Verisign sues .xyz and Negari for “false advertising”

Handbags at dawn!
Verisign, the $7.5 billion .com domain gorilla, has sued upstart XYZ.com and CEO Daniel Negari for disparaging .com and allegedly misrepresenting how well .xyz is doing.
It’s the biggest legacy gTLD versus the biggest (allegedly) new gTLD.
The lawsuit focuses on some registrars’ habit of giving .xyz names to registrants of .com and other domains without their consent, enabling XYZ.com and Negari to use inflated numbers as a marketing tool.
The Lanham Act false advertising lawsuit was filed in Virginia last December, but I don’t believe it’s been reported before now.
Verisign’s beef is first with this video, which is published on the front page of xyz.com:

Verisign said that the claim that it’s “impossible” to find a .com domain (which isn’t quite what the ad says) is false.
The complaint goes on to say that interviews Negari did with NPR and VentureBeat last year have been twisted to characterize .xyz as “the next .com”, whereas neither outlet made such an endorsement. It states:

XYZ’s promotional statements, when viewed together and in context, reflect a strategy to create a deceptive message to the public that companies and individuals cannot get the .COM domain names they want from Verisign, and that XYZ is quickly becoming the preferred alternative.

As regular readers will be aware, .xyz’s zone file, which had almost 785,000 names in it yesterday, has been massively inflated by a campaign last year by Network Solutions to push free .xyz domains into customers’ accounts without their consent.
It turns out Verisign became the unwilling recipient of gtld-servers.xyz, due to it owning the equivalent .com.
According to Verisign, Negari has used these inflated numbers to falsely make it look like .xyz is a viable and thriving alternative to .com. The company claims:

Verisign is being injured as a result of XYZ and Negari’s false and/or misleading statements of fact including because XYZ and Negari’s statements undermine the equity and good will Verisign has developed in the .COM registry.
…
XYZ and Negari should be ordered to disgorge their profits and other ill-gotten gains received as a result of this deception on the consuming public.

The complaint makes reference to typosquatting lawsuits Negari’s old company, Cyber2Media, settled with Facebook and Goodwill Industries a few years ago, presumably just in order to frame Negari as a bad guy.
Verisign wants not only for XYZ to pay up, but also for the court to force the company to disclose its robo-registration numbers whenever it makes a claim about how successful .xyz is.
XYZ denies everything. Answering Verisign’s complaint in January, it also makes nine affirmative defenses citing among other things its first amendment rights and Verisign’s “unclean hands”.
While many of Verisign’s allegations appear to be factually true, I of course cannot comment on whether its legal case holds water.
But I do think the lawsuit makes the company looks rather petty — a former monopolist running to the courts on trivial grounds as soon as it sees a little competition.
I also wonder how the company is going to demonstrate harm, given that by its own admission .com continues to sell millions of new domains every quarter.
But the lesson here is for all new gTLD registries — if you’re going to compare yourselves to .com, you might want to get your facts straight first if you want to keep your legal fees down.
And perhaps that’s the point.
Read the complaint here and the answer here, both in PDF format.

.xyz press release yanked for “encouraging cybersquatting”

XYZ.com has withdrawn a month-old press release following allegations that it encouraged cybersquatting in .xyz.
The December 3 release concerned the release of 18,000 .xyz domains that were previously blocked due to ICANN’s policy on name collisions.
The release highlighted “trademarked names such as Nike, Hulu, Netflix, Skype, Pepsi, Audi and Deloitte” that were becoming available, according to World Trademark Review, which reported the story yesterday.
Five of the seven brands highlighted have since been registered by apparent cybersquatters, WTR reported.
The .xyz press release has since been withdrawn from the web sites on which it appeared, and registry production manager Shayan Rostam told WTR that the intention was to encourage brand owners to register, rather than cybersquatters.
“Cybersquatting has a negative effect on our business and we would never take any action to encourage cybersquatting,” he reportedly said.
Read the WTR article here.

.xyz tops 500,000 names

XYZ.com’s new gTLD .xyz has become the first in this round to accrue over half a million domains in its zone file.
This morning I count 500,050 domains in the zone, up 3,485 on yesterday.
The registry has added over 60,000 domains in the last 30 days.
It’s well-known that the large majority of .xyz names have been given away for free, largely without the registrants’ explicit consent, so it’s not a great measure of demand.
Still, it’s a milestone of sorts.
Some percentage of .xyz’s registrants will renew for a fee next year, so the larger its installed base, the larger the number of paid-for domains the registry could wind up with.

Verisign: 41% of new gTLD sites are parked

As much as 41% of domains registered in new gTLDs are parked with pay-per-click advertising, according to research carried out by Verisign.
That works out to over 540,000 domains, judging by the 1.3 million total I have on record from June 29, the day Verisign carried out the survey.
Domains classified as carrying “business” web sites — defined as “a website that shows commercial activity” — accounted for just 3% of the total, according to Verisign.
There are some big caveats, of course, not least of which is .xyz, which tends to skew any surveys based on “registered” names appearing in the zone file. Verisign noted:

XYZ.COM LLC (.xyz) has a high concentration of PPC websites as a result of a campaign that reportedly automatically registered XYZ domains to domain registrants in other TLDs unless they opted out of receiving the free domain name. After registration, these free names forward to a PPC site unless reconfigured by the end user registrant.

On June 29, .xyz had 225,159 domains in its zone file. I estimate somewhat over 200,000 of those names were most likely freebies and most likely parked.
The practice of registry parking, carried out most aggressively by Uniregistry and its affiliate North Sound, also threw off Verisign’s numbers.
Whereas most new gTLD registries reserve their premium names without adding them to the zone files, Uniregistry registers them via North Sound to park and promote them.
Tens of thousands of names have been registered in this way.
Coupled with the .xyz effect, this leads me to conclude that the number of domains registered by real registrants and parked with PPC is probably close to half of Verisign’s number.
That’s still one out of every five domains in new gTLDs, however.
Judging by a chart on Verisign’s blog, .photography appears to have the highest percentage of “business” use among the top 10 new gTLDs so far.
Verisign also found that 10% of the names it scanned redirect to a different domain. It classified these as redirects, rather than according to the content of their final destination.

ICANN smacks new gTLDs for pre-sunrise auctions

Running a premium domain name auction before you’ve finished your new gTLD sunrise period is Officially Not Cool, according to ICANN’s compliance department.
People who won premium new gTLD domains in auctions that took place before sunrise periods now face the possibility of losing their names to trademark owners.
.CLUB Domains, and probably XYZ.com, operators of .club and .xyz, two of the highest-volume new gTLDs to launch so far, appear to be affected by the ICANN decision.
ICANN told .CLUB that its “winter auction“, which took place in late February, may have violated the rules about allocating or “earmarking” domains to registrants before sunrise takes place.
Meanwhile, NameJet has cancelled the auction for deals.xyz, which “sold” for $8,100 late last year, suggesting that .xyz’s pre-sunrise auction is also considered ultra vires.
ICANN told .CLUB that its auction sales “constitute earmarking” in violation of the rule stating that registries “must not allow a domain name to be allocated or registered prior to the Sunrise period”.
.CLUB had told its auction winners that a sunrise period registration would prevent them from getting the domain they wanted and that they would be refunded if a sunrise registrant emerged.
But ICANN evidently told the registry:

Irrespective of whether “[a]llocation was expressly conditioned upon any Sunrise claim,” or whether any Sunrise claim was made, the pre-selection, pre-registration or pre-designation to third parties, in this case via .Club Domains’ “winter auction,” constitutes improper allocation.

I kinda thought this would happen.
Back in November, when XYZ.com ran its first .xyz auction — about six months before its sunrise even started — CEO Daniel Negari told us he believed it was “comfortably within the rules“.
We said the auction “seems to be operating at the edge of what is permissible under the new gTLD program’s rights protection mechanisms, which state that no domains may be allocated prior to Sunrise.”
I’ve not yet been able to definitively confirm that .xyz is affected by this ICANN decision, but .club definitely is.
.CLUB Domains told its auction winners today that the names they won are now subject to a 60-day period during which they could be obtained by trademark owners.
If no trademark owner claims the name, .CLUB said it will give the auction winner a 10% rebate on their purchase price.
The email states:

We are placing the domain on hold for 60 days, during which time a Trademark Clearinghouse (TMCH) holder will have the opportunity to purchase the domain at Sunrise rates. Although, the domain is not currently in the TMCH, if a trademark holder should file in the TMCH over the next 60 days, the domain will be offered to that registrant. However, if the name is not claimed by filing in the TMCH over the next 60 days, your transaction will move forward as planned.
Although we disagree with ICANN compliance’s position on this matter, the actions we are taking are necessary to ensure that we are not offside with ICANN compliance in any way. We understand that you have been caught in the middle of this issue due to no fault of your own. Given these circumstances, we are offering you two options:
1) Should you decide to complete this transaction, we will issue you a payment of 10% of the purchase price after the transaction closes in 60 days, assuming the name is not registered by a TMCH mark holder because of the delay.
2) At any time during the 60 day period you have the option to rescind the auction bid and not purchasing the domain.

XYZ says auctions “comfortably within the rules”

New gTLD registry XYZ.com has responded to criticisms of its plan to auction .xyz and .college names with NameJet before they even have signed contracts with ICANN.
CEO Daniel Negari told DI that the plan to auction 40 names between now and the end of February, is “comfortably within the rules”.
The company seems to be operating at the edge of what is permissible under the new gTLD program’s rights protection mechanisms, which state that no domains may be allocated prior to Sunrise.
But Negari said in an email interview that nothing will be “allocated” before its Sunrise periods are done:

the buyers at auction are not buying the domain names as in a normal auction. They are buying an option to force us to allocate them the domain after the Sunrise Period for the auction price assuming various contingencies are met — such as us being able to allocate the name in the future, the name being available after sunrise, the name not being blocked-out because of name collisions and so on.

He went on to say that the 40 names being put to auction are being drawn from the 100 names the recently redrafted Registry Agreement says registries are allowed to allocate to themselves “necessary for the operation or the promotion of the TLD”.
There’s also the potential problem that neither TLD has yet received its list of name collisions, which are likely to contain thousands of strings that the registry must block at launch.
As we’ve seen with the gTLDs that already have their lists, many desirable second-level strings are likely to be blocked, which could clash with names XYZ is planning to auction.
But XYZ seems to have access to the Day In The Life Of The Internet data from which these lists are compiled, and Negari said that the names it is auctioning off do not appear.
“We think these auctions are a great way to both promote our TLD as anticipated by ICANN in the RA and to bring increased innovation to the space in line with ICANN’s stated goals for the new gTLD program,” Negari said.

NameJet to auction new gTLD domains before they launch

Many registrars are already offering new gTLD pre-registrations, now NameJet has taken the idea one step further: it’s going to auction premium names months before the gTLDs even go live.
It’s just announced a deal with XYZ.com, which is on track to run the .xyz and .college registries, to sell 40 “premium” domain names this month. In fact, according to its press relase, the first auction started on Wednesday.
These two new gTLDs are uncontested but do not yet have Registry Agreements with ICANN, and have not passed pre-delegation testing or any of the other pre-launch prerequisites.
The companies said they due to go live next year.
Some of the domains to be auctioned include: loans.college, scholarships.college, vacations.xyz, insurancequotes.xyz, students.college, jobs.college, auctions.xyz and health.xyz.
NameJet said it expects the auctions to be wrapped up by the end of February.

Next new gTLD auction set for August 13

Innovative Auctions today announced that its second new gTLD auction is scheduled for August 13 and that several companies have already signed up to participate.
The news follows the settlement of the first round of auctions, which saw $9.01 million shared between losing applicants and Innovative for the rights to six new gTLD strings.
“[A]ll of the participants from this auction who have additional strings in contention have signed on to use the process to resolve their remaining contentions,” Innovative said.
That would mean Afilias, Merchant Law Group and XYZ.com, which took part in this month’s auctions, are all likely to attempt to settle their outstanding contention sets with Innovative.
That’s another roughly 40 strings on top of Donuts’ already-committed monster portfolio.
Of course, the auctions will only be able to go ahead if all of the other applicants in each contention set also agree to participate, which in some cases will be a non-starter.
The money from the first auctions has already been distributed to the losing applicants, according to Innovative.