Unrest remains despite new new gTLD contract

ICANN has proposed big changes to how it will handle premium domain names, dot-brands, mergers and acquisitions and mandatory fees in new gTLDs.

It published a new version of the proposed Registry Agreement for new gTLD operators this morning, saying that it is the product of months of “negotiations” with applicants and registries.

But some applicants and back-end providers disagree with this characterization, saying that while some registries helped ICANN with the text they have no authority to speak for all applicants.

The agreement was posted for 42 days of public comment this morning. Before it is approved by the ICANN board of directors, no new gTLD applicants will be able to sign contracts and begin to go live.

There are several major changes compared to the version in the Applicant Guidebook.

Premium domains not dead after all

In what could prove to be the most significant and controversial changes, ICANN has given registries the ability to run Founders Programs and premium name schemes without interference from trademark owners.

New text in the contract will let them self-register up to 100 names “necessary for the operation or the promotion of the TLD” and release those names to third parties if they want.

This appears to be a way around the fear that mandatory Sunrise periods could thwart registries’ plans to sign up anchor tenants to the gTLDs, a crucial launch marketing tactic for many.

The new RA also appears to give broad powers to the registry to allocate premium domain names at will.

Registry Operator may withhold from registration or allocate to Registry Operator names (including their IDN variants, where applicable) at All Levels in accordance with Section 2.6 of the Agreement. Such names may not be activated in the DNS, but may be released for registration to another person or entity at Registry Operator’s discretion.

There does not appear to be a numerical limit on how many domains can be reserved in this way.

Hypothetically, this might allow a registry to reserve the entire dictionary (or dictionaries) at launch, preventing holders of trademarks on generic terms grabbing the matching names during Sunrise.

The still-draft Trademark Clearinghouse rules will also play a part here, but from the RA it looks like registries have just been handed a massively flexible reservation tool.

If my initial interpretation is correct, I expect the trademark lobby will have strong view here.

Concessions for dot-brands

New text in the agreement makes it clearer that ICANN has no plans to redelegate dot-brand gTLDs to third parties after the Registry Agreement expires or is terminated.

This means, for example, that if L’Oreal decides to stop using .loreal at some point in future, ICANN very probably won’t give .loreal to a competitor. The new text is:

(i) ICANN will take into consideration any intellectual property rights of Registry Operator (as communicated to ICANN by Registry Operator) in determining whether to transition operation of the TLD to a successor registry operator

It’s probably not rigid enough language to satisfy some lawyers’ wishes, but I think it does enough to convey the spirit of ICANN’s intentions.

ICANN is of course mainly concerned that dead gTLDs don’t leave registrants with dead domain names, but if there are no registrants I can’t imagine why it would want to redelegate.

Lower fees for registries

Newly added text in the RA specifies that registries must pay ICANN a $5,000 one-off fee (per TLD) to use the new Trademark Clearinghouse, plus with $0.25 per domain that uses its services.

Domains registered under Sunrise periods or which trigger Trademark Claims alerts would incur this one-time fee, which appears to have been reduced from the $0.30 previously discussed.

These fees will actually be passed on to the Trademark Clearinghouse operators (Deloitte and IBM), for which ICANN has agreed to manage billing in order to keep costs down.

In addition, the RA now clarifies that the registry operator’s regular fixed fees to ICANN of $6,250 a quarter only kick in from the date that the gTLD hits the DNS root, not the date of contract signing. That could save registries up to a year’s worth of fees, if they’re late to delegation.

M&A approvals

There are also changes to the way ICANN plans to approve of mergers and acquisitions among registries.

First, it will be much easier for the contract to be passed around within a corporate holding group. The RA now states:

Registry Operator may assign this Agreement without the consent of ICANN directly to a wholly-owned subsidiary of Registry Operator, or, if Registry Operator is a wholly-owned subsidiary, to its direct parent or to another wholly-owned subsidiary of its direct parent, upon such subsidiary’s or parent’s, as applicable, express assumption of the terms and conditions of this Agreement

This change would seem to enable portfolio applicants that have applied for many gTLDs each under separate shell company names (Donuts, for example) to consolidate their contracts under a single parent.

What I don’t think it does is allow for contention set resolution based on joint ventures (which are obviously not “wholly owned”), such as what Uniregistry and Top Level Domain Holdings announced they had agreed to yesterday.

The new RA also states that ICANN must approve subcontracting deals the registry inks for any of the five “critical functions” (EPP, DNS, DNSSEC, Whois and escrow).

Unilateral amendments are gone

The controversial “unilateral right to amend” that ICANN wanted to grant itself — essentially an emergency power to change the contract almost at whim and over the objections of registries — is gone.

It’s been replaced with a convoluted series of procures almost identical to those found in the proposed final version of the 2013 Registrar Accreditation Agreement currently open for comment.

Registries would get the ability to punt the changes to a GNSO Policy Development Process, submit alternative amendments, take ICANN to arbitration or request exemptions, under the new rules.

While the new provisions still give ICANN the ability to force through unpopular changes under certain circumstances, a lot more engagement by registries is envisaged so “unilateral” is probably not a good word to use any more.

So is the deal final or not?

ICANN said in a blog post: “The proposed agreement is the result of several months of negotiations, formal community feedback, and meetings with various stakeholders and communities.”

It added:

We have come a long way since February 2013 when we posted a proposed Revised New gTLD Registry Agreement for public comment. A new and highly spirited sense of mutual trust has catapulted us into a fresh atmosphere of collaboration, which in turn has led to a consistently more productive environment. The spirit of teamwork, productive dialogue and partnership that has underpinned this negotiation process is tremendously heartwarming, as it has allowed us to bring to fruition a robust contractual framework for the New gTLD Program.

But some are worried that ICANN seems to be portraying the RA as equivalent to the Registrar Accreditation Agreement, which was subject to 18 months of talks with a negotiating team representing registrars.

The registries’ Registry Agreement Negotiating Team (RA-NT), on the other hand, was formed less than three weeks ago during ICANN’s meeting in Beijing, and did not have the authority to speak for all applicants.

The RA-NT said in a statement published by ICANN:

The RA-NT agreed to review the new gTLD Registry Agreement with ICANN staff in an effort to minimize some of the more controversial aspects of the Agreement for applicants as a whole. While participants reflected a variety of perspectives, the team did not “represent” or have any authority to “speak for” new gTLD applicants generally, or any group of applicants.

ARI Registry Services CEO Adrian Kinderis told DI:

My fears (and frustrations) come from the fact that ICANN staff have made it sound like they have reached the same point in the process. “It is done”. It most certainly isn’t “done”. They need to understand that the negotiation is actually still very much active and all of the community should feel like their opinions and feedback will be considered in the development of the “final draft”.

The draft RA is now open for public comment until June 11.

That would give ICANN about a month to synthesize all the comments, make any changes, and put the deal to its board of directors for approval during the meeting in Durban, South Africa, this July.

Registries still angry despite ICANN concessions on new gTLD contract

Domain name companies are coming close to agreement with ICANN on two critical new contracts, but there was still substantial skepticism and anger on display in Beijing yesterday.

It was revealed during a session at ICANN 46 that the long-running negotiations on the 2013 Registrar Accreditation Agreement are now pretty much done, with apparent compromise from both sides.

In addition, the proposed Registry Agreement for new gTLDs has been toned down to make it more acceptable to applicants, with ICANN apparently confident that agreement can be reached soon.

But while registrars seemed relatively content with their outcome, registries appear to still be very upset indeed, largely due to the new “special amendments” process that continues to be on the table.

This unilateral-right-to-amend proposal, which ICANN sprung on the industry in February, has been watered down along the lines that we reported last week.

The scope of the amendment process has been narrowed to items outside the “picket fence” that surrounds ICANN’s regulatory jurisdiction, and there are a few more ways companies can head off ICANN intervention.

“It’s not quite a unilateral amendment process any more, we’ve built in a lot of safeguards,” ICANN senior counsel Samantha Eisner told the meeting.

What’s new in the RAA?

These are some of the other things that have been agreed since the last draft of the RAA was posted a month ago.

• Privacy opt-out on Whois. Registrars based in places such as Europe, which has stronger data protection laws than the US, will be able to opt out of the Whois data retention and verification rules if they can show that they’d be breaking the law otherwise. They won’t have to wait to to get sued first, either.
• Account holder verification. As well as validating the email address or phone number used in the public Whois, registrars will do the same checks on their private account-holder records.
• Proxy and privacy services. If ICANN doesn’t come up with an accreditation program for proxy/privacy services by a certain deadline, the temporary specs in the 2013 RAA will expire.
• Port 43 obligations scrapped. Registrars will no longer have to provide Whois service over port 43 for gTLDs with “thick” registries. They’ll still have to provide it on their web sites though.

The registrars have also agreed to measures that address all 12 of the recommendations proposed by law enforcement agencies a few years ago, which is what kicked off the RAA renegotiation in the first place.

However, as we reported yesterday, law enforcement in the US and Europe are not impressed with the RAA, saying it doesn’t go far enough to verify domain registrants’ identities.

The Governmental Advisory Committee is due to speak to the ICANN board later today, and this is a topic it is likely to bring up. The RAA story may not be over yet.

Generally, the mood from registrars seemed to be mixed but relatively upbeat.

Rob Hall of Pool.com said he’s going to sign the new RAA as soon as possible. He said that the fact that the 2013 RAA is needed in order to sell new gTLD domains is an impetus to sign it.

Elliot Noss of Tucows said he was less eager to sign. He said that the new gTLDs likely to launch in the short term (uncontested ones, in other words) are unlikely to be the most lucrative ones.

Registries and new gTLD applicants, on the other hand, were not so happy with their lot.

Anger over the Registry Agreement

Yesterday’s session in Beijing was notable for a jarring moment in which normally mild-mannered Verisign policy veep Chuck Gomes threw an uncharacteristic wobbler, politely but brutally attacking ICANN for acting in bad faith and treating registries like “second-class citizens”.

He took issue with the fact that the special amendments process in the Registry Agreement was first introduced by ICANN, and then rejected by the community, a few years back.

ICANN can’t describe its eleventh-hour return as an act of “good faith”, he said.

“You’re dealing with organizations on the registry and registrar side that fund 95%, through our registrants, of your budget, and yet we’re treated like second class citizens by throwing something at us that totally reverses a community, multi-stakeholder, bottom-up decision that was made three years ago,” he said.

“Convince me that that was in good faith. I don’t think you can,” he said, receiving a round of applause.

New gTLD applicants such as Verisign have had less time to assemble their collective thoughts and come to a unified negotiating position on the RA, which was thought to be settled until recently.

The amendment provisions were introduced by ICANN in February, and applicants don’t yet have a the same kind of negotiating team the registrars have had for the past 18 months.

What’s more, they’re worried that ICANN is trying to push the changes through without giving them enough time for talks.

Rumors have been circulating in Beijing that the ICANN board is preparing to approve the RAA and RA at a meeting April 20, in time for the first registries to sign up at its April 23 new gTLDs media event.

Under persistent questioning, ICANN vice president of industry engagement Cyrus Namazi said in various different ways that ICANN has no intention to rush-approve an RA to an arbitrarily chosen date.

ICANN says it needs its special amendment rights in order to address unknown future situations in which the voting dynamics of the ICANN policy-making bodies are dominated by special interests that want to block contract changes that would be in the public interest.

Noss from Tucows, an applicant as well as a registrar, said he’s been asking for specific examples of possible reasons the special amendment process would be invoked, but has had no response from ICANN.

He further suggested that if ICANN is so worried about future uncertainties that it feels it needs these rights, then registries and registrars should get the same rights to force amendments.

ICANN tones down power grab in new gTLD contract

ICANN has published a new version of its Registry Agreement for new gTLD operators that waters down the controversial unilateral right to amend provisions.

The revised RA, available for review here, makes it harder for ICANN to force new rules on registries without their consent, at least when compared to the version published in February.

The Special Amendment process is designed to allow ICANN to change the contract when it’s in the public interest.

DI outlined the changes to the process last week.

While most of the changes we described have in fact made it to the published RA, we were wrong on one count: despite what we reported, ICANN directors with conflicts of interest will not be able to vote.

That means representatives of registries and registrars won’t get a say when the board discusses their contracts.

A couple of other significant changes are apparent:

• Concessions to dot-brand registries. It would now be harder for ICANN to redelegate a dot-brand to another operator if the registry abandons its gTLD. ICANN has never had any intention of doing so, of course, but the relative lack of safeguards have been making dot-brand applicants nervous for years. Now, existing intellectual property rights would be taken into consideration during redelegation decisions.
• More secrecy. There’s a new section on “confidential information”, along with references to it sprinkled throughout, designed to protect trade secrets registries may disclose to ICANN.

ICANN CEO Fadi Chehade is expected to play hard-ball on these changes, according to recent reports.

Because registries get a perpetual right of renewal, and because it’s uncertain how the power balance will hang in policy-making, ICANN believes it would be irresponsible to sign an RA that does not give it the right to step in an protect the public interest in future.

ICANN to water down contract powers with “Public Interest Amendments”

ICANN has made a few tweaks to its proposed unilateral-right-to-amend powers in order to fend off open hostility from registries, registrars and new gTLD applicants.

The organization is set to announce “Public Interest Amendments”, a rebadged version of its hugely unpopular proposals for the Registry Agreement and Registrar Accreditation Agreement.

As previously reported, ICANN wants to be able to change both contracts in future, if there’s a “substantial and compelling need”, even if it does not have the majority support of the affected companies.

CEO Fadi Chehade has reportedly indicated that he won’t be budged on the need for some method for ICANN to make emergency changes to the contracts.

And during last night’s new gTLD applicants webinar, he made it clear that the RA and RAA will delay the launch of new gTLDs if registries and registrars cannot agree to ICANN’s terms.

But according to documentation seen by DI today — actually a flowchart of how the amendment process would work — these terms are going to be watered down, giving more power to commercial stakeholders.

Apart from the new Pubic Interest Amendment name, there appear to be three big changes.

First, there would be a way for registrars and/or registries to make a late-stage counter-proposal to the ICANN board if they didn’t like the look of a proposed amendment.

Second, any issues that fell within the so-called “picket fence” — the list of pre-agreed topics for which ICANN is allowed to make binding policy — would have to go into a formal GNSO Policy Development Process first.

Only if the PDP failed to reach consensus would the ICANN board of directors be able to step in and attempt to legislate unilaterally.

A practical effect of that would be to give contracted parties ample opportunity to delay amendments — possibly by years — that they weren’t happy with.

Third, PIAs would only cover changes designed to “ensure competition & consumer choice and promote consumer access to fair business practices” and explicitly “not to change ICANN fees, Consensus Policy Spec., or mechanism to change PIA process”.

This would prevent ICANN unilaterally amending the contract to make its amendment powers even stronger in future, which had been one criticism of the proposed process.

“The board’s ability to introduce an amendment is very tightly defined and limited in scope, so it’s only used in extreme cases and under very strict conditions,” Chehade said last night.

It appears — though I can’t be certain — that ICANN has also decided that the full board of directors, including those with identified conflicts of interest, would be able to participate in votes on PIAs.

That would mean registry and registrar representatives to the board would get to vote on amendments affecting their stakeholder groups.

Chehade is currently explaining all of this to a cautiously optimistic Registry Stakeholder Group on a conference call, and I believe more information is due to be published later this week.

Chehade to play hard-ball over unilateral right to amend?

ICANN CEO Fadi Chehade has reportedly indicated that the unilateral right to amend powers ICANN wants to put in its registry and registrar contracts are non-negotiable.

Speaking at a meeting of the Association of National Advertisers last week, Chehade is reported to have said: “I’m not going to back off this one.”

He is understood to have been referring to the changes ICANN wants to impose on the base new gTLD Registry Agreement and the Registrar Accreditation Agreement.

Amy Bivins of Bloomberg BNA’s Electronic Commerce & Law Report caught the speech live and tweeted the following:

Chehade quotes on RAA: “I cannot live with a perpetual agreement,” and “I’m not going to back off this one.”

— Amy E. Bivins (@AmyEBivins) March 20, 2013

Bivins’ full report is available behind BNA’s paywall.

The unilateral right to amend is just about the most controversial thing ICANN has proposed in a while.

It would give ICANN’s board of directors the power to make changes to both agreements in situations where registrars or registries cannot agree among themselves to a “special amendment” but there’s agreement by other community members that the change is required.

Registries and registrars argue that a contract in which one party has the power to change the agreement without the consent of the other is not really a contract at all.

But ICANN says the powers are needed, partly to redress existing imbalances: the fact that the RAA and RA both last for 10 years and that the RA has a presumptive right of renewal.

Without the right to change the RA over the protests of the registries, it’s possible that in future proposed changes could be vetoed by registries whose interests are not aligned with the “public interest”, ICANN argues.

ICANN says that it’s impossible to know how consolidation, future new gTLD rounds and power shifts in the ICANN community will affect the balance of power, meaning it needs a way to resist a registry choke-hold should the situation arise.

I suspect the fact that it’s taken about three years to get close to adding the recommendations of law enforcement relating to registrar conduct to the RAA may also have something to do with it.