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.

Will the Trademark Clearinghouse kill off premium domains?

Rules proposed for the new Trademark Clearinghouse threaten to cut off some of new gTLD registries major sources of early revenue, according to registry providers.

Premium domain sales and founders programs are among the now industry-standard practices that would be essentially banned under the current draft of the TMCH rules, they say.

The potential problems emerged in a draft TMCH Requirements document circulated to registries 10 days ago and vigorously discussed during a session at the ICANN meeting in Beijing last week.

The document lists all of the things that new gTLD registries must and must not, and may and may not, do during the mandatory Sunrise and Trademark Claims rights protection launch periods.

One of the bits that has left registries confused is this:

2.2.4 Registry Operator MUST NOT allow a domain name to be reserved or registered to a registrant who is not a Sunrise-Eligible Rights Holder prior to the conclusion of the Sunrise Period.

What this means is that trademark owners get first dibs on pretty much every possible string in every gTLD.

“Trademark owners trump everything,” Neustar business affairs veep Jeff Neuman said during the Beijing meeting. “Trademark owners trump every possible use of every possible name.”

It would mean, for example, that if a new gTLD wanted to allocate some names to high-profile anchor tenants during a “founders program”, it would not be able to do so until after the Sunrise was over.

Let’s say the successful applicant for .shop wants to reserve the names of hundreds of shop types (book.shop, food.shop, etc) as premium names, to allocate during its founders program or auction later.

Because the .shop Sunrise would have to happen first, the companies that the own rights to, for example, “wallpaper” or “butcher” (both real US trademarks) would have first rights to wallpaper.shop and butcher.shop, even if they only planned to defensively park the domains.

Because there’s likely to be some degree of gaming (there’s a proof-of-use requirement, but the passing threshold is pretty low), registries’ premium lists could be decimated during Sunrise periods.

If ICANN keeps its TMCH Requirements as they are currently written, new gTLD registries stand to lose a lot of early revenue, not to mention control over launch marketing initiatives.

However, if ICANN were to remove this rule, it might give unscrupulous registries the ability to circumvent the mandatory Sunrise period entirely by placing millions of strings on their premium lists.

“Registries should have discretion to schedule their start-up phases according to their business plans so long as rights protection processes are honored, so that’s the balancing we’ve tried to do,” ICANN operations & policy research director Karen Lenz said during Beijing.

“It’s trying to allow registries to create requirements that suit their purposes, without being able to hollow out the rights protection intention,” she said.

The requirements document is still just a draft, and discussions are ongoing, she added.

“It’s certainly not our intention to restrict business models,” Lenz said.

Registries will get some flexibility to restrict Sunrise to certain registrants. For example, they’ll be able to disqualify those without an affiliation to the industry to which the gTLD is targeted.

What they won’t be able to do is create arbitrary rules unrelated to the purpose of the TLD, or apply one set of rules during Sunrise and another during the first 90 days of general availability.

The standard Registry Agreement that ICANN expects all new gTLDs to sign up to does enable registries to reserve or block as many names as they want, but only if those names are not registered or used.

It seemed to be designed to do things like blocing ‘sensitive’ strings, rather like when ICM Registry reserved thousands of names of celebrities and cultural terms in .xxx.

The Requirements document, on the other hand, seems to allow these names being released at a later date. If they were released, the document states, they’d have to be subject to Trademark Claims notices, but not Sunrise rules.

While that may be a workaround to the premium domains problem, it doesn’t appear to help registries that want to get founders programs done before general availability.

It seems that there are still many outstanding issues surrounding the Trademark Clearinghouse — many more than discussed in this post — that will need to be settled before new gTLDs are going to feel comfortable launching.

Trademark Clearinghouse to get tested out on three existing TLDs

Three already-live TLDs are going to use the Trademark Clearinghouse to handle sunrise periods, possibly before the first new gTLDs launch.

BRS Media is set to use the TMCH, albeit indirectly, in its launch of third-level domains under .radio.am and .radio.fm, which it plans to launch soon as a budget alternative to .am and .fm.

The company has hired TM.Biz, the trademark validation firm affiliated with EnCirca, to handle its sunrise, and TM.biz says it will allow brand owners to leverage Clearinghouse records.

Trademark owners will be able to submit raw trademarks for validation as in previous sunrises, but TM.Biz will also allow them to submit Signed Mark Data (SMD) files, if they have them, instead.

Encrypted SMD files are created by the TMCH after validation, so the trademarks and the strings they represent are pre-validated.

There’ll presumably be some cost benefit of using SMD files, but pricing has not yet been disclosed.

Separately, Employ Media said today that it’s getting ready to enter the final stage of its .jobs liberalization, opening up the gTLD to essentially any string and essentially any registrant.

The company will also use the TMCH for its sunrise period, according to an ICANN press release, though the full details and timing have not yet been announced.

Unusually, .jobs is a gTLD that hasn’t already had a sunrise — its original business model only allowed vetted company-name registrations.

The TMCH is already accepting submissions from trademark owners, but it’s not yet integrated with registries and registrars.

Six big reasons we won’t see any new gTLD launches until Q3

ICANN’s announcement of a big media bash in New York on April 23, to announce the launch of new gTLDs, has gotten many people thinking the first launches are imminent.

Wrong.

We’re not going to see any new gTLD domains on sale until the third quarter at the earliest, in my view, and here are a few good reasons why.

April 23 is just a PR thing

ICANN has said that April 23 is primarily about awareness-raising.

Not only does it hope to garner plenty of column inches talking about new gTLDs — helping the marketing efforts of their registries — it also hopes to ceremonially sign the first Registry Agreements.

I think CEO Fadi Chehade’s push to make the industry look more respectable will also play a part, with the promotion of the Registrant Rights and Responsibilities document.

But there’s never been any suggestion that any strings will be delegated at that time, much less go live.

The contracts are still hugely controversial

If ICANN wants to sign a Registry Agreement on April 23, it’s going to need a Registry Agreement to sign.

Right now, applicants are up in arms about ICANN’s demand for greater powers to amend the contract in future.

While ICANN has toned down its proposals, they may still be unacceptable to many registries and gTLD applicants.

Applicants have some impetus to reach agreement quickly — because they want to launch and start making money as soon as possible.

But ICANN wants the same powers added to the 2013 Registrar Accreditation Agreement, and registrars are generally less worried about the speedy approval of new gTLDs.

ICANN has tied the approval of the RA and the RAA together — only registrars on the new RAA will be able to sell domains in new gTLDs.

Chehade has also made it clear that agreement on the new RAA is a gating issue for new gTLD launches.

If registries, registrars and ICANN can’t settle these issues in Beijing, it’s hard to see how any contracts could be signed April 23. The first launch would be delayed accordingly.

GAC Advice might not be what we’re expecting

GAC Advice on New gTLDs is, in my view, the biggest gating issue applicants are facing right now.

GAC Advice is an integral part of the approval process outlined in the Applicant Guidebook and ICANN has said many times that it cannot and will not sign any contracts until the GAC has spoken.

But what does that mean from a process and timing point of view?

According to the Applicant Guidebook, if an application receives GAC Advice, it gets shunted from the main evaluation track to the ICANN board of directors for consideration.

It’s the only time the ICANN board has to get directly involved with the approval process, according to the Guidebook’s rather complex flow-charts.

GAC Advice is not an automatic death sentence, but any application the GAC is unanimously opposed to stands a very slim chance of getting approved by the board.

Given that ICANN is has said it will not sign contracts until it has received GAC Advice, and given that it has said it wants to sign the first contract April 23, it’s clearly expecting to know which applications are problematic and which are not during the next three weeks.

But I don’t think that’s necessarily going to happen. The GAC moves slowly and it has a track record of missing ICANN-imposed deadlines, which it often seems to regard as irksome.

Neither ICANN nor the GAC have ever said GAC Advice on New gTLDs will be issued during next week’s public meeting in Beijing. If a time is given it’s usually “after” or “following” Beijing.

And I don’t think the GAC, which decided against holding an inter-sessional meeting between Toronto and Beijing, is remotely close to providing a full list of specific applications of concern.

I do think a small number of slam-dunk bad applications – such as DotConnectAfrica’s .africa bid – will get Advised against during or after the Beijing meeting.

But I also think the GAC is likely to issue Advice that is much broader, and which may not provide the detail ICANN needs to carry the process forward for many applicants.

The GAC, in its most recent (delayed) update, is still talking about “categories” of concern – such as “consumer protection” and “geographical names” – some of which are very broad indeed.

Given the limited amount of time available to it in Beijing, I think it’s quite likely that the GAC is going to produce advice about categories as well as about individual applications.

And, crucially, I don’t think it’s necessarily going to give ICANN a comprehensive list of which specific applications fall into which categories.

If the GAC decides to issue Advice under the banner of “consumer protection”, for example, somebody is going to have to decide which applications are captured by that advice.

Is that just strings that relate to regulated industries such as pharmaceuticals or banking? Or is it any string that relates to selling stuff? What about .shop and .car? Shops and cars are “regulated” by consumer protection and safety laws in most countries.

Deciding which Advice covered which applications would not be an easy task, nor would it be a quick one. I don’t think the GAC has done this work yet, nor do I think it will in Beijing.

For the GAC to reach consensus advice against specific applications will in some cases require GAC representatives to return to their capitals for guidance, which would add delay.

There is, in my view, a very real possibility of more discussions being needed following Beijing, just in order to make sense of what the GAC comes up with.

The new gTLD approval process needs the GAC to provide a list of specific applications or strings with which it has concerns, and we may not see that before April 23.

ICANN may get a short list of applications that definitely do have Advice by then, but it won’t necessarily know which applications do not, which may complicate the contract-signing process.

The Trademark Clearinghouse still needs testing

The Trademark Clearinghouse is already, in one sense, open for business. Trademark owners have been able to submit their marks for validation for a couple of weeks now.

But the hard integration work has not been done yet, because the technical specifications the registries and registrars need to interface with IBM’s TMCH database have not all been finalized.

When the specs are done (it seems likely this will happen in the next few weeks), registries and registrars will need to finish writing their software and start production testing.

ICANN’s working timetable has the TMCH going live July 1, but companies that know much more than me about the technical issues at play here say it’s unlikely that they’ll be ready to go live with Sunrise and Trademark Claims services before August.

It’s in everyone’s interests to get all the bugs ironed out before launch.

For new gTLD registries, a failure of the centralized TMCH database could mean embarrassing bugs and downtime during their critical launch periods.

Trademark owners and domain registrants may also be concerned about the potential for loopholes.

For example, it’s still not clear to some how Trademark Claims – which notifies registrants when there’s a clash between a trademark and a domain they want – will interact with landrush periods.

Does the registrant only get a warning when they apply for the domain, which could be some weeks before a landrush auction? If so, what happens if a mark is submitted to the TMCH between the application and the auction and ultimate registration?

Is that a loophole to bypass Trademark Claims? Could a registrant get hit by a Claim after they’ve just spent thousands to register a domain?

These are the kinds of things that will need to be ironed out before the TMCH goes fully live.

There’s a sunrise notice period

The sunrise period is the first stage of launch in which customers get to register domain names.

Lest we forget, ICANN recently decided to implement a mandatory 30-day notice period for every new gTLD sunrise period. This adds a month to every registry’s go-live runway.

Because gTLD sunrise periods from now on all have to use the TMCH, registries may have to wait until the Clearinghouse is operational before announcing their sunrise dates.

If the TMCH goes live in July, this would push the first launch dates out until August.

Super-eager registries may of course announce their sunrise period as soon as they are able, and then delay it as necessary to accommodate the TMCH, but this might carry public relations risks.

Verisign’s security scare

It’s still not clear how Verisign’s warning about the security risks of launching new gTLDs on the current timetable will be received in Beijing.

If the GAC reckons Verisign’s “concerns” are valid, particularly on the issue of root zone stability, ICANN will have to do a lot of reassuring to avoid being advised to delay its schedule.

Could ICANN offer to finish off its work of root zone automation, for example, before delegating new gTLDs? To do so would add months to the roll-out timetable.

First seven TMCH agents approved

The Trademark Clearinghouse has listed its first seven approved trademark submission agents.

These are the companies that are able to secure bulk discounts for submitted marks to the TMCH.

The first seven are NetNames, Corporation Service Company, SafeNames, MailClub, Key-Systems, Net-Chinese, which are all domain registrars too, and the Law Offices of S.J. Christine Yang, which isn’t.

Holders of large trademark portfolios are also allowed to become agents in their own right, but most TMCH submissions are expected to be carried out via these third parties.

The full list is here.

The cost of submitting trademarks, if you’re an agent, can be worked out using the TMCH Cost Calculator.