ICM and YouPorn in antitrust settlement talks

It’s Valentine’s Day, so perhaps it’s appropriate that ICM Registry has just revealed that it’s in talks to settle the .xxx antitrust lawsuit filed by one of the world’s biggest porn networks.
ICM and Manwin Licensing may soon resolve the case, which Manwin filed in November over the “extortion” it saw in the launch of the .xxx top-level domain, according to court documents.
In a joint filing, Manwin and ICM, along with ICANN and Digital Playground – the fellow plaintiff that Manwin has since acquired – said:

in recent days, Plaintiffs and ICM have engaged in discussions aimed at resolving the disputes that are the subject of this litigation.
The parties believe that additional time would potentially allow the parties to resolve all or some portion of their disputes.

The filing stipulates that Manwin has until this Friday to file an amended complaint and that ICANN and ICM should have 60 days after that to file their responses to the complaint.
That’s assuming that the suit isn’t completely settled in the meantime, of course.
The ICANN and ICM motions to dismiss filed in January have been taken off-calendar until Manwin amends its complaint.
I understand that ICANN also has secured a 60-day extension to its deadline to respond to the separate Manwin Independent Review Panel proceeding.
Manwin, which runs Brazzers, YouPorn and the Playboy-branded web sites, claimed in its complaint that the approval of .xxx in the absence of a competitive tender and its subsequent launch policies and pricing violated US antitrust laws.
ICANN and ICM claimed in their responses last month that the company was just scared of a little competition.

Manwin files its first cybersquatting complaint

Manwin Licensing, the company currently suing ICANN and ICM Registry claiming .xxx breaks US competition law, has filed its first cybersquatting complaint using the UDRP.
It’s over a .com domain, pornhubarchive.com (don’t go there, not only is it NSFW but it also looks like it panders to some very dubious tastes), which Manwin thinks infringes on its rights to the PornHub name
The domain is registered to a Russian, while pornhub.com itself is protected by Whois privacy.
There’s a certain irony here. PornHub is a “tube” site that allows users to upload content and has itself come under fire for violating intellectual property rights in the past.
It was sued by the the porn production company Pink Visual for copyright infringement in 2010.

ICANN: antitrust law does not apply to us

ICANN says it “does not engage in trade or commerce” and therefore US antitrust laws do not apply to its approval of the .xxx top-level domain, according to court documents.
The organization and .xxx operator ICM Registry yesterday submitted their coordinated responses to the antitrust lawsuit filed by YouPorn owner Manwin Licensing.
ICANN claims it cannot be held liable under antitrust law and ICM has accused Manwin of filing a nuisance lawsuit because it missed its opportunity to secure some premium .xxx domain names.
Manwin sued in November, alleging ICANN and ICM illegally colluded to deliver “monopolistic conduct, price gouging, and anti-competitive and unfair practices”.
The company, which runs the largest porn sites on the internet, claims ICANN should have opened the .xxx contract to competitive bidding and that ICM’s sunrise policies amounted to “extortion”.
It wants a California District Court to shut down .xxx entirely.
But ICANN has now argued that Manwin’s antitrust claims cannot possibly apply to it because it is a charitable, public-interest organization:

ICANN cannot, as a matter of law, be liable under the antitrust laws with respect to the conduct alleged in the Complaint because ICANN does not engage in “trade or commerce.”
…
[ICANN] does not sell Internet domain names, it does not register Internet domain names, and it certainly is not an Internet pornographer. ICANN does not make or sell anything, it does not participate in any market, and its Bylaws expressly forbid it from participating in any of the markets referenced in the Complaint.

Its motion to dismiss (pdf) goes on to say that the introduction of .xxx is actually pro-competition, and that Manwin only sued because it is scared of losing market share.

Plaintiffs claim to be upset with the manner in which ICM is operating the new .XXX registry, but since Plaintiffs already operate (by their own admission) some of the most successful pornographic websites on the Internet, websites that will continue to operate irrespective of anything ICM might do, what the Plaintiffs are really complaining of is the potential competition that their websites may face from the operation of .XXX.

ICM Registry makes similar arguments in its motion to dismiss (pdf):

what Plaintiffs are really complaining about is the fact that they lost the opportunity to purchase the least expensive defensive registry options offered by ICM because they missed the deadline

But ICM also says that the lawsuit falls foul California’s laws against so-called SLAPPs (“strategic lawsuits against public participation”), basically nuisance suits designed to suppress speech.
Declarations from CEO Stuart Lawley (pdf) and marketing director Greg Dumas (pdf) detail conversations between Manwin and ICM in the run-up to the gTLD’s approval and launch.
Manwin managing partner Fabian Thylmann offered to invest in ICM in July 2010, but Lawley declined, according to an ICM exhibit (pdf).
By October 2010 these offers had turned to legal threats, according to Dumas’ declaration:

Manwin saw the introduction of the .XXX sTLD as a threat to Manwin’s dominance over the adult Internet industry. At that time, Thylmann said that he would do whatever he could to stop .XXX. Specifically, Thylmann said that if ICANN approved the .XXX sTLD, Manwin would file a lawsuit against ICM to disrupt its ability to conduct business

Shortly after ICANN’s December 2010 meeting in Cartagena concluded with an ambiguous resolution on .xxx’s future, Thylmann rebuffed Dumas’ overtures about the .xxx Founders Program.
He predicted in an email to Dumas that ICANN’s Governmental Advisory Committee would force ICANN to reject .xxx, adding “the .xxx domain is useless even if it comes to market”, according to an ICM exhibit.
In September 2011, when the .xxx launch was already well underway, Manwin demanded thousands of free premium .xxx domains and a veto over some registry policies, according to Dumas:

Manwin demanded that ICM: allocate a minimum of several thousand .XXX domain names to Manwin free of charge; commit to prevent IFFOR from making any policies that ban or restrict the operation of user-generated content “tube” sites on .XXX domains; grant across-the-board discounts on all .XXX domain registrations; and allow Manwin to operate certain ‘premium’ or high value domain names, such as “tube.xxx,” through a revenue sharing arrangement between Manwin and ICM.

ICM says that these demands were accompanied by legal threats.
The lawsuit and Manwin’s boycott of companies using .xxx domains has harmed ICM’s business, according to the company’s court filings.
The case continues.

YouPorn owner acquires fellow .xxx plaintiff

Manwin, the porn company currently suing ICANN and ICM Registry over the .xxx launch, has acquired co-plaintiff Digital Playground.
“To me this deal is no different than the acquisition of Pixar by Disney,” Digital Playground CEO Ali Joone said, according to Xbiz.
Terms of the deal were not disclosed.
While Digital Playground was named as a plaintiff on the .xxx lawsuit, Manwin was clearly the lead. Manwin has also launched a solo Independent Review Process arbitration case against ICANN.
The company is one of the biggest porn producers on the internet, owning YouPorn as well as managing Playboy’s web presence under license.
Manwin claims that ICM’s launch amounted to “extortion”, and that it gave away its lack of respect for the porn industry by selling premium names to domainers including Frank Schilling and Mike Berkens.
ICM’s response to the lawsuit is due later this week.

YouPorn imposes embargo on .xxx sites

Manwin, the company behind YouPorn, has stepped up its fight against ICM Registry by saying it will not do business with any .xxx web site.
Reported in the adult press this weekend, the ban seems to extend to webmasters hoping to promote their sites on Manwin’s “tube” sites, including YouPorn.
It also won’t allow its content to be used on .xxx sites, according to Xbiz.
Manwin is of course already suing ICM and ICANN under US monopoly laws, and has demanded an ICANN independent review, claiming the .xxx launch amounted to “extortion”.
The domain YouPorn.xxx is currently on ICM’s Registry Reserved list, meaning it was not acquired during sunrise and will not become available when .xxx opens its doors on Tuesday.
YouPorn is one of the web’s top 100 sites, according to Alexa.

YouPorn challenges new gTLDs with review demand

YouPorn operator Manwin is demanding a review of .xxx, and ICANN’s top-level domains program by association, in a new Independent Review Panel request.
It becomes only the second company ever, after .xxx manager ICM Registry, to file an IRP request with ICANN. The filing came at the same time as Manwin sued ICANN and ICM in California.
The IRP demand ostensibly focuses on .xxx, but it also suggests that the forthcoming new gTLD program has many of the same flaws as the process that led to .xxx’s approval.
IRP is the final, and most expensive, appeals process available within ICANN for companies that believe they’ve been wronged by the organization’s decisions.
It was first used by ICM in 2008-2009 to have the rejection of its .xxx application overturned.
To win an IRP, complainants have to convince an International Centre for Dispute Resolution panel (probably three retired judges) that ICANN violated its own bylaws when it made a harmful decision.
The only reason .xxx is in the root today is that an IRP decided by majority that ICANN broke the bylaws when it approved and then rejected the .xxx bid filed in the 2004 new gTLD round.
Manwin’s IRP claims that ICANN failed to “adequately address issues including competition, consumer protection, malicious abuse and rights protection prior to approving the .xxx TLD”.
It also claims that ICANN failed to enforce ICM’s compliance with its registry contract, allowing it to engage in “anticompetitive conduct” and help violate IP rights.
The company is basically miffed that it felt it was being forced to spend money in ICM’s sunrise period, and that it was not allowed to block its trademarks and variations of its trademarks.
One of its oddest claims, which is in the IRP as well as the lawsuit, is that ICM was selected in a “closed process” that did not consider alternative .xxx operators.
The 2004 gTLD round was of course open to any applicant, so there was nothing stopping anybody else from applying for .xxx. One gTLD, .tel, did in fact have multiple bidders.
Essentially, the IRP demand cuts to the heart of the domain name industry and the new gTLD concept in general, challenging many practices that have become norms.
Sunrise
Sunrise is “extortion”, according to Manwin.
As well as being opposed to the idea of paying for defensive registrations in general, Manwin also thinks that typos and brand+keyword domains should be eligible for blocking, presumably for free.
It also believes that porn companies should have been able to defensively block some .xxx domains (which ICM called “Sunrise B”) and register others for active use (“Sunrise A”).
Speculation
Manwin’s IRP says that ICM did not act in the best interests of its sponsored community (ostensibly the porn industry) when it sold premium .xxx domains to “known domain name speculators”.
Well-known domainers Frank Schilling and Mike Berkens have invested millions in .xxx, but Manwin says their profit motives show ICM broke its commitment to serve the adult industry only.
Schilling, who signed up to buy domains 33 domains including amateur.xxx before ICM’s registry contract had even been approved, is reportedly already leasing out some of his .xxx names to porn companies for five figures a month.
New gTLDs
Manwin seems to support what you might call a ‘string first, registry later’ model for delegating gTLDs.
It states in its lawsuit and IRP that ICANN should have opened up .xxx for competitive bidding, apparently ignoring the fact that the .xxx string was proposed by ICM, not ICANN.
In the IRP demand, it suggests that allowing gTLD applicants to select their own strings is in violation of ICANN’s bylaws. The complaint states:

[ICANN] gave ICM a permanent monopoly over the .XXX TLD without considering other candidates for registry operator and without making provision for considering other potential registry operators at the end of the initial term of the .xxx Registry Agreement.

If Manwin wins, ICANN could be forced into a situation where it must ask for string proposals from new gTLD applicants and then open up each proposed string to competitive bidding.
That’s not necessarily a bad idea, but it’s pretty much exactly the opposite of how the ICANN-approved new gTLD program is going to work.
The IRP and the lawsuit are also notable in that they target the alleged lack of economic studies that support .xxx and new gTLDs in general.
It states that ICANN “failed to conduct proper economic studies of the impact of the introduction of new TLDs, including the .xxx TLD”.
This is a frequent criticism leveled at ICANN by opponents such as the Association of National Advertisers and the newly formed Coalition for Responsible Internet Domain Oversight.
Manwin is being represented in the suit and IRP by the law firm Mitchell Silberberg & Knupp, the employer of Steve Metalitz, a well-known figure in ICANN’s intellectual property constituency.

YouPorn sues ICANN and ICM over .xxx

One of the biggest porn companies in the world has filed an antitrust lawsuit against ICANN and ICM Registry over the introduction of the .xxx top-level domain.
Luxembourg-based Manwin Licensing and California-based Digital Playground allege “monopolistic conduct, price gouging, and anti-competitive and unfair practices”.
Manwin runs YouPorn, Brazzers and, under license, several Playboy-branded web sites, while Digital Playground is among the largest porn production companies in the world.
Together they are demanding an injunction on .xxx altogether, for ICANN to be forced to impose price constraints on ICM, and to open up the .xxx contract for competitive rebidding.
The complaint, apparently filed in California today, essentially alleges that everything ICM has done to date, from its application with ICANN to its sunrise period policies, is wrong and bad.
It claims ICM’s sunrise period amounted to extortion and that ICANN willfully created a monopoly by agreeing to a registry contract with presumptive renewal but no price caps.
ICM, the complaint says, reacted to the approval of .xxx earlier this year “with the anti-competitive behavior expected of a monopolist”.

It has, for example, improperly exploited the newly created market for .XXX defensive registrations by making such registrations unreasonably expensive and difficult, and by placing onerous burdens on parties seeking to protect their intellectual property rights.

Manwin claims that the recently ended sunrise period, which saw over 80,000 defensive registrations, was priced too high given that ICM handed out free domain blocks to thousands of celebrities.
It also claims that ICM should have enabled companies to defensively block typos of their trademarks, and that porn companies without trademarks should have been able to block their brands.
It takes ICANN to task for not operating a competitive bidding process for .xxx, and claims ICM used “misleading predatory conduct and aggressive litigation tactics” to push through its approval.
I’m not a lawyer, but often antitrust cases swing on the way the court decides to define the relevant “market”.
Manwin claims .xxx is the market, whereas it could be argued that because porn sites are free to use .com or almost any other TLD, that the domain industry as a whole is the market.
The complaint states:

The market for blocking services or defensive registrations in the .XXX TLD is a distinct and separate market in part because there is no reasonable substitute for such registrations. For example, blocking or preventing others’ use of names in a non-.XXX TLD is not such a substitute. Blocking use of a name in a non-.XXX TLD does not prevent use of the name in the .XXX TLD.
…
ICM has a complete monopoly in the market for the sale of .XXX TLD blocking or defensive registration services through registrars.

I’m not sure if my legal thinking holds water, but this sounds rather like arguing that BMW has a monopoly on making BMWs or Coca-Cola has a monopoly on Cherry Coke.
But Manwin says that .xxx is the only porn gTLD and ICANN has basically ruled out the creation of any future porn-centric TLDs with clauses in ICM’s registry contract.
It also notes that .sex and .porn would be unlikely to be approved in the next round of new gTLDs due to the restrictions on controversial strings imposed by the Governmental Advisory Committee.
ICM president Stuart Lawley said in a statement:

The claims are baseless and without merit and will be defended vigorously. They also show an apparent lack of understanding of the ICANN process and the rigorous battle we went through with ICANN over eight years in full public scrutiny to gain approval.

The .xxx story really is the gift that keeps on giving.