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Afilias seeks to freeze Architelos patent after $10m lawsuit win

Kevin Murphy, December 22, 2015, Domain Registries

Afilias seems bent on burying domain security software maker Architelos, after winning a $10 million lawsuit against it.

The registry on Friday filed a court motion to freeze the patent at the heart of the lawsuit, which Afilias says — and a jury agreed — was based on trade secrets misappropriated by former Afilias employees.

Afilias said it wants to make sure Architelos does not attempt to sell the so-called ‘801 patent, which covers domain abuse-monitoring software.

Its motion asks for a court order “prohibiting Architelos from taking any action that would dilute… or diminish Architelos’ rights or ownership interests” in the patent.

It notes that Architelos has stated that it does not have the means to pay the $10 million damages awarded by a jury in August, which might give it a reason to try to sell the patent.

Afilias said Architelos had “raised the prospect of bankruptcy” during post-trial negotiations.

The motion seems to have been filed now because the judge in the case is taking an unusually long time to render her final judgment.

Despite the case being heard on a so-called “rocket docket” in Virginia, the two companies haven’t heard a peep out of the court since late October.

According to Afilias’ motion, the judge has indicated that Afilias will wind up at least partially owning the ‘801 patent, but that the jury’s $10 million verdict may be “tweaked”.

Judging by a transcript of the August jury trial, the judge herself was not particularly impressed with Afilias’ case and did not expect the jury to crucify Architelos so badly.

Out of the jury’s earshot, she encouraged Afilias to attempt to settle the case and said “if the jury verdict comes in against what I think is the clear weight of the evidence, I will most likely adjust it.”

She also said: “I would have trouble believing that any reasonable jury would find even if they were to award damages to the plaintiff that there’s any significant amount here.”

She clearly misread the jury, which a few days later handed Afilias every penny of the $10 million it had asked for.

That’s much more money than Architelos is believed to have made in revenue since it launched four years ago.

Afilias’ latest motion is set to be heard in court in early January.

.pro now open to all

Kevin Murphy, November 16, 2015, Domain Registries

Afilias today made the .pro gTLD available to anyone, regardless of their professional qualifications.

The previously restricted TLD was able to do so as a result of its six-week-old contract with ICANN, which loosened many of the conditions former registry RegistryPro originally agreed to when the TLD was delegated 13 years ago.

Under the original Registry Agreements, RegistryPro — since acquired by Afilias — had to verify the professional credentials of potential registrants.

Now that .pro has been brought under something that looks a lot like the 2012 new gTLD RA, it’s pretty much a free-for-all.

The registry said in a press release:

despite demand from registrants and registrars alike, .PRO names have historically been denied to professionals from a wide range of fields such as policemen, firefighters, journalists, programmers, artists, writers, and many others.

In my personal experience, it has been possible to register a .pro domain without providing credentials. I’ve been paying for one for a few years, though I’ve been unable to actually use it.

The gTLD was approved in the original, first round of new gTLD applications, back in 2000.

Part of the original deal was that it would be restricted to three classes of professions — lawyer, doctor, accountant — and only available to buy at the third level.

The third-level limitation was lifted many years ago, but .pro continued to be restricted to people who could show a credential.

However, even as recently as 2012 then-RegistryPro-CEO Karim Jiwani was telling DI that the secret to growth was more restrictions, not less.

He’s no longer with the company.

.pro’s registration numbers have have been suffering the last few years.

The registry peaked at roughly 160,000 names in July 2012, and has been on a downward track ever since. It started this July with about 122,000 registrations.

As part of its new deal with ICANN, Afilias no longer has price caps — previously set around .com prices — and has had to implement some of the provisions of the new gTLD Registry Agreement.

One such provision is the Uniform Rapid Suspension policy, which continues to cause controversy in the industry.

Afilias gives its gTLDs a kick up the bum with U-turn 101domain buy

Kevin Murphy, October 16, 2015, Domain Registries

Afilias, once one of the fiercest opponents of registries owning registrars, has acquired 101domain to gain its first significant foothold in the registrar market.

Wolfgang Reile, president and CEO of 101domain, said he would be quitting the company and that COO/CFO Anthony Beltran will be leading the new Afilias unit in future.

The acquisition, which closed September 2, was for an undisclosed amount, but I’d say it was easily a seven-figure deal.

When Afilias rival CentralNic acquired Internet.bs last year, it paid $7.5 million.

California-based 101domain is currently about a quarter of the size that Internet.bs was when it was bought, based on gTLD domains under management, with a little over 120,000 names on its books as of June this year, according to registry reports.

But the company is well known as a go-to registrar if you want a broad choice of TLDs — it says it currently supports over 900. Its ccTLD sales may make the company much bigger.

Getting its stable of registry offerings to market is one of the reasons Afilias was drawn to 101domain.

Afilias’ own portfolio of TLDs contain some semi-restricted strings — such as .vote, which has a no-domaining policy — that would not be automatically attractive to many registrars.

Afilias told DI:

This acquisition furthers our post-vertical integration strategy of establishing a capability that enables us to both service our registry customers and ensure an outlet for TLDs of our own that may not be easy to find at a traditional registrar. 101domain is expected to continue to operate as it does today.

Afilias actually already had a registrar division — Emerald Registrar, which does business from iDomains.com — but had fewer than 1,500 domains under management at the last count.

Its registry business has over 20 million domains.

If you have a long memory, you may recall that Afilias was once dead-set against the concept of vertical integration — registries and registrars under the same ownership — which in the post-2012 new gTLD world has become industry standard.

The ICANN working group that was tasked with reforming ownership rule was held in stalemate by Afilias and Go Daddy back in 2010, before ICANN finally broke the deadlock.

New gTLD portfolio registries including Uniregistry, Google, Minds + Machines and Rightside have registrar businesses already. Famous Four seems to be closely aligned with Alpnames, and Donuts is tight with Rightside.

Afilias wins $10m judgment in Architelos “trade secrets” case

Kevin Murphy, August 25, 2015, Domain Services

Afilias has won a $10 million verdict against domain security startup Architelos, over claims its flagship NameSentry abuse monitoring service was created using stolen trade secrets.

A jury in Virginia today handed Afilias $5 million for “misappropriation of trade secrets”, $2.5 million for “conversion” and another $2.5 million for “civil conspiracy”.

The jury found (pdf) in favor of Architelos on claims of business conspiracy and tortious interference with contractual relations, however.

Ten million dollars is a hell of a lot of cash for Architelos, which reportedly said in court that it has only made $300,000 from NameSentry.

If that’s true, I seriously doubt the four-year-old, three-person company has even made $10 million in revenue to date, never mind having enough cash in the bank to cover the judgment.

“We’re disappointed in the jury’s verdict and we plan to address it in some post-trial motions,” CEO Alexa Raad told DI.

The lawsuit was filed in January, but it has not been widely reported on and I only found out about its existence today.

The original complaint (pdf) alleged that three Architelos employees/contractors, including CTO Michael Young, were previously employees or contractors of Afilias and worked on the company’s own abuse tools.

It claimed that these employees took trade secrets with them when they joined Architelos, and used them to build NameSentry, which enables TLD registries to monitor and remediate abuse in their zones.

Architelos denied the claims, saying in its March answer (pdf) that Afilias was simply trying to disrupt its business by casting doubt over the ownership of its IP.

That doubt has certainly been cast, though the jury verdict says nothing about transferring Architelos’ patents to Afilias.

The $5 million portion of the verdict deals with Afilias’ claim that Architelos misappropriated trade secrets — ie that Young and others took work they did for Afilias and used it to build a product that could compete with something Afilias had been building.

The other two counts that went against Architelos basically cover the same actions by Architelos employees.

The company may be able to get the amount of the judgment lowered in post-trial, or even get the jury verdict overturned, so it’s not necessarily curtains yet. But Architelos certainly has a mountain to climb.

Afilias wants to buy your failed gTLD

Afilias is on an overt campaign to snap up struggling new gTLDs at bargain basement prices.

“In the neighborhood of a dozen” gTLD operators responded seriously to Afilias’ booth at last month’s ICANN meeting in Buenos Aries, (pictured), Afilias chief marketing officer Roland LaPlante told DI in an interview today.

The company could potentially buy up tens of gTLDs over the coming year, LaPlante said.

“If all of these 500 strings with less than 5,000 names in them start looking for a new owner, it’s going to be a pretty active marketplace,” he said.

Afilias

“There are entrants in the market who either have found the market is not as they expected, or results are not what they need, or for whatever other reason they’re coming to the conclusion this isn’t the business they should be in and they’re looking for options,” LaPlante said.

“There’s been a cold splash of water in the face for a lot of people who didn’t expect it, they’re struggling with relatively low revenues compared to what they might have expected,” he said. “They’re likely to be looking for options.”

Afilias would be happy to take these contracts off their current owners’ hands, for the right price.

“Frankly, we’re not going to be paying huge prices for them,” LaPlante.

“We’ve run into a number of folks who still have fairly inflated opinions of what their string is worth,” he said. “Some of these strings are attractive, but they’re going to need a lot more time to mature.”

Afilias believes that the economies of scale it already has in place would enable it to turn a profit at a much lower registration volume, perhaps under 50,000 names, and that it has the patience and financial strength to wait for its acquisitions to hit those volumes.

“We’re very conservative in our volume estimates,” LaPlante said.

Afilias currently has 26 new gTLDs as back-end and 13 as contracted registry operator.

The company is basically looking for acquisitions where the seller’s looming alternative might be the Emergency Back-End Registry Operator, and where the fees associated with an auction might be a bit too rich.

While LaPlante jokingly compared the proposition to the “We Buy Any Car” business model, he admitted that some registries are less attractive than others.

gTLDs with a lot of restrictions or monitoring would be treated with much more caution — Afilias was not interested in .hiv, which failed to sell at auction recently, for example — and would be skeptical about registries that have given away large numbers of free domains.

“We’d like to pick up strings that have good potential for a profitable amount of volume,” he said.

Afilias quietly sold .meet to Google earlier this year, but LaPlante denied that Afilias is in the business of flipping gTLDs. While he could not get into details, he said the .meet deal was a “special case”.

As we discovered last week, at least eight new gTLDs have changed ownership since signing their registry contracts. A few others have been acquired pre-contracting.