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DirectNIC chief tries to dismiss cybersquatting suit

Kevin Murphy, November 11, 2010, Domain Registrars

The CEO of DirectNIC is trying to wriggle out of a cybersquatting lawsuit filed by Verizon, seemingly on the grounds that the telco has been unable to track him down.

Sigmund Solares heads up the Grand Cayman-based registrar and lives in Florida, but since suing DirectNIC back in March, Verizon has not been able to find him to serve him notice.

Now, his lawyers are arguing on a technicality that the suit against him should be dismissed (pdf).

Verizon claims that DirectNIC and its directors, via a bunch of shell companies, cybersquatted “nearly every single famous trademark in existence”, including some of Verizon’s.

It filed an amended complaint (pdf) a month ago. Due to its inability to track down Solares, it served the Florida Secretary of State instead, which it’s allowed to do if the defendant evades service.

Verizon has filed a number of declarations from process servers who were unable to serve him, despite staking out his Tampa home on at least 10 occasions over the space of several months.

Solares’ lawyers now want the complaint against him dismissed on the grounds that he’s not been served, and that he was not evading service, he was just away on business and vacation:

no where in the Plaintiffs’ affidavits do the Plaintiffs allege any actions whatsoever on the part of Mr. Solares. The Plaintiffs’ complaint and affidavits merely recount their efforts to serve Mr. Solares. Such allegations cannot clearly show that Mr. Solares is evading process because they allege no actions on his part at all. Plaintiffs’ assertions only show Mr. Solares’ absence from Tampa during the periods when the Plaintiffs attempted to effect service of process.

In response, Solares has filed a fairly detailed account (pdf) of his whereabouts between March and September, which included trips to Milan, Miami, Aruba, Ireland and Boston.

Some of the dates and locations coincide with big domainer conferences.

Verizon’s complaint attacks DirectNIC on essentially two fronts.

It claims that DirectNIC’s practice of parking expiring domains – including those that infringe trademarks – constitutes cybersquatting. This is of course a fairly common industry practice.

It also claims that DirectNIC itself cybersquatted on thousands of domains via a number of shell companies, including NOLDC, Spiral Matrix, Kenyatech, Kentech, Speedy Web, Unused Domains, and Belize Domain WHOIS Service.

There’s a fair bit of circumstantial evidence connecting the firms, and UDRP panelists have previously inferred that they shared ownership, but I don’t think it’s ever been definitively proved.

I reported on this evidence in a bit more depth here.

It’s possible that more evidence could emerge during discovery, but the suit cannot proceed to that stage while the court is still figuring out whether Solares has been served or not.

Dell previously sued DirectNIC on the same grounds. Solares signed an affadavit denying he had anything to do with Kenyatech. That suit was settled.

Round-up of the ICANN new TLDs comment period

Today is the deadline to file comments on version four of ICANN’s Draft Applicant Guidebook for prospective new top-level domain registries.

Of the few dozen comments filed, the majority involve special pleading in one way or another – everybody has something to lose or gain from the contents of the DAG.

That said, I’ve read all the comments filed so far (so you don’t have to) and lots of good points are raised. It’s clear that whatever the final Applicant Guidebook contains, not everybody will get what they want.

Here’s a non-comprehensive round-up, organized by topic.

Trademark Protection

Trademark holders were among the first to file comments on DAG v4. As I’ve previously reported, Lego was first off the mark with an attempt to convince ICANN that the concerns of the IP lobby have not yet been resolved.

Since then, a few more of the usual suspects from the IP constituency, such as Verizon and InterContinental Hotels, have filed comments.

The concerns are very similar: the Universal Rapid Suspension process for trademark infringements is too slow and expensive, the Trademark Clearinghouse does not remove cost or prevent typosquatting, not enough is done to prevent deadbeat registries.

Verizon, a long-time opponent of the new TLD program and a rigorous enforcer of its trademarks, used its letter to raise the issue of cybercrime and hit on pressure points relating to compliance.

It brings up the KnujOn report (pdf) released in Brussels, which accused ICANN registrars of being willfully blind to customer abuses, and the fact that ICANN compliance head David Giza recently quit.

Two IP-focused registrars also weighed in on trademark protection.

Com Laude’s Nick Wood filed a very good point-by-point breakdown of why the URS process has become too bloated to be considered “rapid” in the eyes of trademark holders.

Fred Felman of MarkMonitor covers the same ground on rights protection mechanisms, but also questions more fundamentally whether ICANN has shown that the new TLD round is even economically desirable.

Felman has doubts that new gTLDs will do anything to create competition in the domain name market, writing:

the vast majority of gTLDs currently being proposed in this round are gTLDs that hide traditional domain registration models behind a veil of purported innovation and creativity

Well, I guess somebody had to say it.

Fees

There are concerns from the developing world that $185,000, along with all the associated costs of applying for a TLD, is too steep a price to pay.

The “African ICANN Community” filed a comment a month ago asking ICANN to consider reducing or waiving certain fees in order to make the program more accessible for African applicants.

Several potential TLD registries also think it’s unfair that applicants have to pay $185,000 for each TLD they want to run, even if it’s basically the same word in multiple scripts.

Constantine Roussos, who intends to apply for .music, reiterated the points he brought up during the ICANN board public forum in Brussels last month.

Roussos believes that applicants should not have to pay the full $185,000 for each non-ASCII internationalized domain name variant of their primary TLD.

He wrote that he intends to apply for about six IDN versions of .music, along with some non-English Latin-script variants such as .musique.

Antony Van Couvering of registry consultant Minds + Machines and .bayern bidder Bayern Connect both echo this point, noting that many geographical names have multiple IDN variants – Cologne//Koeln/Köln, for example.

Roussos also notes, wisely I think, that it appears to be a waste of money paying consultants to evaluate back-end registry providers for applicants who choose to go with an recognized incumbent such as VeriSign, NeuStar or Afilias.

Another request for lower fees comes from the Japan Internet Domain Name Council, which thinks geographical TLD applications from small cities should receive a discount, as well as a waiver of any fees usually required to object to a third-party application.

Contended Strings and Front-Running

Of the known proposed TLDs, there are several strings that will very likely be contended by multiple bidders. This has led to maneuvering by some applicants designed to increase their chances of winning.

Roussos suggested that applicants such as his own .music bid, which have made their plans public for years, should be awarded bonus points during evaluation.

This would help prevent last-minute con artists stepping in with “copy-paste” bids for widely publicized TLDs, in the hope of being paid off by the original applicant, he indicated.

Roussos thinks the amount of work his .music has done in raising community awareness around new TLDs has earned the company extra credit.

It’s a thought echoed by Markus Bahmann, dotBayern’s chairman, and his counterpart at dotHamburg.

The opposing view is put forward by rival .bayern bidder Bayern Connect’s Caspar von Veltheim. He reckons such a system would put “insiders” at an unfair advantage.

M+M’s Van Couvering also said he opposes any applicant getting special treatment and added that M+M wants an explicit ban on trademark front-running included in the DAG.

Front-running is the practice of registering a TLD as a trademark in order to gain some special advantage in the new TLD evaluation process or in court afterward.

(M+M’s owner, Top Level Domain Holdings, has reportedly been front-running itself – attempting to defensively register trademarks in the likes of .kids, .books and .poker, while simultaneously trying to fight off similar attempts from potential rivals.)

Roussos of .music responded directly to M+M this afternoon, presenting the opposite view and promising to use its trademarks to defend itself (I’m assuming he means in court) if another .music applicant prevails.

Rest assured that if we, as .MUSIC are faced with the possibility of being gamed and abused in a manner that we find illegal, we will use our trademarks and other means necessary to do what we have to do to protect ourselves and our respective community.

He said .music is trademarked in 20 countries.

Morality and Public Order

This was a hot topic in Brussels, after the ICANN Governmental Advisory Committee agreed that it did not like the “MOPO” objection provisions of DAG v4, but could not think of a better replacement.

MOPO would give a way for governments to scupper bids if they do not like the morality implications. Anybody applying for .gay, for example, would have to deal with this kind of nonsense.

Jacob Malthouse of BigRoom, one of the would-be .eco bidders, reckons ICANN should treat the GAC the same as it treated the GNSO on the issue of vertical integration – remove MOPO from the DAG entirely in order to force the GAC to come up with something better.

The GAC had previously said it would address the MOPO issue in its comments on DAGv4, but its filing has not yet appeared on the ICANN site.

There’s a GNSO working group over here, but M+M’s Van Couvering notes that no GAC members have got involved post-Brussels.

Terrorism

Two commentators objected to the idea that an applicant could be rejected for involvement in “terrorism”, a term that DAGv4 does not define.

I reported on this a few days ago, but since then Khaled Fattal of the Multilingual Internet Group has filed a surprising rant that seems to indicate he has way more beef than really necessary.

Here’s a few quotes mined from the full comment:

it will alienate many in the international community who will choose not to take part in future ICANN processes including its New gTLDs, distrusting ICANN’s motives, or actively choosing to boycotting it, and causing many to seriously start re-considering alternatives.

as a Syrian born Arab American would I pass the IvCANN terrorism verification check as they are? After all Syria, my country of birth, is on the U.S. Government list of states sponsor of terrorism? And I admit, I do know an “Osama”, does that disqualify me? I Forgot to add, “Osama Fattal” a cousin. So would I pass or fail this check?

The arbitrary inclusion of terrorism as a measuring stick without any internationally recognized laws or standards is wrong and offensive to many around the world. If acted upon, it will be seen by millions of Muslims and Arabs as racist, prejudicial and profiling and would clearly indicate that ICANN has gone far beyond its mandate.

Vertical Integration and .brand TLDs

The issue of whether registries and registrars should be allowed to own each other is a thorny one, but there’s barely any mention at all of it in the DAGv4 comments filed so far.

The DAGv4 language on VI, which effectively bans it, is a place-holder for whatever consensus policy the GNSO comes up with (in the unlikely event that its working group ever gets its act together).

Most efforts on VI are therefore currently focused in the GNSO. Nevertheless, some commentators do mention VI in their filings.

Roussos of .music wants .music to be able to vertically integrate.

Abdulaziz Al-Zoman of SaudiNIC said VI limits should be removed to help applicants who need to turn to third-party infrastructure providers.

From the IP lobby, Celia Ullman of cigarette maker Philip Morris notes that there’s nothing in DAGv4 about single-registrant .brand TLDs. She writes:

would this mean that trademark owners owning a gTLD would need to open the registration procedure to second-level domain names applied for to third unrelated parties? In this case, what would be the incentive of actually registering and operating such a gTLD?

Clearly, the idea that a .brand would have to be open to all ICANN registrars on a non-discriminatory basis is enough to make any trademark attorney choke on their caviare.

JPNIC, the .jp ccTLD operator, also points out that DAGv4 says next to nothing about .brand TLDs and strongly suggests that the final Applicant Guidebook spells out just what a registry is allowed to do with its namespace (lawsuits are mentioned)

Disclaimer

I’ve paraphrased almost everybody in this article, and I’ve done it rather quickly. Despite my best efforts, some important nuance may have been lost in the act.

If you want to know what the commentators I’ve cited think, in their own words, I’ve linked to their comments individually throughout.

I may update this post as further comments are filed.

Verizon hires investigator to track down DirectNIC bosses

Verizon has won a delay in its cybersquatting lawsuit against domain registrar DirectNIC, because it can’t seem to track down and serve its CEO, Sigmund Solares.

In its latest filings with the Florida District Court, Verizon says that it had to hire a private detective to track down DirectNIC director Michael Gardner, and ended up serving his wife instead.

But, two months after filing the suit, the company still hasn’t managed to track down Solares.

“Plaintiff continues to diligently attempt to serve the lone remaining Defendant yet to be served, Sigmund Solares… Plaintiffs continue to diligently try to locate and serve this Defendant.”

DirectNIC, previously known as Intercosmos Media Group, relocated to the Cayman Islands from New Orleans in 2008, which may explain some of Verizon’s difficulty.

Indeed, when Verizon turned up to serve the company in New Orleans, it found its old office (from where employees attracted global attention for live-blogging Hurricane Katrina) closed.

Verizon sued DirectNIC, along with several directors and alleged aliases, in March, claiming they had squatted on at least 288 domains that included Verizon trademarks.

The case is of note because Verizon alleges that DirectNIC broke US cybersquatting laws when it parked expired domains that contained Verizon trademarks.

Parking pre-delete expired names is a common practice among registrars, which makes the lawsuit puzzling.

But Verizon does appear to be digging for something else, its complaint suggesting a connection between DirectNIC and its nominal registrants that may not be entirely kosher.

Without legal discovery, its hunches could go nowhere. And before Solares is served, it cannot proceed to discovery.

The court has granted an extension until late August, or 30 days after Solares is served, for the first case management meeting.

Verizon seeks another registrar scalp

Kevin Murphy, March 21, 2010, Domain Registrars

After killing off small Indian registrar Lead Networks last week, Verizon wasted no time in gunning for a larger target, DirectNIC.

The carrier sued DirectNIC on Friday, claiming the company has been involved in the systematic typosquatting of hundreds of thousands of domains, including at least 288 belonging to Verizon.

There appears to be at least two things going on here.

First, Verizon is claiming that the common registrar practice of parking expired, pre-delete domains, somehow falls foul of US anti-cybersquatting laws if the parked domains are typosquats.

DomainNameWire addresses the possibly discomforting precedents this could set over here.

Second, the Verizon complaint resurrects the theory that DirectNIC’s owners, including CEO Sigmund Solares, are or were themselves typosquatters, using shell (continue reading)

Cybersquatting registrar goes into receivership

Kevin Murphy, March 18, 2010, Domain Registrars

Lead Networks Domains, an Indian domain name registrar, has been handed to a California receiver after a cybersquatting lawsuit filed by Verizon.

ICANN said today that Bret Fausset has been appointed receiver for the Mumbai-based company, which had about 130,000 domains under management when Verizon sued it.

Verizon sued Lead in January 2008, claiming the registrar’s customers had registered 238 misspellings of Verizon trademarks.

The company further claimed that Lead ignored UDRP rulings that went against it and supplied UDRP avoidance services to its users.

ICANN yanked Lead’s accreditation last July. Fausett said he will now transition any of its remaining domain names to a new registrar.