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Would an ICANN ethics policy break the law?

Kevin Murphy, October 3, 2011, Domain Policy

Calls for a new ethics policy to prevent a “revolving door” between ICANN and the domain name industry stepped up today, with the Association of National Advertisers entering the debate.

But would such a policy be illegal in ICANN’s home state of California?

The ANA and others wrote to ICANN today, in response to a public comment period on the question of whether ICANN should revise its conflicts of interest policy.

ICANN had asked whether the policy should be changed in order to let its board of directors vote to give themselves a salary. They’re currently all unpaid except the chair.

But the responses so far have instead largely focused on the perceived need to stop directors (and to a lesser extent staff) from taking lucrative industry jobs after they quit.

That was perhaps inevitable given the recent mainstream media coverage of former ICANN chair Peter Dengate Thrush, who took a high-paying job with new gTLD applicant Minds + Machines just a few weeks after helping to push through approval of the gTLD program.

The ANA’s president, Bob Liodice, wrote:

There is, at a minimum, legitimate reason for concern that the lack of adequate conflict of interest policies have led to the development of a growing perception that Mr. Thrush (and perhaps other senior staff who recently have left ICANN) may have let future career prospects influence their official duties.

(The other senior staffer he refers to could only be Craig Schwartz, the former chief gTLD registry liaison, who quit ICANN to join a likely .bank applicant in June.

While there are good reasons that Dengate Thrush’s move looks extremely fishy to outsiders, I’ve yet to hear any compelling arguments that Schwartz, who I don’t think had any high-level policy-making power anyway, did anything wrong.)

The ANA is of course the ring-leader of the ongoing campaign to get ICANN to rethink the new gTLD program in its entirety.

Liodice’s letter goes on to outline a number of suggestions, posed as questions, as to how ICANN could improve its conflict of interest policy, such as:

should ICANN consider reasonable restrictions or a moratorium on post‐service employment of ICANN staff by, or the contracting of such staff members with, parties under contract to ICANN, or whose businesses are materially affected by any decision made by the Board during the staff member’s tenure?

In other words: should ICANN staff be banned from joining registrars and registries after they leave?

In two other letters to ICANN today, Coalition for Online Accountability, International Trademark Association and American IP Law Association (collectively) and the French government make similar calls for future employment restrictions, albeit only for ICANN directors rather than staff.

But here’s another question: if the community asked ICANN to institute a revolving-door prevention policy, could it legally do so? A bit of digging suggests it might be tough.

According to the minutes of an August 15 meeting of ICANN’s Board Governance Committee:

The BGC discussed that as a private sector organization, ICANN is limited in its ability to place restrictions on future employment, though there are many things that ICANN can do to address these concerns, such as continued strict adherence and enforcement of confidentiality provisions.

The matter was also discussed by the full board at its retreat last month, and is on the agenda for the public meeting in Dakar, Senegal, at the end of October.

While ICANN does have pseudo-regulatory power (all enforced through contract) it is at the end of the day a California corporation, which is bound by California law.

And in California, it may not be legal to unreasonably restrict employees’ future job opportunities.

I’m not a lawyer, and this may not be applicable to ICANN for any number of reasons, but consider how California law deals with so-called “non-compete clauses” in employment contracts.

The text “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void” is on the California statute books.

And in 2008, the California Supreme Court interpreted this rather strictly, ruling that “non-competition agreements are invalid under section 16600 in California even if narrowly drawn”.

So could ICANN legally prevent staff or directors from jumping into the for-profit sector when they please? Is there any point in the community even debating the subject?

At this point, any members of the California Bar reading this are welcome to throw their $0.02 into the comments section below.