Rejected community gTLD applicant Dot Registry has waded into the lawsuit between DotConnectAfrica and ICANN.
Filing an amicus brief on Friday in support of the unsuccessful .africa applicant, Dot Registry argues that chagrined new gTLD applicants should be allowed to sue ICANN, despite the legal releases they all signed.
The company is clearly setting the groundwork for its own lawsuit against ICANN — or at least trying to give that impression.
If the two companies are successful in their arguments, it could open the floodgates for more lawsuits by pissed-off new gTLD applicants.
Dot Registry claims applicants signed overly broad, one-sided legal waivers with the assurance that alternative dispute mechanisms would be available.
However, it argues that these mechanisms — Reconsideration, Cooperative Engagement and Independent Review — are a “sham” that make ICANN’s assurances amount to nothing more than a “bait-and-switch scheme”.
Dot Registry recently won an Independent Review Process case against ICANN that challenged the adverse Community Priority Evaluation decisions on its .inc, .llc, and .llp applications.
But while the IRP panel said ICANN should pay Dot Registry’s share of the IRP costs, the applicant came away otherwise empty-handed when panel rejected its demand to be handed the four gTLDs on a plate.
The ICANN board of directors has not yet fully decided how to handle the three applications, but forcing them to auction with competing applications seems the most likely outcome.
By formally supporting DotConnectAfrica’s claim that the legal waiver both companies signed is “unconscionable”, the company clearly reckons further legal action will soon be needed.
DotConnectAfrica is suing ICANN on different grounds. Its .africa bid did not lose a CPE; rather it failed for a lack of governmental support.
But both companies agree that the litigation release they signed is not legally enforceable.
They both say that a legal waiver cannot be enforceable in ICANN’s native California if the protected party carries out fraud.
The court seems to be siding with DotConnectAfrica on this count, having thrown out motions to dismiss the case.
Dot Registry’s contribution is to point to its own IRP case as an example of how ICANN allegedly conned it into signing the release on the assumption that IRP would be able to sort out any disputes. Its court brief (pdf) states:
although claiming to provide an alternative accountability mechanism, the Release, in practice, is just a bait-and-switch scheme, offering applicants a sham accountability procedure
Indeed, the “accountability” mechanism is nothing of the sort; and, instead of providing applicants a way to challenge actions or inactions by ICANN, it gives lip-service to legitimate grievances while rubber-stamping decisions made by ICANN and its staff.
That’s an allusion to the IRP panel’s declaration, which found no evidence that ICANN’s board of directors had conducted a thorough, transparent review of Dot Registry’s complaints.
Dot Registry is being represented by the law firm Dechert. That’s the current home of Arif Ali, who represented DotConnectAfrica in its own original IRP, though Ali is not a named lawyer in the Dot Registry brief.
ICANN lawyers have launched an extraordinary attack on a “blogger” who recently wrote an article headlined “ICANN’s general counsel should lose his job over this”.
Early Friday, ICANN’s board of directors issued its response to the recent Independent Review Process case in which new gTLD applicant Dot Registry managed to show that the board had breached its transparency and accountability bylaws.
The board resolution did not say what is going to happen to Dot Registry’s four new gTLD applications, due to lack of guidance from the IRP panel.
But it did contain a surprising retaliation against Chris Williams, a reporter for online news site The Register, referring to “factual inaccuracies that have been reported in online blogged reports”.
(Before going any further, some disclosure: I freelanced for The Register for several months about five years ago, when Williams was the copy editor I sometimes had to work with. I also worked directly under its current group editor for about five years at a different publication in the early-mid 2000s.)
In the rationale accompanying its resolution last week, the board said:
the Board also notes that there have been online blogged reports about what the [IRP] Final Declaration actually says, yet many of the items reported on have been factual inaccuracies
I immediately grew worried that the resolution was having a pop at this site. But it actually refers to The Register, a news site with millions of readers that, despite its tabloid style, is not usually described as a “blog”.
The board ordered the simultaneous release of their staff-prepared briefing notes (pdf) for the meeting at which the resolution was passed, which contain an 800-word rebuttal of Williams’ August 3 article “Simply not credible: The extraordinary verdict against the body that hopes to run the internet”.
The article covers the Dot Registry IRP decision in a tone that is harshly critical of ICANN.
It is particularly critical of ICANN’s legal team and specifically general counsel John Jeffrey and notes that he makes a tonne of cash due to his regular, generous pay rises.
I compared each point in the rebuttal to the original article and I think ICANN is generally on fairly safe ground in some of what it says are inaccuracies.
In other cases, the rebuttal instead takes issue with the opinion of a third party quoted in the piece, or with a different, but in my view fair, characterization of the IRP declaration.
It seems the Reg article did incorrectly conflate “ICANN staff” and the “ICANN legal team” in at least one instance, as the ICANN rebuttal claims.
It also does in fact quote sections of “the [IRP] Panel’s recitation of Dot Registry’s claims as if they are the Panel’s own finding” as the rebuttal says it does.
But the actual findings of the panel were arguably much harsher than the text the Reg quoted.
So why is the ICANN board of directors passing a resolution addressing the veracity of a news report rather than the real concerns raised by the IRP declaration?
Column yards of horseshit are written about ICANN on a daily basis — I’m probably responsible for an inch or two myself — so why has ICANN zeroed in on this particular piece?
Could it be because Williams’ follow-up piece, August 4, leads with Dot Registry CEO Shaul Jolles calling for the head of Jeffrey? Jolles is quoted as saying:
ICANN’s general counsel should lose his job for this. The advice that he gives, everything was processed through him. It’s shocking.
There’s a rich irony at work here.
The main takeaway from the IRP’s declaration was that the ICANN board sometimes rubber-stamps resolutions drafted by ICANN staff without doing its due diligence.
The Reg then reported that fact.
In response, ICANN staff drafted a resolution designed to shoot the messenger, deflecting attention from the IRP’s findings, which the board then approved without amendment.
If somebody over at ICANN is chagrined about inaccurate reporting, I can’t help but feel that the best way to deal with that would be to request a correction or publish a rebuttal in the form of a blog post or some other kind of statement.
Using the very method under scrutiny — staff drafts, board approves — to issue a rebuttal simply serves to highlight the failings outlined by the IRP panel.
Compounding this, the only reason we’re able to see the full rebuttal today is that the board approved a (staff-drafted) resolution authorizing the concurrent publishing of staff briefing materials.
Usually, briefing materials are published alongside formal minutes when they are approved many weeks later.
If the ICANN board is able to publish briefing materials just a couple of days after passing its resolutions, why on Earth does it not do so as a matter of course?
Did any member of the ICANN board raise her or his hand to ask why these materials had to be published with such haste?
Can ICANN only be transparent in a timely fashion when its lawyers have been criticized in the press?
ICANN has lost another Independent Review Process decision, with the panel stating some potentially alarming opinions about how much power ICANN staff has over its board and “independent” third-party contractors.
This time, the successful IRP complainant was Dot Registry LLC, the Kansas company that applied for the gTLDs .llc, .llp, and .inc as a “Community” applicant.
The company lost its Community Priority Evaluations back in 2014, scoring a miserable 5 of the possible 16 points, missing the 14-point winning line by miles.
The IRP panel has now found — by a two-to-one panelist majority — that these CPE decisions had extensive input by ICANN staff, despite the fact that they’re supposedly prepared by an independent third-party, the Economist Intelligence Unit.
It also found that the ICANN Board Governance Committee rejected Dot Registry’s subsequent Request for Reconsideration appeals without doing its due diligence.
The IRP panel said in essence that the BGC merely rubber-stamped RfR decisions prepared by legal staff:
apart from pro forma corporate minutes of the BGC meeting, no evidence at all exists to support a conclusion that the BGC did more than just accept without critical review the recommendations and draft decisions of ICANN staff.
ICANN had of course denied this interpretation of events, but refused to provide the IRP panel with any of the information the BGC had supposedly used in its decision-making, citing legal privilege.
The panel also had questions related to the relationship between the EIU and ICANN staff, pointing to extensive margin notes left on the draft CPE decisions by ICANN staff.
Remarkably, the EIU appears to have incorporated ICANN suggested text into its decisions, even when the facts may not have supported the text.
For example, the final CPE decision on .inc contained the sentence:
Research showed that firms are typically organized around specific industries, locales, and other criteria not related to the entities structure as an LLC
The panel concluded that this text had originated in ICANN’s margin notes:
Possibly something like… “based on our research we could not find any widespread evidence of LLCs from different sectors acting as a community”.
According to the IRP decision, there was no mention of any pertinent “research” in the record prior to ICANN’s note. It’s possible no such research existed.
It seems the ICANN legal team helps redraft supposedly independent CPE decisions to make them less likely to be thrown out on appeal, then drafts the very decisions that the compliant BGC later uses to throw out those eventual appeals.
The IRP panel by majority therefore found a lack of due diligence and transparency at the BGC, which means the ICANN board failed to act in accordance with its bylaws and articles of incorporation.
One of the three panelists dissented from the the majority view, appending a lengthy opinion to the majority declaration.
The IRP panel went beyond its mandate by improperly extending ICANN’s bylaws commitments beyond its board of directors, he wrote, calling the declaration “a thinly veiled rebuke of actions taken by the EIU and ICANN staff”
Just because ICANN submitted no evidence that the BGC acted independently rather than merely rubber-stamping staff decisions, that does not mean the BGC did not act independently, he wrote.
The dissenting view may carry some weight, given that the majority declaration does not give ICANN any guidance whatsoever on how it should proceed.
Dot Registry has specifically not asked for a rerun of the CPEs, and the panel didn’t give it one. Instead, it had asked the panel to simply declare that its applications should have passed CPE the first time around.
That bold demand was, naturally, declined.
But the panel offers no redress in its place either. ICANN has simply been told that the BGC’s decisions on Dot Registry’s RfRs broke the bylaws. What ICANN does with that information seems to be up to ICANN.
These gTLDs are almost certainly still heading to auction.
The documents for this IRP case can be found here.
At least two new gTLD applicants reckon ICANN has screwed up their Initial Evaluation, flunking their applications due to missing or mishandled communications.
Following Friday’s batch of IE results, which saw four failures, one angry applicant got in touch with DI to complain about discrepancies in how his bids were scored.
Dot Registry has applied for five “corporate identifier” strings — .inc, .corp, .ltd, .llc and .llp — and has made decent progress convincing the powers that be that they will be operated responsibly.
On Friday, its .inc bid passed its Initial Evaluation with flying colors while .llc and .ltd were marked as “Eligible For Extended Evaluation”, a polite code phrase for #fail.
Both of the unsuccessful bids scored 0 on question 50, “Funding Critical Registry Functions”, which is an automatic failure no matter what the overall score on the financial evaluation.
Applicants are scored on question 50 from 0 to 3 by showing that they have a “Continuing Operations Instrument” to cover three years of operations in the event that their registry fails.
Most applicants have been submitting letters of credit supplied by their bank, which promise to pay ICANN these emergency funds should the need arise.
A zero score indicates basically that no COI was provided.
But CEO Shaul Jolles claims that Dot Registry submitted a single letter of credit to cover all five applications, later amended at ICANN’s request so that each string in the portfolio was broken out individually.
“We then received a note that they now have whatever they needed and it’s resolved,” he said.
He noted that .inc, which passed on Friday with maximum score of 3, is covered by exactly the same LOC as the two applications that scored a 0, which doesn’t make much sense.
A second applicant, which does not currently wish to be named, has told DI that it failed its financial evaluation on a question for which it received no Clarifying Questions.
CQs are the handy method by which ICANN gave applicants a second shot at getting their applications right. Hundreds have been issued, the vast majority related to financial questions.
The common complaint to both failing applicants is that at no point did ICANN inform the applicant that its application was deficient.
We understand both applicants are currently in touch with ICANN management in order to try to get their predicaments resolved.
The secretary of state for Delaware has come out in opposition to new gTLD applications such as .inc, .corp and .ltd.
Bullock wrote (emphasis added):
none of the applications contains a fully thought out, achievable, transparent and enforceable system for fully safeguarding that a firm remains legally registered with a company registry at all times.
none of the applications adequately safeguards consumers, legitimate businesses, the public at large, state regulators, and the internet itself from the risks that “company endings” are used for fraudulent or misleading purposes.
Therefore, at this stage of the gTLD process, I strongly believe that the public is best served if these company endings are not made available for use. There is no overriding public policy purpose or strong business case for making them available and the opportunity for fraud and abuse is very high.
There are a few dozen corporate-themed gTLD applications, including contests for: .inc, .corp, .llp, .ltd, .company and .gmbh.
Back in March, before any of the applications had been published, Bullock and other secretaries of state said that such gTLDs should only be approved with “restrictions that would attempt to protect legitimate businesses and consumers from confusion or fraud.”
His letter suggested that DOT Registry’s proposals might be adequate, but he’s apparently changed his mind after reading the applications.
Based on the March letters, I’d say there’s a strong possibility of objections being filed against some or all of these applications.
Delaware is of course the state most big US companies choose to register themselves in, due to its generous company laws.