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Verisign sues .xyz and Negari for “false advertising”

Kevin Murphy, February 24, 2015, Domain Registries

Handbags at dawn!

Verisign, the $7.5 billion .com domain gorilla, has sued upstart XYZ.com and CEO Daniel Negari for disparaging .com and allegedly misrepresenting how well .xyz is doing.

It’s the biggest legacy gTLD versus the biggest (allegedly) new gTLD.

The lawsuit focuses on some registrars’ habit of giving .xyz names to registrants of .com and other domains without their consent, enabling XYZ.com and Negari to use inflated numbers as a marketing tool.

The Lanham Act false advertising lawsuit was filed in Virginia last December, but I don’t believe it’s been reported before now.

Verisign’s beef is first with this video, which is published on the front page of xyz.com:

Verisign said that the claim that it’s “impossible” to find a .com domain (which isn’t quite what the ad says) is false.

The complaint goes on to say that interviews Negari did with NPR and VentureBeat last year have been twisted to characterize .xyz as “the next .com”, whereas neither outlet made such an endorsement. It states:

XYZ’s promotional statements, when viewed together and in context, reflect a strategy to create a deceptive message to the public that companies and individuals cannot get the .COM domain names they want from Verisign, and that XYZ is quickly becoming the preferred alternative.

As regular readers will be aware, .xyz’s zone file, which had almost 785,000 names in it yesterday, has been massively inflated by a campaign last year by Network Solutions to push free .xyz domains into customers’ accounts without their consent.

It turns out Verisign became the unwilling recipient of gtld-servers.xyz, due to it owning the equivalent .com.

According to Verisign, Negari has used these inflated numbers to falsely make it look like .xyz is a viable and thriving alternative to .com. The company claims:

Verisign is being injured as a result of XYZ and Negari’s false and/or misleading statements of fact including because XYZ and Negari’s statements undermine the equity and good will Verisign has developed in the .COM registry.

XYZ and Negari should be ordered to disgorge their profits and other ill-gotten gains received as a result of this deception on the consuming public.

The complaint makes reference to typosquatting lawsuits Negari’s old company, Cyber2Media, settled with Facebook and Goodwill Industries a few years ago, presumably just in order to frame Negari as a bad guy.

Verisign wants not only for XYZ to pay up, but also for the court to force the company to disclose its robo-registration numbers whenever it makes a claim about how successful .xyz is.

XYZ denies everything. Answering Verisign’s complaint in January, it also makes nine affirmative defenses citing among other things its first amendment rights and Verisign’s “unclean hands”.

While many of Verisign’s allegations appear to be factually true, I of course cannot comment on whether its legal case holds water.

But I do think the lawsuit makes the company looks rather petty — a former monopolist running to the courts on trivial grounds as soon as it sees a little competition.

I also wonder how the company is going to demonstrate harm, given that by its own admission .com continues to sell millions of new domains every quarter.

But the lesson here is for all new gTLD registries — if you’re going to compare yourselves to .com, you might want to get your facts straight first if you want to keep your legal fees down.

And perhaps that’s the point.

Read the complaint here and the answer here, both in PDF format.

New gTLD registries increasingly attacking .com

Kevin Murphy, August 18, 2014, Domain Registries

Is .com “silly” and “meaningless”?

That’s what some new gTLD registries would have you believe.

In separate blog posts over the last week, Donuts and ARI Registry Services have gone on the offensive, dismissing .com as an irrelevant relic of a bygone age.

ARI CEO Adrian Kinderis branded .com as “meaningless and unintuitive” in a post slamming the Board of Racing Victoria, an Australian horse-racing organization, for the purchase of racing.com for (he claimed) $500,000.

New gTLDs with more semantic relevance to horse racing or geographic regions will make this purchase look “silly” in future, he said.

Take for instance .racing which is set to launch soon. It would offer a more creative and relevant domain name such as horses.racing, victorian.racing or vichorses.racing.

He also said that most Australians are conditioned to visit .com.au (for which ARI provides the registry back-end), which will lead to traffic leakage from racing.com to racing.com.au.

The problem is that racing.com does not have an intrinsic connection with Victorian horse racing that would lend itself to intuitive navigation and recall.

Donuts had a similar message in a blog post last week.

Donuts vice president Mason Cole said on that company’s blog that .com is “diluted and meaningless” when compared to more vertically oriented TLDs such as Donuts’ .photography and .bike.

It adds nothing to an identity. Except perhaps to say, “I’m on the Internet somewhere.” .COM is “1999” — not “today,” and definitely not the future. New .COM registrations are extraordinarily long and much less meaningful when compared to a new registration in a new gTLD. And with its recent price decreases on new registrations (which apparently is necessary to match their low quality), .COM now means “low quality and cheap.”

It will be interesting to see whether this kind of messaging will be carried over from lightly trafficked corporate blogs into more mainstream new gTLD marketing by registries.

What do you think? Do Donuts and ARI have a point? Is .com meaningless? Will it fall out of fashion? Is going negative on legacy gTLDs a wise strategy for new gTLD companies?

Reported mass exodus from .com explained

Kevin Murphy, August 15, 2014, Domain Registries

Did Verisign suffer from a massive 2,600% increase in the number of deleted .com domain names this April?

Not quite, although the bizarre spike in deletes may have highlighted an area where the company was previously out of compliance with its ICANN Registry Agreements.

April’s .com registry report, filed with ICANN and published last week, shows 2.4 million domains were deleted, compared to just 108,000 in March and 90,000 in April 2013.

The spike looks surprising, and you may be tempted to think it is in some way related to the arrival of new gTLDs.

But look again. Could .com, a registry with over 116 million domains under management, really only see roughly 100,000 deletes every month? Clearly that number is far too low.

So what’s going on? I asked Verisign.

The company said that it has implemented “voluntary” changes to its reporting of deleted domains, based on the standard new gTLD Registry Agreement, which specifies what must be reported by new gTLD registries.

It said:

Prior to the April 2014 monthly reports, and per the ICANN gTLD registry reporting guidelines, Verisign reported on only deleted domains outside of any grace period.

There are five “grace periods” permitted by ICANN contracts: the Add Grace Period, Renew/Extend Grace Period, Auto-Renew Grace Period, Transfer Grace Period, and Redemption Grace Period.

The familiar Add Grace Period allows registrars to cancel registrations within a week of registration if the registrant made a typo, for example, and asked for a refund.

The Redemption Grace Period covers domains that have expired and do not resolve, but can still be restored for 30 days at the request of the registrant.

According to Verisign, before April, domains that were deleted outside of any of the five grace periods were reported as “deleted-domains-nograce”.

From April, the company is reporting domains only as “deleted-domains-nograce” if they delete outside of the Add Grace Period.

According to my reading of the .com contract, that’s what Verisign should have been doing all along.

The contract, which Verisign and ICANN signed in late 2012, defines “deleted-domains-nograce” only as “domains deleted outside the add grace period”. There’s no mention of other grace periods.

The same definition can be found in the 2006 contract.

It appears to me that Verisign may have been under-reporting its deletes for quite some time.

Verisign said in response that it does not believe it has a compliance issue. A spokesperson said: “[We] voluntarily updated our reporting of deleting domain names so that our reporting is aligned with ICANN’s reporting clarifications for the new gTLDs.”

ICANN reveals gTLD objections appeals process

Kevin Murphy, February 12, 2014, Domain Policy

Two new gTLD applicants would get the opportunity to formally appeal String Confusion Objection decisions that went against them, under plans laid out by ICANN today.

DERCars and United TLD (Rightside), which lost SCOs for their .cars and .cam applications respectively, would be the only parties able to appeal “inconsistent” objection rulings.

DERCars was told that its .cars was too similar to Google’s .car, forcing the two bids into a contention set. But Google lost similar SCO cases against two other .cars applicants.

Likewise, Rightside’s .cam application was killed off by a Verisign SCO that stated .cam and .com were too similar, despite two other .cam applicants prevailing in virtually identical cases.

Now ICANN plans to give both losing applicants the right to appeal these decisions to a three-person panel of “Last Resort” operated by the International Centre for Dispute Resolution.

ICDR was the body overseeing the original SCO process too.

Notably, ICANN’s new plan would not give Verisign and Google the right to appeal the two .cars/.cam cases they lost.

Only the applicant for the application that was objected to in the underlying SCO and lost (“Losing Applicant”) would have the option of whether to have the Expert Determination from that SCO reviewed.

There seems to be a presumption by ICANN already that what you might call the “minority” decision — ie, the one decision that disagreed with the other two — was the inconsistent one.

I wonder if that’s fair on Verisign.

Verisign lost two .cam SCO cases but won one, and only the one it won is open for appeal. But the two cases it lost were both decided by the same ICDR panelist, Murray Lorne Smith, on the same grounds. The decisions on .cam were really more 50-50 than they look.

According to the ICANN plan, there are two ways an appeal could go: the panel could decide that the original ruling should be reversed, or not. The standard of the review is:

Could the Expert Panel have reasonably come to the decision reached on the underlying SCO through an appropriate application of the standard of review as set forth in the Applicant Guidebook and procedural rules?

The appeals panelists would basically be asked to decide whether the original panelists are competent or not.

If the rulings were not reversed, the inconsistency would remain in place, making the contention sets for .car, .cars and .cam stay rather confusing.

ICANN said it would pay the appeals panel’s costs.

The plan (pdf) is now open for public comment.

Famous Four says that Demand Media’s .cam should be rejected

Kevin Murphy, September 6, 2013, Domain Policy

Demand Media’s application for .cam should be rejected because it lost a String Confusion Objection filed by .com registry Verisign, according to rival applicant Famous Four Media.

“The process in the applicant guidebook is now clear: AC Webconnecting and dot Agency Limited proceed to resolve the contention set, and United TLD’s application cannot proceed,” chief legal officer Peter Young told DI.

dot Agency is Famous Four’s applicant for .cam, which along with AC Webconnecting survived identical challenges filed by Verisign. United TLD is the applicant subsidiary of Demand Media.

Serious questions were raised about the SCO process after two International Centre for Dispute Resolution panelists reached opposition conclusions in the three .cam/.com cases last month.

Demand Media subsequently called for an ICANN investigation into the process, with vice president Statton Hammock writing:

String confusion objections are meant to be applicant agnostic and have nothing to do with the registration or use of the new gTLD.

However, Famous Four thinks it has found a gotcha in a letter (pdf) written by a lawyer representing Demand which opposed consolidation of the three .cam cases, which stated:

Consolidation has the potential to prejudice the Applicants if all Applicants’ arguments are evaluated collectively, without regard to each Applicant’s unique plan for the .cam gTLD and their arguments articulating why such plans would not cause confusion.

In other words, Demand argued that the proposed usage of the TLD should be taken into account before the ICDR panel ruled against it, and now it saying usage should not have been taken into account.

Famous Four’s Young said:

Whether or not one ascribes to the view that usage should not be taken into account, and we believe that it should (otherwise we would not have argued it), the fact is that United TLD were very explicit prior to the publication that usage should indeed be taken into account.

The SCO debate expanded yesterday when the GNSO Council spent some time discussing .cam and other SCO discrepancies during its regular monthly meeting.

Concerns are such that the Council intends to inform the ICANN board of directors and its New gTLD Program Committee that it is looking into the issue.

The NGPC, has “Update on String Similarity” on its agenda for a meeting on Tuesday, which will no doubt try to figure out what, if anything, needs to be done.

String confusion in disarray as Demand’s .cam loses against Verisign’s .com

Kevin Murphy, August 20, 2013, Domain Policy

Demand Media is demanding an ICANN review of its objections policy, after its applied-for new gTLD .cam was beaten in a String Confusion Objection by .com registry Verisign.

A International Centre for Dispute Resolution panelist has ruled (pdf) that .cam and .com are too confusingly similar to coexist, meaning Demand’s bid for .cam must be rejected by ICANN.

But the ruling by Urs Laeuchli conflicts with two other ICDR panel decisions on .cam, which both found that the string is NOT confusingly similar to .com and therefore can be delegated.

So while Demand’s .cam bid, under a strict reading of the rules, is now supposed to be rejected, applications for identical strings filed by AC Webhosting and dotAgency can go ahead.

ICANN has been thrown a curve ball it is not yet fully prepared to deal with.

As Akram Atallah, president of ICANN’s Generic Domains Division, told DI last week, it’s possible that the policy or the implementation of that policy may need to be revisited by ICANN and the community.

United TLD, the Demand Media subsidiary that applied for .cam, is now calling for precisely that, with vice president of business and legal affairs Statton Hammock writing today:

String confusion objections are meant to be applicant agnostic and have nothing to do with the registration or use of the new gTLD. What matters in string confusion objections is whether a string is visually, aurally or, according to ICANN’s Applicant Guidebook, otherwise “so nearly resembles another that it is likely to deceive or cause confusion.” Individuals may disagree on whether .CAM and .COM are similarly confusing, but there can be no mistake that United TLD’s .CAM string, AC Webhosting’s .CAM string, and dotAgency Limited’s .CAM string are all identical. Either all three applications should move forward or none should move forward.

The .cam cases are not alone in presenting ICANN with SCO problems.

Last week, Donuts’ bid for .pets was ruled confusingly similar to Google’s .pet, despite previous ICDR cases finding that plurals and singulars are not too confusing to coexist.

Where the .cam panelists disagreed

While there were three .cam cases, two of them were decided by the same panelist. It seems that both panelists were provided with very similar sets of evidence in all three cases.

It’s relevant to note that neither panelist — unlike some of their colleagues in other cases — thought it was appropriate to apply trademark law such as the DuPont factors in their decisions.

They did, however, consider the expected use cases of .cam.

All three applicants take .cam as short for “webcam” or “camera” and would target registrants interested in those fields (a lot of the use will likely be pornographic — AC Webconnecting is a porn firm after all).

But all three applicants also want to run “open” gTLDs, with no registration restrictions.

ICDR panelist Murray Smith was in charge of both the AC Webconnecting and dotAgency cases. He addressed expected usage explicitly in dotAgency, and explained why:

It is not just the visual, phonetic and conceptual similarity between the words that must be taken into account. In my view the greater emphasis should be focused on the use of the disputed extensions in the context of modern Internet usage. It is this context that compels the conclusion that an average Internet user would not be confused and would know that a .com website is probably a commercial website while a .cam websites would be something more focused in a particular field.

In AC Webconnecting, he wrote:

I agree that a consumer would quickly realize that a .cam website is likely associated with photography or camera use and is different than a .com website in use generally by a myriad of commercial entities.

So he’s putting the “greater emphasis” on usage — a factor that is not explicitly mentioned in the Applicant Guidebook’s description of the SCO and which may quite often differ between applicants.

Right there, in Smith’s interpretation of his task, we have a reason why SCOs will produce different results for identical strings.

I find Smith’s thinking baffling for a couple of reasons.

First, “a consumer would quickly realize that a .cam website is likely associated with photography” seems to ignore the existence of a bazillion .com web sites that are also associated with photography.

When did “commercial entities” and “photography or camera use” become mutually exclusive? Is photographyblog.com not confusingly similar to photographyblog.cam?

Second, he ignores the fact that basically anyone will be able to register a .cam web site for basically any purpose. None of the applicants want to restrict the gTLD to camera-related stuff.

ICDR panelist Laeuchli, in the Demand Media .cam case, raised this precise point, saying:

“.com” and “.cam” would use the same channels appealing to a broad audience. Even though according to Applicant, its envisioned TLD will “likely appeal” to a specific audience, it plans to operate “.cam” as an open gTLD. This would lead to extensive overlap.

Panelist Smith has some other notions about confusion that seem to defy common sense. He wrote in the AC Webconnecting case:

The .com TLD is the most widely recognized string in the Internet world. No reasonable Internet user would fail to recognize the .com TLD. The very reputation of the .com name serves to limit the potential for an average Internet user to be confused by the proposed .cam TLD. It is indeed unlikely that an online consumer would confuse a .com website with a .cam website.

Does this not strike anyone else as bad thinking?

It seems to me to be a little like saying that it’s perfectly okay to market a brand of carbonated beverage called Cuke, because Coke is so famous that nobody could possibly be confused. I don’t know where the law stands on that issue, but I’m pretty sure Coke wouldn’t be happy about it.

There’s also some weirdness in Laeuchli’s decision in the Demand case.

He puts some weight on the similarity scores produced by the controversial Sword algorithm in his decision, but apparently without doing even the basic research. He writes in his findings:

No matter what the standards and purpose the ICANN SWORD algorithm includes, it has comparative value.

Since pairs such as “God” and “dog” (85%) reach similarity scores of 84% and higher, how much more similar would “cxm” and “cxm” be (x being replaced with a vowel)!

The answer is that, according to Sword, they’re less similar. Sword scores “cam” v “com” at 63%.

Laeuchli knows it’s 63%, because he makes reference to that fact in his summary of Verisign’s evidence. He doesn’t need to speculate about the number based on what “god” v “dog” scores (and if he did the “dog” v “god” query himself, why on earth didn’t he just query “com” v “cam” too?)

His finding that .cam and .com will cause probable confusion seems to be based largely on expert witness testimony provided by both Verisign and Demand, in which he found Verisign’s more persuasive.

This evidence seems to have largely comprised the opinions of linguists, examining mouth shapes and acoustic frequencies, and market research looking into internet user behavior. As none of it has been published, it’s difficult to judge which side had the better arguments.

But it’s undeniably about the similarity of the strings, rather than the proposed usage, which makes Demand Media’s statement today — that SCOs “are meant to be applicant agnostic and have nothing to do with the registration or use of the new gTLD” — quite confusing.

Demand lost its case based on the string similarity, whereas the other two applicants won theirs based on the usage.

Perhaps Demand senses that its .cam application will not be immediately rejected if ICANN reopens the debate about string similarity. If think it’s probably correct.

Verisign lays out ‘buy once’ IDN gTLD plans

Verisign has finally clarified how it proposes to let existing registrants of internationalized domain names grab the matching domains in its 12 forthcoming IDN gTLDs.

The company has applied for transliterations of .com in nine non-Latin scripts and .net in three, but its applications were light on details about existing registrants’ rights.

But today Verisign senior vice president Pat Kane outlined precisely how name allocations will be handled.

At first glance it sounds like good news for existing IDN registrants, particularly domainers whose investments in IDN .com and .net domains are about to become much more valuable.

If you already own a .com domain that is an IDN at the second level, you will have exclusive rights to that IDN string in all other .com transliterations, but not .net transliterations.

That works the other way around too: if you own the IDN .net domain, you get the matching second level in all of Verisign’s .net transliterations.

Owning the Chinese word for “beer” in Latin .com would not give you rights to the Thai word for “beer” in the Thai transliteration of .com, but you could buy the Chinese equivalent.

The rules seem to apply to future registrations too.

You could register the Hebrew for “beer” in the Hebrew transliteration of .com and you would also get the exclusive right to that Hebrew string in Latin .com.

There would be no obligation, and you wouldn’t lose your right to register matching domains if you chose not to immediately exercise it, Kane said. He wrote:

Two primary objectives in our strategy to implement new IDN gTLDs are, where feasible, to avoid costs to consumers and businesses from purely defensive registrations in these new TLDs, as well as to avoid end-user confusion.

It all sounds pretty fair to me, based on Kane’s blog post.

There’s a hint that trademark rights protection mechanisms may complicate matters, which has apparently been discussed in a letter to ICANN, but if it’s been published anywhere I’ve been unable to find a copy.

Surprise! Verisign to increase .net fees

Kevin Murphy, December 19, 2012, Domain Registries

Verisign has just announced that it will increase its .net registry fee by 10% next year.

The changes, which will become effective July 1, 2013, see the charge for a one-year registration increase from $5.11 to $5.62.

The increase, which is permitted under Verisign’s contract with ICANN, was inevitable given the fact that the company has just lost the right to increase .com prices.

US Department of Commerce intervention in .com means that prices there are frozen for the next six years, so Verisign can be relied upon to seize every alternative growth opportunity available to it.

The last time .net’s fee was increased was January 2012, when it went up by 10% to the current $5.11.

Verisign’s IDN gTLDs “could increase phishing” say Asian registries

Kevin Murphy, November 30, 2012, Domain Policy

It’s a bad day for Verisign.

As the company pins its growth hopes partially on its applications for IDN gTLDs — in the wake of losing its price-raising powers over .com — ccTLD registries from Asia-Pacific have raised serious concerns about its bids.

The Asia Pacific Top Level Domain Association says that many of its members reckon the proposed IDN transliterations of .com “could give rise to an increased risk of phishing and other malicious abuses”.

Verisign has applied for a dozen transliterations of .com and .net in scripts such as Hebrew, Cyrillic and Arabic. The strings themselves are meaningless, but they sound like “com” and “net”.

It’s for this reason that APTLD reckons they could cause problems. In an October 1 letter to ICANN, published today, the organization said:

In addition to the potential for user confusion, some [Working Group] members also noted that the creation of transliterated TLDs, without the development of adequate registration and eligibility polices and procedures, could give rise to an increased risk of phishing and other malicious abuses of the new spaces.

The WG notes that this potential problem manifests itself at the second level, and is not unique to tranlisterated TLDs, but would argue that the very nature of these TLDs, and their close similarity to existing TLDs, makes them particularly high-risk targets.

The letter does not single out Verisign, and does not represent a consensus APTLD view.

There are also worries among APTLD members about the application for .thai in Latin script, which could clash with Thailand’s IDN ccTLD, and various translations of “.site”.

APTLD notes that the new gTLD evaluation process only contains checks for visual similarity between TLDs.

The only way to block an application based on phonetic confusion is to file a String Confusion Objection, but the only entity eligible to object to Verisign’s applications is Verisign itself.

Winners and losers in the new .com pricing regime

Kevin Murphy, November 30, 2012, Domain Registries

Today’s shock news that Verisign will be subject to a .com price freeze for the next six years will have broad implications.

The US Department of Commerce has told the company it will have to continue to sell .coms at $7.85 wholesale until 2018, barring exceptional circumstances.

Here’s my initial take on the winners and losers of this new arrangement.

Domain investors

Volume .com registrants are of course the big winners here. A couple of dollars a year for a single .com is pretty insignificant, but when you own tens or hundreds of thousands of names…

Mike Berkens of Most Wanted Domains calculated that he’s saved $170,000 $400,000 over the lifetime of the new .com deal, and he reckons fellow domainer Mike Mann will have saved closer to $800,000 $2 million.

Brand owners

The other big constituency of volume registrants are the brand owners who spend tens or hundreds of thousands of dollars a year maintaining defensive registrations — mostly in .com — that they don’t need.

Microsoft, for example, owns over 91,000 domain names, according to DomainTools. I’d hazard a guess that most of those are defensive and that most are in .com.

Registries

There’s potentially trouble on the horizon for new gTLD applicants and existing registry operators. Verisign is looking for new ways to grow, and it’s identified its patent portfolio as an under-exploited revenue stream.

The company says it has over 200 patents either granted or pending, so its pool of potential licensees could be quite large.

Its US portfolio includes patents such as 7,774,432, “Registering and using multilingual domain names”, which appear to be quite broad.

Verisign also owns a bunch of patents related to its security business, so companies in that field may also be targeted.

Registrars

Verisign’s registrars will no longer have to pass their cost increases on to consumers every year.

While this may help with renewal rates, it also means registrars won’t be able to sneak in their own margin increases whenever Verisign ups its annual fees.

IDN buyers

Another area Verisign plans to grow is in internationalized domain names, where it’s applied to ICANN for about a dozen non-Latin variants of .com and .net.

Those registry deals, assuming they’re approved by ICANN, will not be governed by the .com pricing restrictions. Now that Verisign’s growth is getting squeezed, we might expect higher prices for IDN .com variants.

ICANN

ICANN may have suffered a small reputational hit today, with Commerce demonstrating it has the balls to do what ICANN failed to do six years ago, but money-wise it’s doing okay.

The new .com contract changes the way Verisign pays ICANN fees, and Commerce does not appear to have made any changes to that structure. ICANN still stands to get about $8 million a year more from the deal.

The Department of Commerce

Unless you’re a Verisign shareholder, Commerce comes out of this deal looking pretty good. It played hard-ball and seems to have won a lot of credibility points as a result.