Latest news of the domain name industry

Recent Posts

.web ruling hands Afilias a chance, Verisign a problem, and ICANN its own ass on a plate

Kevin Murphy, May 26, 2021, Domain Policy

ICANN has lost yet another Independent Review Process case, and been handed a huge legal bill, after being found to have violated its own rules on transparency and fairness.

The decision in Afilias v ICANN has failed to definitively resolve the issue of whether the auction of the .web gTLD in 2016, won by a shell applicant called Nu Dot Co backed by $135 million of Verisign’s money, was legit.

ICANN’s now urging NDC, Afilias and other members of the .web contention set to resolve their beefs privately, which could lead to big-money pay-days for the losing auction bidders at Verisign’s expense.

For ICANN board and staff, the unanimous, three-person IRP panel decision is pretty damning, with the ruling saying the org “violated its commitment to make decisions by applying documented policies objectively and fairly”.

It finds that ICANN’s board shirked its duty to consider the propriety of the Verisign/NDC bid, allowing ICANN staff to get perilously close to signing a registry contract with an applicant that they knew may well have been in violation of the new gTLD program rules.

Despite being named the prevailing party, it’s not even close to a full win for Afilias.

The company had wanted the IRP panel to void the NDC/Verisign winning bid and award .web to itself, the second-highest bidder. But the panel did not do that, referring the decision instead back to ICANN.

As the loser, ICANN has been hit with a $1,198,493 bill to cover the cost of the case, which includes Afilias’ share of $479,458, along with another $450,000 to cover Afilas’ legal fees connected to an earlier emergency IRP request that ICANN “abusively” forced Afilias into.

The case came about due to a dispute about the .web auction, which was run by ICANN in July 2016.

Six of the seven .web applicants had been keen for the contention set to be settled privately, in an auction that would have seen the winning bid distributed evenly among the losing bidders.

But NDC, an application vehicle not known to be particularly well-funded, held out for a “last resort” auction, in which the winning bid would be deposited directly into ICANN’s coffers.

This raised suspicions that NDC had a secret sugar daddy, likely Verisign, that was covertly bankrolling its bid.

It was not known until after NDC won, with a $135 million bid, that these suspicions were correct. NDC and Verisign had a “Domain Acquisition Agreement” or DAA that would see NDC transfer its .web contract to Verisign in exchange for the money needed to win the auction (and presumably other considerations, though almost all references to the terms of the DAA have been redacted by ICANN throughout the IRP).

Afilias and fellow .web applicant Donuts both approached ICANN before and after the auction, complaining that the NDC/Verisign bid was bogus, in violation of program rules requiring applicants to notify ICANN if there’s any change of control of their applications, including agreements to transfer the gTLD post-contracting.

ICANN has never decided at the board level whether these claims have merit, the IRP panel found.

The board did hold a secret, off-the-books discussion about the complaints at its retreat November 3, 2016, and concluded, without any type of formal vote, that it should just keep its mouth shut, because Afilias and Donuts had already set the ball rolling on the accountability mechanisms that would ultimately lead to the IRP.

More than half the board was in attendance at this meeting, and discussions were led by ICANN’s top two lawyers, but the fact that it had even taken place was not disclosed until June last year, well over three and a half years after the fact.

Despite the fact that the board had made a conscious, if informal, choice not to decide whether the NDC/Verisign bid was legit, ICANN staff nevertheless went ahead and started contracting with NDC in June 2018, taking the .web contention set off its “on-hold” status.

Talks progressed to the point where, on June 14, ICANN had sent the .web contract to NDC, which immediately returned a signed copy, and all that remained was for ICANN to counter-sign the document for it to become binding.

ICANN VP Christine Willett approved the countersigning, but four days later Afilias initiated the Cooperative Engagement Process accountability mechanism, the contract was ripped up, and the contention set was placed back on hold.

“Thus, clearly, a registry agreement with NDC for .WEB could have been executed by ICANN’s Staff and come into force without the Board having pronounced on the propriety of the DAA under the Guidebook and Auction Rules,” the IRP panel wrote.

This disconnect between the board and the legal staff is at the core of the panel’s criticism of ICANN.

The board had decided that Afilias’ claim that NDC had violated new gTLD program rules was worthy of consideration and had informally agreed to defer making a decision, but the staff had nevertheless gone ahead with contracting with a potentially bogus applicant, the panel found.

In the opinion of the Panel, there is an inherent contradiction between proceeding with the delegation of .WEB to NDC, as the Respondent [ICANN] was prepared to do in June 2018, and recognizing that issues raised in connection with NDC’s arrangements with Verisign are serious, deserving of the Respondent’s consideration, and remain to be addressed by the Respondent and its Board, as was determined by the Board in November 2016. A necessary implication of the Respondent’s decision to proceed with the delegation of .WEB to NDC in June 2018 was some implicit finding that NDC was not in breach of the New gTLD Program Rules and, by way of consequence, the implicit rejection of the Claimant’s [Afilias’] allegations of non-compliance with the Guidebook and Auction Rules. This is difficult to reconcile with the submission that “ICANN has taken no position onw hether NDC violated the Guidebook”.

The upshot of the panel’s ruling is to throw the issue back to ICANN, requiring the board to decide once and for all whether Verisign’s auction gambit was kosher.

If you’ll excuse the crude metaphor, ICANN’s board has been told to shit or get off the pot:

The evidence in the present case shows that the Respondent, to this day, while acknowledging that the questions raised as to the propriety of NDC’s and Verisign’s conduct are legitimate, serious, and deserving of its careful attention, has nevertheless failed to address them. Moreover, the Respondent has adopted contradictory positions, including in these proceedings, that at least in appearance undermine the impartiality of its processes.

[The panel r]ecommends that the Respondent stay any and all action or decision that would further the delegation of the .WEB gTLD until such time as the Respondent’s Board has considered the opinion of the Panel in this Final Decision, and, in particular (a) considered and pronounced upon the question of whether the DAA complied with the New gTLD Program Rules following the Claimant’s complaints that it violated the Guidebook and Auction Rules and, as the case may be, (b) determined whether by reason of any violation of the Guidebook and Auction Rules, NDC’s application for .WEB should be rejected and its bids at the auction disqualified;

At the same time as the decision was published last night — shortly after midnight UTC and therefore helpfully too late to make it into today’s edition of ICANN’s godawful new email subscriptions feature — ICANN issued a statement on the outcome.

“In its Final Declaration, the IRP panel ruled that the ICANN Board, and not an IRP panel, should decide which applicant should become the registry operator for .WEB,” CEO Göran Marby said.

“The ICANN Board will consider the Final Declaration as soon as feasible, within the timeframe prescribed in the Bylaws, and remains hopeful that the relevant .WEB applicants will continue to seek alternatives to resolve the dispute between them raised during the IRP,” the statement concludes.

That should be of concern to Verisign, as any non-ICANN resolution of the .web battle is inevitably going to involve Verisign money flowing to its competitors.

But my first instinct strikes me that this a is a low-probability outcome.

It seems to me much more likely at first glance that ICANN will rule the NDC/Verisign ploy legitimate and proceed to contracting again.

For it to declare that using a front organization to bid for a gTLD is against the rules would raise questions about other applications that employed more or less the same tactic, such as Automattic’s successful bid, via an intermediary, for .blog, and possibly the 100-ish applications Donuts and Rightside cooperated on.

The ICANN bylaws say the board has to consider the IRP’s findings at its next meeting, for which there’s currently no published date, where feasible.

I should note that, while Donuts acquired Afilias last December, the deal did not include its .web application, which is why both the panel’s decision and this article refer to “Afilias” throughout.

Verisign hopeful after decision reached in .web gTLD case

Kevin Murphy, May 25, 2021, Domain Policy

The fate of .web has been decided, over 20 years after it was first applied for, and Verisign thinks it might emerge triumphant.

The company said last night that the ICANN Independent Review Panel handling the case of Afilias v ICANN reached a decision May 20 and delivered it to Verisign the following day.

Verisign says the panel “dismissed Afilias’ claims for relief seeking to invalidate the .web auction and to award the .web TLD to Afilias, concluding that such issues were beyond its jurisdiction.”

Sounds good for Verisign so far. Afilias wanted its $135 million bid for .web, submitted via an intermediary called Nu Dot Co, thrown out due to claims that ICANN violated its own bylaws by not sufficiently vetting the bidder.

But Verisign goes on to say “the panel’s ruling recommends that ICANN’s Board of Directors consider the objections made about the .web auction and then make a decision on the delegation of .web”.

It adds that the panel found that ICANN violated its fairness and transparency commitments:

With respect to ICANN, the ruling finds that certain actions and/or inaction by ICANN in response to Afilias’ objections violated aspects of ICANN’s bylaws related to transparency and fairness. These findings are particular to ICANN’s actions and not conduct by Verisign. Verisign anticipates that ICANN’s Board will review the panel’s ruling and proceed consistent with the panel’s recommendation to consider the objections and make a decision on the delegation of .web.

Based on Verisign’s statements, it seems that ICANN lost, but Afilias didn’t win.

The revelation was buried in a Securities and Exchange Commission filing on an unrelated financial matter last night. Hat tip to @jintlaw for spotting and tweeting about it.

It’s the most eagerly anticipated IRP ruling since 2011’s .xxx case, but in stark contrast to Rod “let’s draft this tweet” Beckstrom-era ICANN, where the decision was posted in a matter of hours, the 2021 org has not yet posted the panel’s findings or made a public statement acknowledging the ruling.

Verisign says it intends to “vigorously pursue” .web, but “can provide no assurance” as to which way the ICANN board of directors will swing.

Decision on $135 million .web auction expected in weeks

Kevin Murphy, April 22, 2021, Domain Registries

ICANN, Verisign, Donuts, and the other applicants for .web will find out who gets to control the fiercely contested gTLD by the first week of June at the latest, according to Verisign’s CEO.

Jim Bidzos told analysts tonight that the Independent Review Process panel currently handling a complaint filed by Afilias declared its case closed April 7, and said that a decision will come within 60 days.

Afilias, now owned by Donuts, came second in an ICANN “auction of last resort” in which a Verisign-backed company called Nu Dot Co agreed to pay $135 million for the coveted string.

Afilias wants the auction declared invalid because ICANN, it claims, did not sufficiently pursue allegations that NDC was being secretly bankrolled by Verisign, which it says broke ICANN bylaws and new gTLD application rules.

This is denied by ICANN, as well as NDC and Verisign, which have filed legal documents with the IRP panel despite not being parties.

Afilias and others suspect that Verisign wants .web in order to bury it, keeping what could be a strong .com competitor weak, which Verisign also denies.

The IRP panel held a seven-day virtual hearing last August, but has continued to receive briefs from ICANN and Afilias since then.

Donuts boss discusses shock Afilias deal

Kevin Murphy, November 20, 2020, Domain Registries

Afilias is to spin off its registrar business and also its contested application for the .web gTLD, following its acquisition by Donuts, according to Donuts CEO Akram Atallah.

Speaking to DI last night, Atallah explained a little about how the deal, which creates a registry with about 450 strings under management, came about.

Rather than a straightforward bilateral negotiation, is seems like Afilias was shopping itself around for a buyer. Several companies were invited to bid, and Donuts won. Atallah said he does not know how many, or which, bidders Donuts was competing against.

Afilias was making over $100 million a year in revenue last time its accounts were published in 2017, but its largest gTLDs are in decline and it took a big hit when Public Interest Registry renegotiated its back-end contract for .org in 2018.

The acquisition, the value of which has not been disclosed, does not include Afilias’ registrar or mobile businesses, which Atallah said will be spun off.

He also revealed that the deal does not include Afilias’ .web gTLD application, which came second in an ICANN auction won by a Verisign-backed bidder a few years back.

Afilias is currently waiting for the results of an Independent Review Process case that seeks to overturn the winning $135 million bid and award the potentially lucrative gTLD to Afilias. The case was heard in August and a decision is surely not many months away.

What the deal does include are all of Afilias’ registry assets, including its owned gTLDs and its back-end service provider contracts.

I asked Atallah what the plans are for migrating or integrating the two registry platforms. While Afilias runs its own data centers, Donuts migrated its registry to Amazon’s AWS cloud service earlier this year.

“We have to make sure whatever we do is as painless as possible to our registrar channel and partners,” he said. “We believe that at least on the new gTLDs that they have it will probably be easier for us to move them to our back-end, which is on the cloud already… We’ll probably do that fairly quickly.”

“But remember they have other registries and ccTLDs that don’t own that they run on their back-end, so there’ll be business issues and negotiations there to see what we can do there,” he added.

While he’s not expecting anyone to notice any big changes immediately, Atallah said that over time features such as the companies’ different EPP commands will be merged, and that valued-added services will start to cross-pollinate.

“All of the features we have on our TLDs will migrate to their TLDs and vice versa,” he said.

That means things like the Domain Protected Marks List, a defensive registration service for trademark owners, will start to show up in Afilias gTLDs before long, he said.

I asked about the possibility of layoffs, something that is no doubt worrying staff at both companies right now and seems quite possible given the move to the cloud, but Atallah said it was too early to say. Nothing will change until the deal closes at the end of the year, he said.

“Once we actually close, we’ll sit down with the management of the Afilias registry team and look at all the different assets that we have and try to pick the best in class in technology and services,” he said.

Having seen some mutterings about competition concerns, I put that question to Atallah. He laughed it away, pointing out that, even combined with Afilias, Donuts will have fewer than 15 million domains under management.

.web ruling might not come this year

Kevin Murphy, October 26, 2020, Domain Registries

A decision about who gets to run the .web gTLD may not arrive until early next year, according to Verisign CEO Jim Bidzos.

“A final decision from the [Independent Review Process[ panel may be issued later this year or early next year,” he told analysts late last week.

.web sold at auction for $135 million four years ago to a company being secretly bankrolled by Verisign, but the outcome is being challenged in the IRP by runner-up bidder Afilias.

Afilias argues that the auction should be voided because ICANN failed to sufficiently investigate links between Verisign and the winning bidder. ICANN denies any wrongdoing.

It’s widely believed that .web is the strongest potential competitor to Verisign’s .com, and its attempt to secure the string is largely defensive.

The IRP case heard several days of testimony in August and the panel retired to consider its decision.

The $135 million battle for .web could be won in weeks

Afilias is to get its day in “court” to decide the fate of the .web gTLD just 10 days from now.

The registry is due to face off with ICANN before an Independent Review Process panel in a series of virtual hearings beginning August 3.

The IRP complaint was filed late 2018 as the endgame of Afilias’ attempt to have the results of the July 2016 .web auction overturned.

You’ll recall that Verisign secretly bankrolled the winning bidder, a new gTLD investment vehicle called Nu Dot Co, to the tune of $135 million, causing rival bidders to cry foul.

If that win was vacated, Afilias could take control of .web with its second-place bid.

Afilias claims that ICANN broke its own rules by refusing to thoroughly analyze whether NDC had a secret sugar daddy, something DI first reported on two weeks before the auction.

It has put forward the entirely plausible argument that Verisign splashed out what amounts to about a month’s .com revenue on .web in order to bury it and fortify its .com mindshare monopoly against what could be its most formidable competitor.

In the IRP case to date, ICANN has been acting as transparently as you’d expect when its legal team is involved.

It first redacted all the juiciest details from the Verisign-NDC “Domain Acquisition Agreement” and the presumably damaging testimony of one of its own directors, and more recently has been fighting Afilias’ demands for document discovery.

In March, the IRP panel ruled against ICANN’s protests on almost every count, ordering the org to hand over a mountain of documentation detailing its communications with Verisign and NDC and its internal deliberations around the time of the auction.

But the ace up ICANN’s sleeve may be an allegation made by Verisign that Afilias itself is the one that broke the auction’s rules.

Verisign has produced evidence that an Afilias exec contacted his NDC counterpart five days before the auction, breaking a “blackout period” rule so serious that violators could lose their applications.

While Afilias denies the allegation, the IRP panel ruled in March that Afilias must hand over copies of all communications between itself and rival bidders over the auction period.

We’re not likely to see any of this stuff until the panel issues its final declaration, of course.

In the past, IRP panels have taken as long as six or seven months after the final hearing to deliver their verdicts, but the most-recently decided case, Amazon v ICANN, was decided in just eight or nine weeks.

ICANN redacts the secrets of Verisign’s .web deal

Afilias thinks it has found the smoking gun in its fight to wrestle .web out of the hands of rival Verisign, but for now the details are still a closely guarded secret.

The company recently filed an amended complaint in its Independent Review Process case against ICANN, after it managed to get a hold of the deal that Verisign struck with Nu Dot Co, the company that spent $135 million of Verisign’s money to win .web at auction in 2016.

The Domain Acquisition Agreement, which apparently set out the terms under which NDC would bid for .web on Verisign’s behalf, was revealed during disclosure in December.

But in publishing the amended complaint (pdf) (which seems to have happened in the last week or two), ICANN has whited out all references to the contents of this document.

Afilias claims that the DAA proves that NDC broke the rules of the new gTLD program by refusing to disclose to ICANN that it had essentially become a Verisign proxy:

It claims that ICANN should therefore have disqualified NDC from the .web auction.

Based on the terms of the DAA, it is evident that NDC violated the New gTLD Program Rules. ICANN, however, has refused to disqualify NDC from the .WEB contention set, or to disqualify NDC’s bids in the .WEB Auction.

Afilias came second in the 2016 auction, bidding $135 million. NDC/Verisign won with a $142 million bid, committing it to pay the amount Afilias was willing to pay.

While Verisign has said that it plans to market .web, Afilias believes that Verisign’s primary motivation at the auction was to essentially kill off what could have been .com’s biggest competitor. It says in its amended complaint:

ICANN has eviscerated one of the central pillars of the New gTLD Program and one of ICANN’s founding principles: to introduce and promote competition in the Internet namespace in order to break VeriSign’s monopoly

Whether the DAA reveals anything we do not already know is an open question, but Afilias reckons ICANN’s prior failure to disclose its contents represents a failure of its commitment to transparency.

Reading between the lines, it seems Afilias is claiming that ICANN got hold of the DAA some time before it was given to Afilias in discovery last December, but that ICANN “had refused to provide the DAA (or even confirm its existence)”.

By redacting its contents now, ICANN is helplessly playing into the narrative that it’s trying to cover something up.

But ICANN is probably not to blame for the redactions. It was ICANN holding the axe, yes, but it was Verisign that demanded the cuts.

ICANN said in its basis for redactions document (pdf) that it “has an affirmative obligation to redact the information designated as confidential by the third party(ies) unless and until said third party authorizes the public disclosure of such information.”

Afilias has also managed to put George Sadowsky, who for the best part of the last decade until his October departure was one of ICANN’s most independent-minded directors, on the payroll.

In his testimony (pdf), he apparently reveals some details of the ICANN boards private discussions about the .web case.

Guess what? That’s all redacted too, unilaterally this time, by ICANN.

Verisign says Afilias tried to “rig” $135 million .web auction

Kevin Murphy, December 17, 2018, Domain Services

Verisign has jumped back into the fight for the .web gTLD, all guns blazing, with a claim that Afilias offered millions in an attempt to “rig” a private auction for the string.

The .com behemoth accused Afilias last week of “collusive and anti-competitive efforts to rig the [.web] auction in its favor”.

It claims that Afilias offered rival bidder — and secret Verisign stooge — Nu Dot Co up to $17 million if it would participate in a private auction, and then tried to contact NDC during the auction’s “Blackout Period”.

The claims came in an amicus brief (pdf) filed by Verisign as part of Afilias’ Independent Review Process proceeding against ICANN.

The IRP is Afilias’ attempt to overturn the result of the July 2016 .web auction, in which NDC paid ICANN $135 million of Verisign’s money in exchange for the exclusive rights to .web

While neither Verisign nor NDC are parties to the IRP, they’re both attempting to become amicus curiae — “friends of the court” — giving them the right to provide evidence and arguments to the IRP panel.

Verisign argues that its rights would be seriously impacted by the proceeding — Afilias is looking for an emergency ruling preventing .web being delegated — because it won’t be able to bring .web to market.

But it’s also attempting to have the IRP thrown out altogether, on the basis of claims that Afilias broke the auction rules and has “unclean hands”.

Verisign’s brief states:

Afilias and other bidders proposed that a private auction be performed pursuant to collusive and potentially illegal terms about who could win and who would lose the auction, including guarantees of auction proceeds to certain losers of the auction.

NDC CFO Jose Rasco provides as evidence screenshots (pdf) of a text-message conversation he had with Afilias VP of sales Steve Heflin on June 7, 2016, in which Heflin attempts to persuade NDC to go to a private auction.

Every other member of the contention set at that point had agreed to a private auction, in which the winning bid would be shared out among the losers.

NDC was refusing to play along, because it had long ago secretly agreed to bid on behalf of Verisign, and was forcing a last-resort ICANN auction in which ICANN would receive the full sum of the winning bid. 

In that SMS conversation, Heflin says: “Can’t give up…how about I guarantee you score at least 16 mil if you go to private auction and lose?” followed by three money-bag emojis that I refuse to quote here on general principle.

Rasco responds with an offer to sell Afilias the .health gTLD, then just weeks away from launch, for $25 million.

Heflin ignores the offer and ups his .web offer to $17.02 million.

Given that it was a contention set of seven applicants, that suggests Afilias reckoned .web was going to sell for at least $100 million.

Verisign claims: “Afilias’s offers to ‘guarantee’ the amount of a payment to NDC as a losing bidder are an explicit offer to pay off NDC to not compete with Afilias in bidding on .web.”

Rasco also provides evidence that Schlund, another .web applicant, attempted to persuade NDC to join what it called an “Alternative Private Auction”.

This process would have divided bidders into “strong” and “weak” categories, with “strong” losing bidders walking away with a greater portion of the winning bid than the “weak” ones.

Verisign and NDC also claims that Afilias broke ICANN’s auction rules when VP John Kane texted Rasco to say: “If ICANN delays the auction next week would you again consider a private auction?”

That text was received July 22, four days before the auction and one day into the so-called “Blackout Period”, during which ICANN auction rules (pdf)  prohibit bidders from “cooperating or collaborating” with each other.

At that time, .web applicants Schlund and Radix already suspected Verisign was bankrolling NDC, and they were trying to get the auction delayed.

According to Verisign, Kane’s text means Afilias violated the Blackout rules and therefore it should lose its .web application entirely.  

The fact that these rules proscribe “collaborating” during the Blackout suggests that collaborating at other times was actually envisaged, which in turn suggests that Heflin’s texts may not be as naughty as Verisign claims.

Anyway, I think it’s fair to say the gloves, were they ever on, have come off.

Weighing in at over 1,000 pages, the combined amicus briefs and attached exhibits reveal some interesting additional facts that I don’t believe were in the public domain before now and may be worth noting here.

The Verisign filing reveals, I believe for the first time, that the final Verisign bid for .web was $142 million. It only paid $135 million because that was runner-up Afilias’ final bid.

It also reveals that Verisign and NDC signed their “executory agreement” — basically, NDC’s promise to sign over .web if Verisign bankrolled its bid — in August 2015, nearly a year before the auction took place. NDC evidently kept its secret for a long time before rivals got suspicious.

The IRP panelist is scheduled to rule on Afilias’ request for a “stay of all ICANN actions that further the delegation of the .WEB gTLD” on January 28.

No .web until 2021 after Afilias files ICANN appeal

Kevin Murphy, December 6, 2018, Domain Registries

Afilias has taken ICANN to arbitration to prevent .web being delegated to Verisign.

The company, which came second in the $135 million auction that Verisign won in 2016, filed Independent Review Process documents in late November.

The upshot of the filing is that .web, considered by many the best potential competitor for .com — Afilias describes it as “crown jewels of the New gTLD Program” — is very probably not going to hit the market for at least a couple more years.

Afilias says in in its filing that:

ICANN is enabling VeriSign to acquire the .WEB gTLD, the next closest competitor to VeriSign’s monopoly, and in so doing has eviscerated one of the central pillars of the New gTLD Program: to introduce and promote competition in the Internet namespace in order to break VeriSign’s monopoly

Its beef is that Verisign acquired the rights to .web by hiding behind a third-party proxy, Nu Dot Co, the shell corporation linked to the co-founders of .CO Internet that appears to have been set up in 2012 purely to make money by losing new gTLD auctions.

Afilias says NDC broke the rules of the new gTLD program by failing to notify ICANN that it had made an agreement with Verisign to sign over its rights to .web in advance of the auction.

The company says that NDC’s “obligation to immediately assign .WEB to VeriSign fundamentally changed the nature of NDC’s application” and that ICANN and the other .web applicants should have been told.

NDC’s application had stated that .web was going to compete with .com, and Verisign’s acquisition of the contract would make that claim false, Afilias says.

This means ICANN broke its bylaws commitment to apply its policies, “neutrally, objectively, and fairly”, Afilias claims.

Allowing Verisign to acquire its most significant potential competitor also breaks ICANN’s commitment to introduce competition to the gTLD market, the company reckons.

It will be up to a three-person panel of retired judges to decide whether these claims holds water.

The IRP filing was not unexpected. I noted that it seemed likely after a court threw out a Donuts lawsuit against ICANN which attempted to overturn the auction result for pretty much the same reasons.

The judge in that case ruled that new gTLD applicants’ covenant not to sue ICANN was valid, largely because alternatives such as IRP are available.

ICANN has a recent track record of performing poorly under IRP scrutiny, but this case is by no means a slam-dunk for Afilias.

ICANN could argue that the .web case was not unique, for starters.

The .blog contention set was won by an affiliate of WordPress maker Automattic under almost identical circumstances earlier in 2016, with Colombian-linked applicant Primer Nivel paying $19 million at private auction, secretly bankrolled by WordPress.

Nobody complained about that outcome, probably because it was a private auction so all the other .blog applicants got an even split of the winning bid.

Afilias wants the .web IRP panel to declare NDC’s bid invalid and award .web to Afilias at its final bid price.

For those champing at the bit to register .web domains, and there are some, the filing means they’ve likely got another couple years to wait.

I’ve never known an IRP to take under a year to complete, from filing to final declaration. We’re likely looking at something closer to 18 months.

Even after the declaration, we’d be looking at more months for ICANN’s board to figure out how to implement the decision, and more months still for the implementation itself.

Barring further appeals, I’d say it’s very unlikely .web will start being sold until 2021 at the very earliest, assuming the winning registry is actually motivated to bring it to market as quickly as possible.

The IRP is no skin off Verisign’s nose, of course. Its acquisition of .web was, in my opinion, more about restricting competition than expanding its revenue streams, so a delay simply plays into its hands.

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.

  • Page 1 of 2
  • 1
  • 2
  • >