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Donuts files $10 million lawsuit to stop .web auction

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).

.web auction to go ahead after ICANN denies Donuts/Radix appeal

The new gTLD .web seems set to go to auction next week after ICANN rejected an 11th-hour delay attempt by two applicants.

ICANN’s Board Governance Committee said yesterday that there is no evidence that applicant Nu Dot Co has been taken over by a deep-pocketed third party.

The BGC therefore rejected Donuts’ and Radix’s joint attempt to have the July 27 “last resort” auction delayed.

Donuts and Radix had argued in a Request for Reconsideration earlier this week that Nu Dot Co has changed its board of directors since first applying for .web, which would oblige it to change the application.

Its failure to do so meant they auction should be delayed, they said.

They based their beliefs on an email from NDC director Jose Ignacio Rasco, in which he said one originally listed director was no longer involved with the application but that “several others” were.

There’s speculation in the contention set that a legacy gTLD operator such as Verisign or Neustar might now be in control of NDC.

But the BGC said ICANN had already “diligently” investigated these claims:

in response to the Requesters’ allegations, ICANN did diligently investigate the claims regarding potential changes to Nu Dot’s leadership and/or ownership. Indeed, on several occasions, ICANN staff communicated with the primary contact for Nu Dot both through emails and a phone conversation to determine whether there had been any changes to the Nu Dot organization that would require an application change request. On each occasion, Nu Dot confirmed that no such changes had occurred, and ICANN is entitled to rely upon those representations.

ICANN staff had asked Rasco via email and then telephone whether there had been any changes to NDC’s leadership or control, and he said there had not.

He is quoted by he BGC as saying:

[n]either the ownership nor the control of Nu Dotco, LLC has changed since we filed our application. The Managers designated pursuant to the company’s LLC operating agreement (the LLC equivalent of a corporate Board) have not changed. And there have been no changes to the membership of the LLC either.

The RfR has therefore been thrown out.

Unless further legal action is taken, the auction is still scheduled for July 27. The deadline for all eight applicants (seven for .web and one for .webs) to post deposits with ICANN passed on Wednesday.

As it’s a last resort auction, all funds raised will go into an ICANN pot, the purpose of which has yet to be determined. The winning bid will also be publicly disclosed.

Had the contention set been settled privately, all losing applicants would have made millions of dollars of profit from their applications and the price would have remained a secret.

NDC is the only applicant refusing to go to private auction.

The applicants for .web are NDC, Radix, Donuts, Schlund, Afilias, Google and Web.com. Vistaprint’s bid for .webs is also in the auction.

The RfR decision can he read here (pdf).

Donuts joins fight to delay .web gTLD auction with emergency appeal

Donuts and Radix have filed an “emergency” appeal with ICANN in an attempt to get the forthcoming auction for the .web gTLD delayed.

The companies, both of which have applied for .web, say they have evidence that one of their rival bidders recently changed ownership without telling ICANN, in breach of application rules.

They filed a Request for Reconsideration (pdf) with ICANN (pdf) on Sunday, demanding the delay and an investigation into whether Nu Dot Co LLC is under new control.

The move follows speculation, which we reported last week, that Nu Dot Co is now being controlled by a major legacy gTLD registry player such as Verisign.

The evidence for the the change of ownership comes to light for the first time in the RfR. It’s an email from Nu Dot Co director Jose Ignacio Rasco to Donuts dated June 7. It reads:

Nicolai is at NSR full time and no longer involved with our TLD applications. I’m still running our program and Juan sits on the board with me and several others.

“Nicolai” is Nicolai Bezsonoff, who is listed as an NDC director in its .web application. NSR is presumably Neustar, where Bezsonoff went to work when it acquired .CO Internet.

“Juan” is Juan Calle, the third NDC director, CEO, and former CEO of .CO Internet.

Donuts and Radix believe that Bezsonoff’s departure and the apparent appointment of the unnamed “several others” as NDC directors gave NDC the obligation, under Applicant Guidebook rules, to inform ICANN of the changes.

The Guidebook states:

If at any time during the evaluation process information previously submitted by an applicant becomes untrue or inaccurate, the applicant must promptly notify ICANN via submission of the appropriate forms. This includes applicant-specific information such as changes in financial position and changes in ownership or control of the applicant.

(With that in mind, one wonders whether the acquisition of .blog at auction was strictly legit).

Donuts and Radix now want ICANN to delay the “last resort” auction, which is currently slated for July 27, and “conduct a thorough and transparent investigation into the apparent discrepancies and/or changes in NDC’s .WEB/.WEBS application”.

NDC is believed to be the only one of the eight .web/.webs applicants to be refusing to settle the contention set via a private auction, where the losers get an equal share of the winning bid.

If the set goes to ICANN’s last-resort auction, ICANN gets all the cash.

The final price of .web could easily be in the ball park of $50 million, so each applicant stands to lose several million dollars if the July 27 auction goes ahead as planned.

Radix and fellow .web applicant Schlund had previously written to ICANN to request the delay, but were rebuffed in a letter last week.

The decision outlined in that letter is what the new RfR challenges.

RfRs have a long track record of being dismissed by ICANN’s Board Governance Committee, very often because the requester has not supplied ICANN with any new information with which to change its mind.

That’s a risk here, too, given that ICANN seems to have been in possession of the Rasco email since June 22, before decision to go ahead with the auction was made.

However, that decision seems to have been made by ICANN staff. An RfR makes sure it gets the attention of the ICANN board of directors.

Is Verisign .web applicant’s secret sugar daddy?

The fiercely contested .web gTLD is being forced into a last-resort auction and some people seem to think a major registry player is behind it.

Two .web applicants — Radix (pdf) and Schlund (pdf) — this week wrote to ICANN to demand that the .web auction, currently planned for July 27, be postponed.

They said the sale should be delayed to give applicants time “to investigate whether there has been a change of leadership and/or control” at rival applicant Nu Dot Co LLC.

Nu Dot Co is a new gTLD investment vehicle headed up by Juan Diego Calle, who launched and ran .CO Internet until it was sold to Neustar a couple of years ago.

I gather that some applicants believe that Nu Dot Co’s .web application is now being bankrolled by a larger company with deeper pockets.

The two names I’ve heard bandied around, talking to industry sources this week, are Verisign and Neustar.

Nobody I’ve talked to has a shred of direct evidence either company is involved and Calle declined to comment.

So is this paranoia or not?

There are a few reasons these suspicions may have come about.

First, the recent revelation that successful .blog applicant Primer Nivel, a no-name Panama entity with a Colombian connection, was actually secretly being bankrolled by WordPress, has opened eyes to the possibility of proxy bidders.

It was only after the .blog contention set was irreversibly settled that the .blog contract changed hands and the truth become known.

Some applicants may have pushed the price up beyond the $19 million winning bid — making the rewards of losing the private auction that much higher — had they known they were bidding against a richer, more motivated opponent.

Second, sources say the .web contention set had been heading to a private auction — in which all losing applicants get a share of the winning bid — but Nu Dot Co decided to back out at the last minute.

Under ICANN rules, if competing applicants are not able to privately resolve their contention set, an ICANN last-resort auction must ensue.

Third, this effective vetoing of the private auction does not appear to fit in with Nu Dot Co’s strategy to date.

It applied for 13 gTLDs in total. Nine of those have already gone to auctions that Nu Dot Co ultimately lost (usually reaping the rewards of losing).

The other four are either still awaiting auction or, in the case of .corp, have been essentially rejected for technical reasons.

It usually only makes sense to go to an ICANN last-resort auction — where the proceeds all go to ICANN — if you plan on winning or if you want to make sure your competitors do not get a financial windfall from a private auction.

Nu Dot Co isn’t actually an operational registry, so it doesn’t strictly have competitors.

That suggests to some that its backer is an operational registry with a disdain for new gTLD rivals. Verisign, in other words.

Others think Neustar, given the fact that its non-domains business is on the verge of imploding and its previous acquisition of .CO Internet from Calle.

I have no evidence either company is involved. I’m just explaining the thought process here.

According to its application, two entities own more than 15% of Nu Dot Co. Both — Domain Marketing Holdings, LLC and NUCO LP, LLC — are Delaware shell corporations set up via an agent in March 2012, shortly before the new gTLD application filing deadline.

Many in the industry are expecting .web to go for more than the $41.5 million GMO paid for .shop. Others talk down the price, saying “web” lacks the cultural impact it once had.

But it seems we will all find out later this month.

Responding to the letters from Schlund and Radix, ICANN yesterday said that it had no plans to postpone the July 27 last-resort auction.

All seven applicants had to submit a postponement form by June 12 if they wanted a delay, ICANN informed them in a letter (pdf), and they missed that deadline.

They now have until July 20 to either resolve the contention privately or put down their deposits, ICANN said.

The applicants for .web, aside from Nu Dot Co, are Google, Donuts, Radix, Schlund, Web.com and Afilias.

Due to a string confusion ruling, .webs applicant Vistaprint will also be in the auction.

CentralNic doing okay out of new gTLDs

Local former rival Minds + Machines may be struggling to turn a profit, but CentralNic seems to be doing quite well out of this new gTLD malarkey.

But not as well as you might expect. Large growth at its clients does not appear to have translated to a whole lot more revenue for CentralNic itself.

The company yesterday reported 2015 profit before tax of £1.45 million ($2.13 million), compared to £520,000 in 2014, on revenue up 71% at £10.39 million ($15.28 million).

While it may be best known nowadays as a back-end registry provider, its revenue is now fairly evenly split over its three reporting segments.

CentralNic runs the back-end registry for volume gTLDs including .xyz and Radix’s .site, .online, .website, and .space.

The company calls this “wholesale domain sales”, and it brought in £3.12 million last year, compared to £2.82 million in 2014.

You might think that the volume success of .xyz, which added about a million names in 2015, might have translated into a bigger boost, but it didn’t.

Its registrar business, which it got into through the acquisitions of Internet.bs and Instra, brought in £3.4 million, compared to £1.55 million in 2014.

Its third segment, “Enterprise including Premium Domain Name Sales” saw revenue of £3.85 million, compared to $1.69 million.

The enterprise business, which also included two software licenses and revenue from dot-brand clients, is easily the most profitable segment, with a 67% EBITDA margin. For wholesale, it’s 44%.

The £3.8 million of enterprise revenue included £3.22 million premium name sales, of which over £3 million came from a single buyer.

It’s not clear whether this was a single domain deal or a package of premiums, but it represents the most volatile element of CentralNic’s revenue.

Update (May 30) — This article originally misidentified “Company A” and “Company B” in CentralNic’s accounts as registry clients. In fact, according to CEO Ben Crawford, they’re registrar channel partners.

Radix joins the Hollywood content police

Radix has become the second major gTLD registry to announce a content policing deal with the movie industry.

It today said it has signed an agreement with the Motion Picture Association of America similar to the one Donuts announced in February.

Like Donuts, Radix will treat the MPAA as a “trusted notifier” for the purposes of taking down “large-scale pirate websites”.

Radix said the deal “imposes strict standards for such referrals, including that they be accompanied by evidence of clear and pervasive copyright infringement, and a representation that the MPAA has first attempted to contact the registrar and hosting provider for resolution.”

Donuts described its notifier program in this document (pdf). Radix said its arrangement is “similar”.

The Donuts-MPAA deal proved somewhat controversial.

The Electronic Frontier Foundation invoked the slippery slope argument, saying of it:

The danger in agreements like this is that they could become a blanket policy that Internet users cannot avoid. If what’s past is prologue, expect to see MPAA and other groups of powerful media companies touting the Donuts agreement as a new norm, and using it to push ICANN and governments towards making all domain name registries disable access to an entire website on a mere accusation of infringement.

The EFF said these kinds of deals could ultimately lead to legal freedom of speech being curtailed online.

We’re not quite there yet — right now we have two gTLD registries (albeit covering over 200 gTLDs) and one trusted notifier — but I expect more similar deals in future, branching out into different industries such as music and pharamaceuticals.

The deals stem in part from the Domain Name Association’s Healthy Domains Initiative, which aims to avoid ICANN/government regulation by creating voluntary best practices for the industry.

The advantage of a voluntary arrangement is that there’s no risk of a terminal sanction — such as losing your registry contract — if you fail to live up to its terms.

Radix’s portfolio includes .website, .space, .online and .tech. It’s also a .music and .web applicant.

WordPress reveals IT bought .blog for $19 million

WordPress.com owner Automattic has outed itself as the bankroll behind the winner of the .blog auction and the new owner of the forthcoming new gTLD.

Founder Matt Mullenweg also revealed that the company paid around $19 million for the domain at private auction in February 2015, about $1 million more than the amount DI estimated at the time.

Until now, the winning .blog applicant, which fought off competition from eight competitors including Google, M+M, Radix and Donuts, was only known as Primer Nivel.

Primer Nivel is a Panamanian company previously described to DI as an investment vehicle with links to Colombian registrar My.co.

To the best of my knowledge, Automattic’s involvement with the bid has never even been hinted at, but Automattic founder Matt Mullenweg said in a blog post last night that it has been involved since well before the auction took place.

It’s now public that Automattic is the company behind Knock Knock Whois There LLC, the registry for the new .blog TLD. (And a great pun.) We wanted to stay stealth while in the bidding process and afterward in order not to draw too much attention, but nonetheless the cost of the .blog auction got up there (people are estimating around $20M).

An earlier version of the blog post put the price at “about $19m”, as captured by Google.

ICANN approved the reassignment of the .blog contract from Primer Nivel to Knock Knock WHOIS There on April 29.

In the original Primer Nivel application, only My.co CEO Gerardo Aristizabal and VP of business development Carlos Neira were listed as shareholders of 15% or more of the company in its answer to question 11 of the application form.

ICANN processed a change request to the question 11 answer in March 2014, but did not publish the result of the change. It may merely have been a change of personal contact information.

One has to wonder whether, had WordPress’ involvement in Primer Nivel been public, the .blog auction could have fetched even more.

One might imagine that Google, which competes with WordPress with its Blogger service, would have viewed .blog as more threatening in a rival’s hands.

But Primer Nivel and now Automattic/KKWT appear to have no intention to make .blog a WordPress-exclusive gTLD. The original application stated that it would be open to all, and ICANN has since banned so-called “closed generics”.

The registry has already opened a web site at kkwt.domains, which is currently pitching the product to accredited registrars.

It says it plans to go to general availability and “activate” 250,000 .blog domains before the end of the year.

Automattic obtained an ICANN registrar accreditation back in October 2010 but to date has not sold a single domain via that accreditation.

It offers WordPress.com hosting customers domain registrations, but I believe it does so as a GoDaddy reseller.

.blog is currently in “transition to delegation” and it’s probably only a matter of days before it is delegated to the internet.

Mullenweg blogged that the sunrise period is expected to start in August, with and October landrush.

Pricing is expected to be in line with current industry standards, including premium tiers.

The gTLD has always been one of my favorites, and having WordPress backing it will almost certainly make it more successful than if the registry were an independent third party, possibly raising the profile of new gTLDs as a whole.

Afilias takes over .hotel, sidelines Krischenowski over hacking claims

Afilias has sought to distance itself from DotBerlin CEO Dirk Krischenowski, due to ongoing claims that he improperly accessed secret data on rival .hotel applicants.

The company revealed in a recent letter to ICANN that it has bought out Krischenowski’s 48.8% stake in successful .hotel applicant Hotel Top Level Domain Sarl and that Afilias will become the sole shareholder of HTLD.

The move is linked to claims that Krischenowski exploited a glitch in ICANN’s new gTLD applicants’ portal to access confidential financial and technical information belonging to rival .hotel applicants.

These competing applicants have ganged up to demand that HTLD should lose its rights to .hotel, which it obtained by winning a controversial Community Priority Evaluation.

Afilias chairman Philipp Grabensee, now “sole managing director” of HTLD, wrote ICANN last month (pdf) to explain the nature of the HTLD’s relationship with Krischenowski and deny that HTLD had benefited from the alleged data compromise.

He said that, at the time of the incidents, Krischenowski was the 50% owner and managing director of a German company that in turn was a 48.8% owner of HTLD. He was also an HTLD consultant, though Grabensee played down that role.

He was responding to a March ICANN letter (pdf) which claimed that Krischenowski’s portal credentials were used at least eight times to access confidential data on .hotel bids. It said:

It appears that Mr Krischenowski accessed and downloaded, at minimum, the financial projections for Despegar’s applications for .HOTEL, .HOTEIS and .HOTELES, and the technical overview for Despegar’s applications for .HOTEIS and .HOTEL. Mr Krischenowski appears to have specifically searched for terms and question types related to financial or technical portions of the application.

Krischenowski has denied any wrongdoing and told DI last month that he simply used the portal assuming it was functioning as intended.

Grabensee said in his letter that any data Krischenowski may have obtained was not given to HTLD, and that his alleged actions were not done with HTLD’s knowledge or consent.

He added that obtaining the data would not have helped HTLD’s application anyway, given that the incident took place after HTLD had already submitted its application. HTLD did not substantially alter its application after the incident, he said.

HTLD’s rival .hotel applicants do not seem to have alleged that HTLD won the contention set due to the confidential data.

Rather, they’ve said via their lawyer that HTLD should be disqualified on the grounds that new gTLD program rules disqualify people who have been convicted of computer crime.

Even that’s a bit tenuous, however, given that Krischenowski has not been convicted of, or even charged with, a computer crime.

The other .hotel applicants are Travel Reservations, Famous Four Media, Radix, Minds + Machines, Donuts and Fegistry.

ICANN is now pressing HTLD for more specific information about Krischenowski’s relationship with HTLD at specific times over the last few years, in a letter (pdf) published last night, so it appears that its overdue investigation is not yet complete.

Donuts wins .doctor

Donuts has emerged the victor of the .doctor gTLD contention set.

Competing applicants Radix and The Medical Registry both withdrew their applications last week.

The string wasn’t due to head to its ICANN last-resort auction until May 25, indicating that the contention set was settled privately.

.doctor has been the subject of some controversy.

ICANN’s Governmental Advisory Committee had insisted that .doctor should be reserved purely for licensed medical doctors.

Donuts had complained that this would rule out use by any of the myriad other types of doctor, as well as registrants using “doctor” in a fanciful sense (like “rug doctor” or “PC doctor”).

ICANN initially accepted the GAC advice, but changed its mind this February, declining to impose such restrictive language on .doctor’s contractual Public Interest Commitments.

So it seems that .doctor will be generally unrestricted.

Donuts will have to sign up to the standard “Category 1” PICs, which require the registry to work with relevant regulatory bodies, however.

.web has an auction date

Kevin Murphy, April 29, 2016, Domain Registries

The .web gTLD will go to auction July 27, according to ICANN.

The organization released an updated auction schedule (pdf) on Wednesday night that also slates .kids/.kid for an auction on the same day.

Both auctions have confusing “indirect contention” elements, where two strings were ruled confusingly similar.

With .web, it’s lumped in with Vistaprint’s application for .webs, which lost a String Confusion Objection filed by Web.com.

Under ICANN rules, .webs is confusingly similar to to Web.com’s .web, but not to the other six .web applications.

This means that Vistaprint and Web.com basically are fighting a mini contention set auction to see who gets their applied-for gTLD.

If Web.com wins the auction for .web, Vistaprint cannot have .webs. However, if any other .web applicant wins, Vistaprint can go ahead with .webs.

Either way, there will be a .web delegated this year. Google, Donuts, Radix, Afilias, Schlund Technologies, Nu Dot Co are all contenders.

In the case of .kids/.kid, the one applicant for .kid — Google — won SCOs against DotKids Foundation and Amazon by default because both .kids applicants failed to respond to the complaints.

DotKids Foundation recently lost a Community Priority Evaluation, enabling the auction to go ahead.

Because Google is in contention with both .kids applicants, only one of the two strings will ultimately be delegated — .kids and .kid will not coexist.

The only other scheduled auction right now is that of .doctor, which is planned for May 25. Radix, Donuts and The Medical Registry will fight it out in this rather less complex battle.

It’s worth noting that if any of these contention sets unanimously choose to resolve their differences via private auction, none of the ICANN auctions will go ahead.