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New gTLDs not an illegal conspiracy, court rules

Kevin Murphy, August 5, 2015, Domain Policy

ICANN has beaten off a lawsuit from alternate root provider name.space for a second time, with a US appeals court ruling that the new gTLD program was not an illegal conspiracy.

name.space sued ICANN in 2012, claiming that the program broke competition laws and that “conflicted” ICANN directors conspired with the industry in an “attack” on its business model.

The company runs an alternate DNS root containing hundreds of TLDs that hardly anyone knows about, cares about, or has access to.

Almost 200 of the strings in its system had matching applications in the 2012 new gTLD round; many have since been delegated.

The company’s complaint asked for an injunction against all 189 matching TLDs.

But a court ruled against it in 2013, saying that name.space had failed to make a case for breaches of antitrust law.

Last week, an appeals court upheld that ruling, saying that the company had basically failed to cross the legal threshold from simply making wild allegations to showing evidence of an illegal conspiracy.

“We cannot… infer an anticompetitive agreement when factual allegations ‘just as easily suggest rational, legal business behavior.’,” the court ruled, citing precedent.

“Here, ICANN’s decision-making was fully consistent with its agreement with the DOC [US Department of Commerce] to operate the DNS and the Root,” it wrote. “In transferring control to ICANN, the DOC specifically required it to coordinate the introduction of new TLDs onto the Root. This is exactly what ICANN did in the 2012 Application Round”.

“The 2012 rules and procedures were facially neutral, and there are no allegations that the selection process was rigged,” the panel ruled.

The court further ruled that ICANN is not a competitor in the markets for domain names as registry, registrar or defensive registration services, therefore it could not be subject to antitrust claims for those markets.

A few other claims against ICANN were also dismissed.

In short, it’s a pretty decisive victory for ICANN. General counsel John Jeffrey said in a statement that ICANN is “pleased” to have won.

All the major documents in the case, including the latest opinion, can be downloaded here.

While the lawsuit has been making its way through the courts, the .space gTLD has actually been delegated and the domain name.space is owned by its new registry, Radix.

There’s some salt in the wounds.

Right Of The Dot gets legal opinion: new gTLD auctions not illegal

Kevin Murphy, April 4, 2013, Domain Services

Right Of The Dot, one of the companies hoping to offer contention set resolution services to new gTLD applicants, has published a legal opinion arguing that auctions are not inherently illegal.

The document was issued in response to Uniregistry’s claim that the US Department of Justice has refused to give auctions a green light under antitrust law.

ROTD hired the law firm Lewis Brisbois Bisgaard & Smith, including a partner with DoJ experience, to draft the statement.

It’s aimed at lawyers, primarily, but the gist of it is that simply participating in an auction is not illegal in and of itself — participants would have to collude in some other way too.

It states:

The finding of an antitrust violation necessarily would depend on a showing that the private auction unreasonably restrained interstate trade or commerce.

The question comes down to the conduct of the parties to an auction, be it a private auction or an ICANN Last Resort Auction.

If the parties to an auction, engage in collusion such as price fixing and/or bid rigging, it constitute per se violations of Section 1 of the Sherman Act.

It’s not the auction provider that creates a violation it’s the action of the parties to an auction and those actions can take place in an ICANN Last Resort auction.

In other words, there’s no difference between an ICANN-run auction, in which ICANN gets paid, and a private auction in which the participants and the auctioneer get paid, according to these lawyers.

Uniregistry’s argument as I understand it, on the other hand, is that simply participating in an action that could constitute illegal collusion, because ICANN ends up out of pocket.

Who’s right? Who’s wrong?

I think the only person who could answer that, in light of the DoJ’s refusal to intervene, would be a judge. We’re unlikely to get an answer unless somebody sues somebody.

Company files for injunction against 189 new gTLDs

Kevin Murphy, October 12, 2012, Domain Registries

Alternate root player Name.Space has sued ICANN for trademark infringement and anti-competitive behavior, saying “insiders” have conspired to keep it out of the new gTLD program.

If successful, the suit would prevent dozens of new gTLD applicants from having their applications approved.

The lawsuit, filed in California this week, follows a warning the company fired at ICANN this March.

While only ICANN is named as a defendant, the suit alleges that the new gTLD program was crafted by and is dominated by “ICANN insiders” and “industry titans”.

It wants an injunction preventing ICANN delegating any of the 189 gTLD strings that it claims it has rights to.

It also fingers several current and former ICANN directors, including current and former chairs Steve Crocker and Peter Dengate Thrush, over their alleged conflicts of interest.

Name.Space has been operating 482 diverse TLDs — such as .news, .sucks, and .mail — in a lightly used alternate root system since 1996.

Most people can’t access these zones and are unaware that they exist.

The company applied to have 118 of these strings added to the root in ICANN’s “proof of concept” gTLD expansion in 2000, when the application fee was $50,000, but was unsuccessful.

Now, the company claims the new gTLD program is “an attack on name.space’s business model and a mean by which to create and maintain market power in the TLD markets”.

The complaint (pdf) states:

Rather than adopting a procedure to account for the pending 2000 Application and facilitate the expansion of TLD providers in the DNS, ICANN has adopted a procedure so complex and expensive that it once again effectively prohibited newcomers from competing. It instead has permitted participation solely by ICANN insiders and industry titans.

If it had applied for all 118 again in this year’s round, it would have cost almost $22 million (though it would have qualified for an $83,000 discount on a single bid).

Name.Space is asking for damages and an injunction preventing ICANN from approving 189 gTLDs that match those it currently operates in its alternate root.

The full list of affected applications is attached to the complaint.

ICM hires Fausett to help with YouPorn antitrust case

Kevin Murphy, August 29, 2012, Domain Registries

ICM Registry has hired new lawyers to help it fend off the antitrust lawsuit filed against it by YouPorn owner Manwin Licensing.

Gordon & Rees senior partner Richard Sybert is taking over as lead counsel in the case, which relates to the launch of .xxx last year.

Notably, the new team includes long-time ICANN legal expert Bret Fausett of Internet.Pro, who represented the Coalition For ICANN Transparency in its antitrust case against ICANN and Verisign.

That’s a bit of a coup for ICM. Manwin’s recent legal arguments have relied heavily on the antitrust precedents Fausett helped set in the CFIT case.

Gordon & Rees replaces Wilmer Cutler Pickering Hale and Dorr as ICM’s outside counsel, due to the recent departure of Wilmerhale’s ICANN guru and ICM defender, Becky Burr.

Burr joined Neustar as its chief privacy officer in May.

Manwin sued ICM and ICANN last October, arguing that the launch of .xxx was little more than a shake-down.

Earlier this month, a California District Court judge ruled that ICANN is not immune from competition law and that the litigation can proceed.

The case will turn in part on the question of whether there’s a market for “defensive registrations” under competition law and whether ICANN and ICM illegally exploited it.

Court rules YouPorn can sue ICANN for alleged .xxx antitrust violations

Kevin Murphy, August 14, 2012, Domain Policy

A California court today ruled that ICANN is subject to US antitrust laws and therefore the lawsuit filed by YouPorn.com owner Manwin Licensing over the .xxx gTLD can proceed.

In a mixed ruling, the Central District of California District Court granted some parts of ICM Registry and ICANN’s motions to dismiss the case and rejected others.

Here’s what it had to say on the subject of antitrust law, which ICANN argued back in January did not apply to it because it “does not engage in trade or commerce”:

The Court finds the transactions between ICANN and ICM described in the First Amended Complaint are commercial transactions.

ICANN established the .XXX TLD. ICANN granted ICM the sole authority to operate the .XXX TLD. In return, ICM agreed to pay ICANN money.

This is “quintessential” commercial activity and it falls within the broad scope of the Sherman Act. Even aside from collecting fees from ICM under the contract, ICANN’s activities would subject it to the antitrust laws.

That’s a pretty definitive knock-back for ICANN’s ballsy opening manoeuvre.

The court is allowing Manwin’s claims against ICANN to proceed. Manwin has until September 9 to amend and re-file its complaint.

As you may recall, Manwin sued ICANN and ICM last November, alleging that they conspired to break competition law by, among other things, forcing companies to defensively register .xxx domains.

ICM and ICANN filed separate motions to dismiss the case on seven grounds, but according to today’s ruling only two of these requests were successful.

What strikes me as particularly interesting on a first read are the definitions of the relevant domain name markets.

Under the Sherman Act, antitrust allegations have to be based on a defined “market”. Manwin’s complaint was based on the markets for “defensive registrations” and “affirmative registrations”.

The court ruled today that the company failed make the case that “affirmative registrations” is a market — because Manwin is happily running hundreds of porn sites in .com:

The Court finds Plaintiffs have failed to adequately plead the affirmative registration market. Plaintiffs have not alleged why other currently operating TLDs are not reasonable substitutes to the .XXX TLD for hosting adult entertainment websites. To the contrary, Plaintiffs allege that Manwin’s own website YouPorn.com is the most popular free adult video website on the internet.

However, the court found that “defensive registrations” is a market for the purposes of this case.

I am not a lawyer, but my sense is that this (pdf) is important stuff.

Lawyers: do feel free to chip in in the comments or via email.