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Architelos files bankruptcy after Afilias lawsuit

Kevin Murphy, March 21, 2016, Domain Services

Afilias has managed to bury domain security software provider Architelos, which filed for bankrupcty today.

Architelos filed Chapter 7, which basically means the company will close and its assets will be liquidated to pay off creditors.

Its only major creditor is Afilias, which won a patent lawsuit against it last August.

The jury in the case set damages at $10 million, finding that Architelos had misappropriated Afilias trade secrets, but the trial judge recently indicated her intention of reducing the award to $2 million.

Even that was a bit too rich for the company, which floated the idea of operating NameSentry on a revenue share with Afilias until its debt was paid.

Clearly, that’s no longer going to happen.

Architelos was founded by Alexa Raad in 2011, to exploit the new gTLD opportunity as a consulting and software tools provider.

It made seven figures in its first year, mainly through gTLD application consulting fees, but saw modest adoption of its subsequent security offering, NameSentry.

The flagship service only made $300,000 in revenue, according to court documents. After the August verdict, Architelos’ sales pipeline dried up.

The software and the US patents covering them are the company’s key assets, though Afilias is expected to be awarded at least partial ownership rights of the patents.

The company had about 10 employees at its peak, but has been operating on a skeleton crew of two or three for the last few months.

Architelos said in a blog post that NameSentry customers will be able to continue to use the service in the short term, but what happens to it in future depends on how the bankruptcy court appointed trustee does with it.

Afilias also has an outstanding lawsuit against Architelos and Raad in Canada.