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ZACR wades into .africa lawsuit, tells judge he screwed up

ZA Central Registry has told the judge in DotConnectAfrica’s lawsuit against ICANN that the preliminary injunction he granted DCA recently was based on a misunderstanding.

The injunction, granted a month ago, prevents ICANN delegating the .africa gTLD to ZACR until the lawsuit reaches a conclusion.

But, in papers filed Friday, ZACR points out that the judge screwed up in his reasoning. Judge Gary Klausner’s ruling was “predicated upon a key factual error”, ZACR says.

The error is the same one I wrote about last month — the judge thinks DCA originally passed the Geographic Names Review of its Initial Evaluation for .africa, and that ICANN later failed it anyway.

In fact, DCA never passed the GNR, and the document the judge cites in his ruling is actually ZACR’s Initial Evaluation report.

The GNR is the bit of the evaluation where both .africa applicants had to prove they had support from 60% of African governments and no more than one African governmental objection.

ZACR said in one of its Friday filings (pdf):

The record is undisputed that DCA’s application had not passed the geographic names evaluation process. And it could not because DCA did not have the requisite support of 60% or more of the African Union governments. Further, DCA’s application had been the subject of 17 “Early Warning” submissions by African Union governments. Correcting for this factual error, the record is clear that DCA has no likelihood of success in this litigation.

ZACR also says Klausner erred by saying .africa could only be delegated once, saying that TLDs can be redelegated to different operators after their initial delegation.

It’s filed a motion asking the judge to “reconsider and vacate” his preliminary injunction ruling.

ZACR is now named as a defendant in the lawsuit, which originally only named ICANN and unidentified parties.

ICANN has dropped its motion to dismiss the case and last week filed its answer (pdf) to DCA’s complaint, in which it denies any wrongdoing.

ICANN appears to be happy to let the judge’s mistake slide, or at least to allow ZACR to burden the risk of potentially pissing him off by highlighting his error.

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.

Verisign v XYZ judge confirms both companies suck

Kevin Murphy, November 21, 2015, Domain Registries

Verisign and XYZ.com have both come out of a US lawsuit looking like scumbags.

Explaining his dismissal of Verisign’s false advertising lawsuit against .xyz registry XYZ.com, Virginia judge Claude Hilton today said that XYZ.com’s statements about its registration numbers were “verifiably true”.

At the same time, he confirmed that they came about as a result of a bullshit deal with Network Solutions to bolster .xyz’s launch numbers.

The judge’s ruling confirms for the first time the financial details of the deal between XYZ and Web.com (Network Solutions) that saw .xyz’s registration volume rocket in its first few weeks of general availability. He wrote:

Web.com purchased 375,000 domain names for a price of $8 each totaling $3 million dollars. In exchange, XYZ purchased advertising from Web.com in the form of 1,000 impressions for $10 each, at a total cost of $3 million dollars. Instead of cash exchanging hands, advertising credit was given to XYZ and the .xyz domain names were given to Web.com, who subsequently gave them away as free trials to their subscribers.

In other words, XYZ bought $10,000 of advertising for $3 million and paid for it with $3 million of free .xyz domains — 375,000 of them.

That bogus deal enabled XYZ to report big reg volume numbers without actually, legally, lying,

“The statements regarding Defendants’ revenue and number of registrations are statements of fact that are verifiably true,” the judge wrote.

When the Defendants [XYZ.com] stated they were a market leader in new TLD’s and that they had the most new registrations than any other TLD, they were basing that information off of an accurate zone file. Further, the zone file confirms that there are over 120 million .com registrations and one {1) million .xyz registrations. These statements are also true.

The judge said he was dismissing the suit not just because XYZ wasn’t lying, but also because Verisign couldn’t show that it had been harmed.

The number of .com registrations has actually been going up, he noted.

Much of Verisign’s complaint centered on this ad:

Verisign said the ad lied about the availability of .com domains, which XYZ denied.

The judge said:

The video posted to YouTube is puffery and opinion. It displays no actual domain names, and communicates a subjective measure of value and superiority, not capable of being proven false.

“Puffery” is a term with legal weight in false advertising cases under US law. It basically means that advertisers are allowed to exaggerate. XYZ had in fact used the “puffery” defense.

The judge seems to have relied heavily on zone file analysis to reach his conclusions. He wrote.

according to Plaintiff’s [Verisign’s] own data, .com names are largely unavailable. In a given month, Plaintiff reports that it receives about two (2) billion requests to register <.com> domain names, yet fewer than three (3) million are actually registered.

I believe that “two billion” number refers to how many “attempted adds” Verisign gets every month for .com domains, as reported in its monthly reports with ICANN.

That number would include every automated attempt to register a dropping domain by every registrar.

It’s not a reflection of how many actual human beings attempt and fail to register .com domains and, in my view, it’s worrying that the judge took it to mean that.

In summary, the lawsuit managed to unearth the dirty reality behind XYZ’s launch “success”, whilst also making Verisign look like a petty, petulant, child.

Everybody loses.

Except the lawyers, obviously, who have been paid millions.

Verisign’s silly .xyz lawsuit thrown out

Kevin Murphy, October 28, 2015, Domain Registries

Verisign has had its false advertising lawsuit against the .xyz gTLD registry thrown out of court.

XYZ.com this week won a summary judgement, ahead of a trial that was due to start next Monday.

“By granting XYZ a victory on summary judgement, the court found that XYZ won the case as a matter of law because there were no triable issues for a jury,” the company said in a statement.

The judge’s ruling does not go into details about the court’s rationale. XYZ’s motion to dismiss has also not been published.

So it’s difficult to know for sure exactly why the case has been thrown out.

Verisign sued in December, claiming XYZ and CEO Daniel Negari had lied in advertising and media interviews by saying there are no good .com domain names left.

Many of its claims centered on this video:

XYZ said its ads were merely hyperbolic “puffery” rather than lies.

Verisign also claimed that XYZ had massively inflated its purported registration numbers by making a shady $3 million reciprocal domains-for-advertising deal with Network Solutions.

XYZ general counsel Grant Carpenter said in a statement: “These tactics appear to be part of a coordinated anti-competitive scheme by Verisign to stunt competition and maintain its competitive advantage in the industry.”

While Verisign has lost the case, it could be seen to have succeeded in some respects.

XYZ had to pay legal fees in “the seven-figure range”, as well as disclose hundreds of internal company documents — including emails between Negari and me — during the discovery phase.

Through discovery, Verisign has obtained unprecedented insight into how its newest large competitor conducts its business.

While I’ve always thought the lawsuit was silly, I’m now a little disappointed that more details about the XYZ-NetSol deal are now unlikely to emerge in court.

Did XYZ.com pay NetSol $3m to bloat .xyz?

Kevin Murphy, August 25, 2015, Domain Registries

Evidence of a possibly dodgy deal between XYZ.com and Network Solutions has emerged.

Court documents filed last week by Verisign suggest that the .xyz registry may have purchased $3 million in advertising in exchange for $3 million of .xyz domain names.

Verisign, which is suing .xyz and CEO Daniel Negari over its allegedly “false” advertising, submitted to the court a list of hundreds of exhibits (pdf) that it proposes to use at trial.

Among them are these two:

  • Email from Negari to Andrew Gorrin re EPP Feed and billing directly for $3,000,000 in domains
  • Credit Memo to Andrew from Negari “We have elected to pay for our $3MM Q2 advertising insertion order, which was dated May 20th with a credit…….” (5/31/14)

Gorrin is Web.com’s senior VP of marketing and Negari is Daniel Negari, XYZ.com’s CEO.

The documents these headings refer to are not public information, and are not likely to be any time soon, but they appear to refer to on the one hand XYZ billing NetSol for $3 million in domain names and on the other NetSol billing XYZ for $3 million in advertising.

Only one of the two document headings is dated, so we don’t know how closely they coincided.

Other headings, among the 446 documents Verisign wants to use at trial, suggest that they happened at pretty much the same time:

  • Email from Andrew Gorrin to Ashley Henning (web.com) re Bulk Purchase of .xyz domains (5/29/14)
  • Email from Andrew Gorrin to Negari re XYZ.Com Advertising IO and Marketing Agreement attaching signed agreements (5/20/14)
  • Email string Ashley Henning to Christine Nagey, Andrew Gorrin, Edward Angstadt re Bulk Purchase of .XYZ Domains (5/30/14)

The emails Verisign cites were dated May 2014, shortly before .xyz went into general availability June 2.

What we seem to be looking at here — and I’m getting into speculative territory here — are references to two more or less simultaneous transactions, both valued at exactly $3 million, between the two parties.

Both companies have consistently refused to address the nature of their deal, citing NDAs.

As you recall, the vast majority of .xyz’s early registrations were provided by NetSol, which pushed hundreds of thousands of free .xyz domains into its customers’ accounts without their explicit consent.

The number of freebies is believed to be about 350,000, based on comments Negari recently made to The Telegraph, in which he stated that .xyz, which had about 850,000 domains in its zone at the time, would have 500,000 registrations if the freebies were excluded.

With a registry fee roughly equivalent to .com’s (.xyz’s is believed to be a little lower), 350,000 names would work out to roughly $3 million.

Negari has stated previously that every .xyz registration was revenue-generating, even the freebies.

Is it possible that NetSol paid XYZ’s registry fees using money XYZ paid it for advertising? Is it possible no money changed hands at all?

I’m not saying either company has done anything illegal, and it’s completely possible I’m completely misunderstanding the situation, but it does rather put me in mind of the old “round-trip” deals that tech firms used to dishonestly prop up their tumbling revenue at the turn of the century.

Back in 2000, the dot-com bubble was on the verge of popping, taking the US economy with it, and companies facing the decline of their businesses came up with “creative” ways to show investors that they were still growing.

AOL Time Warner, for example, “effectively funded its own online advertising revenue by giving the counterparties the means to pay for advertising that they would not otherwise have purchased”.

Regulators exercised their legal options in these cases only where there appeared to be dishonest accounting, and I’ve seen no evidence to suggest that XYZ or Web.com unit NetSol have failed to adhere to anything but the highest accounting standards.

Again, I’m not saying we’re looking at a “round-trip” deal here, and there’s not a great deal of evidence to go on, but it sure smells familiar.

Certainly, questions have been raised that Verisign did not raise in its initial complaint.

Anyway.

On a personal note, I’d like to disclose that among the documents Verisign demanded from XYZ are dozens of pages of previously confidential emails exchanged between myself and Negari.

I’ve read them, and they’re mostly heated arguments about a) his refusal to give details about the NetSol deal and b) my purported lack of journalistic integrity whenever I published a post about .xyz with an even slightly negative angle.

XYZ had no choice but to supply these emails. I can’t blame it for complying with its legal requirements.

I wasn’t the only affected blogger. Mike Berkens, Konstantinos Zournas, Rick Schwartz and Morgan Linton also had their private correspondence compromised by Verisign.

I don’t know how they feel about this violation, but in my view this shows Verisign’s contempt for the media and its disregard for the sanctity of off-the-record conversations between reporters and their sources.

And that’s what I have to say about that.