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Donuts loses to ICANN in $135 million .web auction appeal

Kevin Murphy, October 16, 2018, Domain Registries

Donuts has lost a legal appeal against ICANN in its fight to prevent Verisign running the .web gTLD.

A California court ruled yesterday that a lower court was correct when it ruled almost two years ago that Donuts had signed away its right to sue ICANN, like all gTLD applicants.

The judges ruled that the lower District Court had “properly dismissed” Donuts’ complaint, and that the covenant not to sue in the Applicant Guidebook is not “unconscionable”.

Key in their thinking was the fact that ICANN has an Independent Review Process in place that Donuts could use to continue its fight against the .web outcome.

The lawsuit was filed by Donuts subsidiary Ruby Glen in July 2016, shortly before .web was due to go to an ICANN-managed last-resort auction.

Donuts and many others believed at the time that one applicant, Nu Dot Co, was being secretly bankrolled by a player with much deeper pockets, and it wanted the auction postponed and ICANN to reveal the identity of this backer.

Donuts lost its request for a restraining order.

The auction went ahead, and NDC won with a bid of $135 million, which subsequently was confirmed to have been covertly funded by Verisign.

Donuts then quickly amended its complaint to include claims of negligence, breach of contract and other violations, as it sought $22.5 million from ICANN.

That’s roughly how much it would have received as a losing bidder had the .web contention set been settled privately and NDC still submitted a $135 million bid.

As it stands, ICANN has the $135 million.

That complaint was also rejected, with the District Court disagreeing with earlier precedent in the .africa case and saying that the covenant not to sue is enforceable.

The Appeals Court has now agreed, so unless Donuts has other legal appeals open to it, the .web fight will be settled using ICANN mechanisms.

The ruling does not mean ICANN can go ahead and delegate .web to Verisign.

The .web contention set is currently “on-hold” because Afilias, the second-place bidder in the auction, has since June been in a so-called Cooperative Engagement Process with ICANN.

CEP is a semi-formal negotiation-phase precursor to a full-blown IRP filing, which now seems much more likely to go ahead following the court’s ruling.

The appeals court ruling has not yet been published by ICANN, but it can be viewed here (pdf).

The court heard arguments from Donuts and ICANN lawyers on October 9, the same day that DI revealed that ICANN Global Domains Division president Akram Atallah had been hired by Donuts as its new CEO.

A recording of the 32-minute hearing can be viewed on YouTube here or embedded below.

ICANN says it can spend quarter-billion-dollar auction fund however it likes

Kevin Murphy, October 12, 2018, Domain Policy

ICANN can tap into its $236 million new gTLD auction fund whenever it wants, and there’s nothing the community can do about it, according to its board of directors.

The board this week said it has a “legal and fiduciary responsibility” over the money, and would be obliged to spend the cash to meet ICANN’s obligations if it ever needed to.

The statement came in a letter to the leaders of a community working group that this week published a set of preliminary recommendations (pdf) for how the money should be distributed.

The group — a cross-community working group or CCWG — laid out a few options for how the money should be administered, either by ICANN alone or in conjunction with a charitable third party, and distributed.

The money was collected from new gTLD applicants that participated in ICANN’s “last-resort” auctions to settle their contention sets. Over half of the money came from Verisign’s winning bid for .web, which is still being contested.

The CCWG said that the money should be used to:

  • Benefit the development, distribution, evolution and structures/projects that support the Internet’s unique identifier systems;
  • Benefit capacity building and underserved populations, and;
  • Benefit the open and interoperable Internet

But the CCWG could not agree among itself whether ICANN Org or community groups such as the GNSO or GAC should be able to grab some of the cash, which is currently held in a special fund, separated from ICANN’s operational budget.

The group asked the board for its opinion, and the board responded (pdf):

ICANN maintains legal and fiduciary responsibility over the funds, and the directors and officers have an obligation to protect the organization through the use of available resources. In such a case, while ICANN would not be required to apply for the proceeds, the directors and officers would have a fiduciary obligation to use the funds to meet the organization’s obligations.

In other words: it doesn’t matter what rules you put in place, it’s our money and we’re duty-bound to spend it if we have to.

The board added, however, that ICANN Org “currently does not foresee a situation where it would need to apply for the proceeds”.

ICANN is pretty well-funded. It would have to hit hard times indeed before it needed to crack open the auction nest egg.

The board also said that supporting organizations and advisory committees would not be able to apply for funding because they’re not legal entities and wouldn’t pass the due diligence.

The CCWG’s initial report is now open for public comment until November 27.

ICANN number two Atallah is new CEO of Donuts

Kevin Murphy, October 9, 2018, Domain Registries

Akram Atallah, head of ICANN’s Global Domains Division, has quit and joined Donuts as its new CEO, DI has learned.

According to multiple sources, Atallah’s last day at ICANN was yesterday.

While neither company has announced the move yet, I gather that ICANN staff were informed by CEO Goran Marby today.

The news comes just a month after private equity firm Abry Partners, which counts former ICANN CEO Fadi Chehade among its partners, acquired Donuts for an undisclosed sum.

While the revolving door between industry and ICANN is pretty much continuous, Atallah is probably the highest-profile example since Kurt Pritz in 2012 and Peter Dengate Thrush in 2011.

As head of ICANN GDD, he was responsible for all things gTLD. Before the creation of the role, he was COO.

He was also interim president and CEO of the organization on two occasions, keeping the seat warm prior to the arrival of Chehade and Marby,

Atallah and Chehade also worked together in their pre-ICANN days in the software industry.

Donuts is of course the largest new gTLD registry in terms of TLDs, with 241 in its stable.

I’ve no word yet on where Bruce Jaffe, Donuts’ current CEO, is going, but I’ll update this post when I do.

Jaffe joined Donuts as chief a little over a year ago, replacing founder Paul Stahura.

Presumably, Jaffe was the turnaround guy and with Donuts’ acquisition secured the new owners figured it was time to hire an ops guy.

UPDATE 2022 UTC: Donuts just issued a press release in which it said that Jaffe will remain a senior adviser during the transition. It also said that Atallah starts in his new job November 12.

UPDATE October 10: ICANN said in a statement overnight that VP of DNS industry engagement Cyrus Namazi will head GDD on an interim basis, with support from CTO David Conrad.

ICANN blocks .islam after government veto

Kevin Murphy, October 8, 2018, Domain Policy

After six years, ICANN has finally killed off the applications for the new gTLDs .islam and .halal, due to objections from several governments.

It has also rejected the application for .persiangulf from the same applicant.

The decisions were made by the ICANN board of directors last Wednesday. The resolutions were published Friday night.

The board said: “it is apparent that the vast majority of the Muslim community (more than 1.6 billion members) object to the applications for .HALAL and .ISLAM.”

This actually means that the Organization of Islamic Cooperation, the 57-nation treaty group with a combined 1.6 billion nominal Muslim citizens, objected to the applications.

Several governments with large Muslim populations — including the UAE, Malaysia, Turkey, India and Iran — had also individually told ICANN on the record that they were not happy.

The view from these governments seemed to be that if there’s going to be a .islam, it should be run under the umbrella of a group such as the OIC, rather than some random tuppenny ha’penny gTLD registry.

In Christianity, the comparable gTLD .catholic is run by an affiliate of the world’s oldest pedophile ring, while .bible is being run as a propaganda tool by a group of sexually repressed, homophobic American evangelicals.

The ICANN board said its decision to reject .islam and .halal was in tune with its “core values” to protect the “public interest”.

The decision was based “on its consideration of and commitment to ICANN’s Mission and core values set forth in the Bylaws, including ensuring that this decision is in the best interest of the Internet community and that it respects the concerns raised by the majority of the community most impacted by the proposed .HALAL and .ISLAM gTLDs”.

It’s been avoiding making this decision since at least December 2013.

But it has now voted that the two applications “should not proceed”. It does not appear to have banned organizations from applying for the strings in subsequent application rounds.

The applicant for .islam and .halal was Turkey-based Asia Green IT System. It applications have been “on-hold” since the GAC issued non-consensus advice against them back in April 2013.

The OIC filed Community Objections against both gTLDs with the International Chamber of Commerce, but failed on both counts.

Having failed to see any progress, in December 2015, AGIT filed an Independent Review Process appeal against its treatment by ICANN, and won.

The November 2017 IRP decision held that the “on-hold” status was a “new policy”, unilaterally put in place by ICANN Org, that unfairly condemned AGIT’s applications to indefinite limbo.

The panel ordered ICANN to make its damn mind up one way or the other and pay about $270,000 in costs.

While rejecting the applications may not seem unreasonable, it’s an important example of a minority group of governments getting an essential veto over a gTLD.

Under the rules of the 2012 application round, consensus GAC advice against an application is enough to kill it stone dead.

But the GAC had merely said (pdf):

The GAC recognizes that Religious terms are sensitive issues. Some GAC members have raised sensitivities on the applications that relate to Islamic terms, specifically .islam and .halal. The GAC members concerned have noted that the applications for .islam and .halal lack community involvement and support. It is the view of these GAC members that these applications should not proceed.

That’s non-consensus advice, which is expected to initiate bilateral engagement with ICANN’s board before a decision is made.

In the case of .persiangulf, also applied for by AGIT and also now rejected, the GAC didn’t even give non-consensus advice.

In fact, in its July 2013 Durban communique (pdf) is explicitly stated it “does not object to them proceeding”.

This appears to have been a not atypical GAC screw-up. The minutes of the Durban meeting, published months later, showed that the Gulf Cooperation Council states had in fact objected — there’s a bit of a dispute in that part of the world about whether it’s the “Persian Gulf” or “Arabian Gulf” — so the GAC would have been within its rights to publish non-consensus advice.

This all came out when the GCC filed its own IRP against ICANN, which it won.

The IRP panel in that case ordered ICANN to outright reject .persiangulf. Two years later, it now has.

While the three gTLDs in question are now going into “Will Not Proceed” status, that may not be the end of the story. One “Will Not Proceed” applicant, DotConnectAfrica, has taken ICANN to court in the US over its .africa application.

CentralNic buys .fans for peanuts

Kevin Murphy, October 8, 2018, Domain Registries

CentralNic has acquired the flailing new gTLD .fans for an undisclosed sum.

The value of the deal was low enough that publicly traded CentralNic was not obliged to disclose the purchase to the market, CEO Ben Crawford confirmed.

The ICANN contract seems to have changed hands — transferred to a CentralNic subsidiary call Fans TLD Ltd — back in August.

We revealed back in May that CentralNic was acting as a caretaker for .fans, and sister TLD .fan, after original registry Asiamix Digital failed to make enough money to keep the business going.

.fan, which Asiamix bought from Donuts but never launched, was sold back to Donuts in June.

Donuts took .fan to sunrise last week and plans to take it to general availability in December.

.fans domains, meanwhile, have been in registrar storefronts since 2015, but the current tally of registered domains is barely above 1,600.

Domains are still selling for around the $100 mark, roughly double the expected retail price of .fan.