master.

The complaint alleges breach of contract, negligence, unfair competition and other claims. It says:

ICANN allowed a third party to make an eleventh-hour end run around the application process to the detriment of Plaintiff, the other legitimate applicants for the .WEB gTLD and the Internet community at large.

ICANN intentionally failed to abide by its obligations to conduct a full and open investigation into NDC’s admission because it was in ICANN’s interest that the .WEB contention set be resolved by way of an ICANN auction.

The irony here is that Ruby Glen LLC, the Donuts company that applied for .web, is subject to an arrangement not dissimilar to NDC’s with Verisign.

Ruby Glen is owned by Covered TLD LLC, in turn a wholly-owned Donuts subsidiary.

It’s well-known that fellow portfolio registry Rightside has rights to acquire Covered TLD’s over 100 applied-for strings, but this is not disclosed in its .web application.

ICANN will no doubt make use of this fact when it files its answer to the complaint.

Verisign itself has not been added as a defendant, but much of the new text in the complaint focuses on its now-confirmed involvement with NDC. The suit reads:

Had VeriSign’s apparent acquisition of NDC’s application rights been fully disclosed to ICANN by NDC… the relationship would have also triggered heightened scrutiny of VeriSign’s Registry Agreements with ICANN for .COM and .NET, as well as its Cooperative Agreement with the Department of Commerce.

The fact that Verisign is allowed to collect over half a billion dollars cash every year as a result of its state-endorsed monopoly is a longstanding cause of embarrassment for the Department of Commerce.

It has taken an interest in regulating Verisign’s .com contract in the past — it’s the only reason Verisign has not been able to raise .com prices in the last few years.

But the US government is not a party to the .web contract (unlike .com, where it has a special relationship with Verisign) and is not involved in the new gTLD program’s management or policies.

The complaint also makes reference to a completely unrelated Independent Review Process declaration from last week, which slammed ICANN for its lack of accountability and transparency.

Donuts faces the additional problem that, like all new gTLD applicants, it signed a covenant not to sue ICANN when it applied for its new gTLDs.

A judge in the DotConnectAfrica v ICANN can has allowed that lawsuit to proceed, regardless, but it may prove a stumbling block for Donuts.

It all looks a bit flimsy to me, but I’ve learned not to second-guess American judges so we’ll just have to see how it plays out.

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IRP panel crucifies ICANN for lack of transparency

Kevin Murphy, August 3, 2016, Domain Policy

ICANN has lost another Independent Review Process decision, with the panel stating some potentially alarming opinions about how much power ICANN staff has over its board and “independent” third-party contractors.

This time, the successful IRP complainant was Dot Registry LLC, the Kansas company that applied for the gTLDs .llc, .llp, and .inc as a “Community” applicant.

The company lost its Community Priority Evaluations back in 2014, scoring a miserable 5 of the possible 16 points, missing the 14-point winning line by miles.

The IRP panel has now found — by a two-to-one panelist majority — that these CPE decisions had extensive input by ICANN staff, despite the fact that they’re supposedly prepared by an independent third-party, the Economist Intelligence Unit.

It also found that the ICANN Board Governance Committee rejected Dot Registry’s subsequent Request for Reconsideration appeals without doing its due diligence.

The IRP panel said in essence that the BGC merely rubber-stamped RfR decisions prepared by legal staff:

apart from pro forma corporate minutes of the BGC meeting, no evidence at all exists to support a conclusion that the BGC did more than just accept without critical review the recommendations and draft decisions of ICANN staff.

ICANN had of course denied this interpretation of events, but refused to provide the IRP panel with any of the information the BGC had supposedly used in its decision-making, citing legal privilege.

The panel also had questions related to the relationship between the EIU and ICANN staff, pointing to extensive margin notes left on the draft CPE decisions by ICANN staff.

Remarkably, the EIU appears to have incorporated ICANN suggested text into its decisions, even when the facts may not have supported the text.

For example, the final CPE decision on .inc contained the sentence:

Research showed that firms are typically organized around specific industries, locales, and other criteria not related to the entities structure as an LLC

The panel concluded that this text had originated in ICANN’s margin notes:

Possibly something like… “based on our research we could not find any widespread evidence of LLCs from different sectors acting as a community”.

According to the IRP decision, there was no mention of any pertinent “research” in the record prior to ICANN’s note. It’s possible no such research existed.

It seems the ICANN legal team helps redraft supposedly independent CPE decisions to make them less likely to be thrown out on appeal, then drafts the very decisions that the compliant BGC later uses to throw out those eventual appeals.

The IRP panel by majority therefore found a lack of due diligence and transparency at the BGC, which means the ICANN board failed to act in accordance with its bylaws and articles of incorporation.

One of the three panelists dissented from the the majority view, appending a lengthy opinion to the majority declaration.

The IRP panel went beyond its mandate by improperly extending ICANN’s bylaws commitments beyond its board of directors, he wrote, calling the declaration “a thinly veiled rebuke of actions taken by the EIU and ICANN staff”

Just because ICANN submitted no evidence that the BGC acted independently rather than merely rubber-stamping staff decisions, that does not mean the BGC did not act independently, he wrote.

The dissenting view may carry some weight, given that the majority declaration does not give ICANN any guidance whatsoever on how it should proceed.

Dot Registry has specifically not asked for a rerun of the CPEs, and the panel didn’t give it one. Instead, it had asked the panel to simply declare that its applications should have passed CPE the first time around.

That bold demand was, naturally, declined.

But the panel offers no redress in its place either. ICANN has simply been told that the BGC’s decisions on Dot Registry’s RfRs broke the bylaws. What ICANN does with that information seems to be up to ICANN.

These gTLDs are almost certainly still heading to auction.

The documents for this IRP case can be found here.

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L’Oreal shows cards on former “closed generic” gTLDs

Kevin Murphy, August 3, 2016, Domain Registries

Want to register a .beauty or .makeup domain name? L’Oreal will get to decide unilaterally whether “you’re worth it”.

The cosmetics maker has released the registration policies for its first former “closed generic” gTLD, .makeup, and they’re among the most restrictive in the industry.

Free speech appears to be the first victim of the policy — “gripe sites” are explicitly banned in the same breath as cybersquatting, 419 scams and the sale of counterfeit goods.

Domain investors and those who would hide their identity behind Whois privacy services appear to be unwelcome, too.

But perhaps most significantly, L’Oreal has also given itself the right to decide, in its sole discretion, whether a would-be registrant is eligible to own a .makeup domain.

Its launch policy reads:

Registrant Eligibility Requirements

To support the mission and purpose of the TLD, in order to register or renew a domain name in the TLD, Applicants must (as determined by the Registry in its sole and exclusive right):

  • Own, be connected to, employed by, associated with, or affiliated with a company that provides makeup and/or cosmetics related products, services, news, and/or content; or (ii) be an individual, association, or entity that has a meaningful nexus (as determined by the Registry in its sole discretion) with the cosmetics industry; and
  • Possess a bona fide intention to use the domain name in supporting the mission and purpose of the TLD.

Would-be registrants have to submit an “application” for the domain they want, and L’Oreal gets to decide whether to approve it or not.

Whether L’Oreal chooses to apply liberal or conservative standards here remains to be seen.

Like most new gTLD registries, the company plans to reserve many domains for the use of itself, partners, or future release.

The policies also give L’Oreal broad discretion to suspend or terminate names it decides violate the terms of the registration policy, which it says it can amend and retroactively apply at any time.

Using the domain counter to the mission statement of the gTLD is a violation. The mission statement reads:

The mission and purpose of the TLD is first and foremost to promote the beauty, makeup and cosmetics segments, through meaningful engagement with manufacturers, beauty enthusiasts, consumers, and retailers, using a domain space intended for use by individuals and/or companies within or associated with the various industries that provide, utilize, or bear a recognizable connection to makeup and cosmetic products and/or services.

L’Oreal has defined gripe sites — sites established primarily to criticize — as a security and stability concern that “may put the security of any Registrant or user at risk”, banning

other abusive behaviors that appear to threaten the stability, integrity or security of the TLD or any of its registrar partners and/or that may put the security of any Registrant or user at risk, including but not limited to: cybersquatting, sale and advertising of illegal or counterfeit goods, front-running, gripe sites, deceptive and⁄or offensive domain names, fake renewal notices, cross gTLD registration scams, traffic diversion, false affiliation, domain kiting⁄tasting, fast-flux, 419 scams.

If you want to set up a .makeup web site to criticize, say, L’Oreal for “body shaming” or for its animal testing policy, lots of luck to you.

The gTLD is owned by L’Oreal but seems to be being managed primarily by its application consultant, Fairwinds Partners.

It was originally designated as a single-registrant space, a so-called “closed generic” or “exclusive access” gTLD, in which only L’Oreal could register names.

But the company was forced to change its plans, under pain of losing its application, after the Governmental Advisory Committee persuaded ICANN to perform a U-turn on the permissibility of closed generics.

.makeup is due to start accepting pre-launch requests for Founders Program domains next Monday. General availability will start October 19.

Sunrise will kick off September 8, though L’Oreal warns that it has withheld generic terms such as “shop” from this period.

The company also owns .beauty, and I expect its terms there to be similar.

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