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ICANN won’t say how Demand Media passed its new gTLD background check

Kevin Murphy, May 31, 2013, 16:27:37 (UTC), Domain Registries

After badgering ICANN for a few weeks, I’ve finally got a firm “no comment” on the question of how new gTLD applicant Demand Media managed to pass its background checks.
The question of whether it’s possible for serial cybersquatters to bypass ICANN screening and be awarded new gTLDs just by setting up shell companies is still open, it seems.
As DI and other blogs have been reporting for the past few years, there was a question mark over Demand Media’s eligibility for the new gTLD program due to its history of cybersquatting.
Under ICANN rules, any company that lost three or more UDRP decisions with at least one loss in the last three years would not pass its background screening. The Applicant Guidebook states:

In the absence of exceptional circumstances, applications from any entity with or including any individual with convictions or decisions of the types listed in (a) – (m) below will be automatically disqualified from the program.
…
m. has been involved in a pattern of adverse, final decisions indicating that the applicant or individual named in the application was engaged in cybersquatting as defined in the Uniform Domain Name Dispute Resolution Policy (UDRP), the Anti-Cybersquatting Consumer Protection Act (ACPA), or other equivalent legislation, or was engaged in reverse domain name hijacking under the UDRP or bad faith or reckless disregard under the ACPA or other equivalent legislation. Three or more such decisions with one occurring in the last four years will generally be considered to constitute a pattern.

Demand Media subsidiary Demand Domains has lost over 30 UDRP cases, most recently in 2011, but its United TLD Holdco subsidiary has sailed through its Initial Evaluations.
Technically, shouldn’t it have failed screening and therefore IE?
Domain Name Wire speculated in November 2010 that ICANN had deliberately introduced loopholes in order to let Demand — and, at the time, Go Daddy — into the new gTLD program.
At that time, ICANN had just removed references to “any person or entity owning (or beneficially owning) fifteen percent or more of the applicant” in the background screening section of the Guidebook.
That might have introduced a loophole allowing subsidiaries of cybersquatters to apply.
But Demand Media seemed to think it was still at risk, asking ICANN in December 2010 to change the background check rules.
ICANN did. In the next version of the Guidebook, published in April 2011, it added the “In the absence of exceptional circumstances” qualifying language.
It’s also possible that this was the loophole that allowed Demand to pass screening.
Judging by the UDRP complaints it was involved in in the past, the company usually argued against the “bad faith” element of the policy. It often said it didn’t know about the complainant’s trademark and/or said it had offered to transfer the domain at no charge.
But more than 30 UDRP panelists didn’t buy that argument and still found against Demand. The company lost far more complaints than it won.
The fact that the company apparently managed to clean its act up a few years ago — not being hit with any complaints since 2011 — suggests that its act wasn’t all that clean to begin with.
Either way, neither ICANN nor Demand wants to talk about how the company passed screening, so I guess we’re still left wondering whether this section of the Guidebook is worth the PDF it’s written on.

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Comments (10)

  1. Scott says:
    May 31, 2013 at 11:38 pm

    Shady stuff on ICANN’s part…though it’s not very surprising. They are all about the Benjamins whether they admit to it or not.

    Reply
  2. Constantine Roussos (.MUSIC) says:
    June 1, 2013 at 12:58 am

    Kevin,
    I think we all know how Donuts and Demand Media passed the background checks. ICANN introduced the loopholes and they were used to circumvent the rules. DomainNameWire predicted this would happen and it surely did.
    In regards to ICANN, a lot remains to be seen. Question now is will these types of applicants and portfolio applicants be allowed to make material changes to their applications to circumvent GAC Beijing Communique advise – i.e another loophole – at the expense of community applicants? As the Guidebook illustrates any material changes (http://newgtlds.icann.org/en/applicants/customer-service/change-requests) lead to application denial. This will have a disastrous effect on the entire process and harm those applicants (such as community applicants) who have already included these types of safeguards and other commitments. Safeguards should be implemented across the board but in those cases where there is a community WITH those commitments/policies in a contention set, the applicant with enhanced safeguards/commitments (community applicants) should be allowed to continue with the process while the others do not. I do not see any other fair way to go forward with this since in context, this shows the qualifications of one applicant over another to address relevant sensitive issues surrounding some strings. This does not affect many contention sets to the joy of the portfolio applicants (but my guess is they will come up with some excuse or new loophole why incorporating new safeguards and material changes should not disqualify them even if it is unfair to other community applicants who do have these commitments/safeguards in place).
    I do believe the GAC safeguards/advice will be another instance where these types of applicants will try to find a loophole to continue with the process even if it harms other applicants who already made those commitments in their applications. Look at Famous Four Media. They are now creating material changes to their application by incorporating Governance Councils to bypass any GAC advice issues relating to multi-stakeholder community-based governance (which many community applicants have already incorporated in their applications) which I personally posed to ICANN as a requirement dozens of times but was never implemented in the Guidebook.
    Applicants have not taken a strong stance with Donuts/Demand Media passing Background Checks but I think we are approaching a tipping point in regards to whether this process has been fair or not and whether this process is taking in consideration the global public interest as outlined by the GAC Communique. These topics are not new topics. ICANN will eventually be held accountable if the process continues with this trajectory. The Board can certainly fix a lot of the issues at hand for the global public interest. It is obvious that the Guidebook is flawed and ICANN does reserve the right to make appropriate changes to serve the global public interest especially after GAC advice.
    Kevin, I am glad that you are asking ICANN these Background Check questions that do require further clarification from ICANN since they do impact many contention sets and create clouds around ICANN’s transparency surrounding the fairness of this process.

    Reply
    • Rubens Kuhl says:
      June 1, 2013 at 12:20 pm

      Not all community applications are grassroots community endeavors; .LAMBORGHINI is one that wouldn’t pass any criteria I can think of. To differentiate these, AGB has established the community priority evaluation panel. If a community applicant passes CPEP, it doesn’t matter what changes to the application the non-community ones did, they will be excluded from the contention set. What you’re asking is already built into AGB, so these application changes won’t matter in contention sets where there is or are community applicant(s).

      Reply
  3. Constantine Roussos (.MUSIC) says:
    June 1, 2013 at 3:54 pm

    Rubens,
    .Lamborghini is uncontested and so are other brands which for some odd reason applied for community. So they will NOT call for CPE. It is an irrelevant point because one would call CPE only if they are in a contention set which was exactly my point. My issue is why would others be allowed to make material changes if some competing applicants already incorporated those safeguards/commitments (and more) in a few of the contention sets? I agree it does not impact 90% of contention sets but for the ones where there is a community applicant it does.
    In regards to material changes, those are clearly outlined. If applicants can start making changes why can’t community applicants make changes to their community application to score higher?
    Your claim that application changes do not matter is far from the truth and quite an irresponsible statement: http://newgtlds.icann.org/en/applicants/customer-service/change-requests
    If you want it in ICANN’s writing here it is:
    “Determination of whether changes will be approved will balance the following factors:
    Explanation – Is a reasonable explanation provided? Evidence that original submission was in error – Are there indicia to support an assertion that the change merely corrects an error?”
    IS ACCEPTING THAT THERE ARE INSUFFICIENT SAFEGUARDS OR NO GOVERNANCE STRUCTURE REASONABLE AND DONE IN ERROR? ADDING THESE LATER ARE PURPOSELY DONE IN RESPONSE TO WRITING AN INSUFFICIENT APPLICATION WHICH DID NOT LOOK INTO SENSITIVE MATTERS OR WAS RESPONSIBLE (QUALIFICATION ISSUE).
    “Other third parties affected – Does the change affect other third parties materially?” YES, WE ARE AFFECTED MATERIALLY SINCE APPLICANTS ARE MAKING MATERIAL CHANGES. CAN YOU IMAGINE IF WE WERE ALLOWED TO MAKE CHANGES IN OUR COMMUNITY SECTION? WHERE DO YOU DRAW THE LINE?
    “Precedents – Is the change similar to others that have already been approved? Could the change lead others to request similar changes that could affect third parties or result in undesirable effects on the program?”
    WHERE DO YOU DRAW THE LINE IN REGARDS TO WHAT IS A CHANGE AND WHAT IS NOT? YOU CAN’T
    “Fairness to applicants – Would allowing the change be construed as fair to the general community? Would disallowing the change be construed as unfair?”
    THIS IS UNFAIR TO US AND OTHERS SINCE WE DID ALREADY INCORPORATE SAFEGUARDS AND COMMITMENTS. HOWEVER IN A STRING CONTENTION SET WHERE THERE ARE NO COMMUNITY APPLICANTS AND NO ENHANCED SAFEGUARDS BY ANY APPLICANT THEN IT IS FAIR TO ALLOW CHANGES SINCE THEY DO NOT NEGATIVELY IMPACT ANYONE IN THE CONTENTION SET.
    “Materiality – Would the change affect the evaluation score or require re-evaluation of some or all of the application? Would the change affect string contention or community priority consideration?”
    ANY CHANGE DOES AFFECT STRING CONTENTION AND CPE. IF WE CAN MAKE CHANGES TO OUR COMMUNITY SECTION KNOWING WHAT WE KNOW IN ORDER TO SCORE A HIGHER SCORE THEN HOW IS THAT NOT MATERIAL? OUR COMPETITORS WILL BE SCREAMING. HOW IS THAT DIFFERENT FROM THE CURRENT SITUATION
    “Timing – Does the timing interfere with the evaluation process in some way? ICANN reserves the right to require a re-evaluation of the application in the event of a material change. This could involve additional fees or evaluation in a subsequent application round. (AGB §1.2.7.)”
    YES ANY MATERIAL CHANGE CREATES DELAYS
    “Note that per section 1.2.7 of the Applicant Guidebook, if at any time during the evaluation process information previously submitted by an applicant becomes untrue or inaccurate, the applicant must promptly notify ICANN via submission of the appropriate forms. This includes applicant-specific information such as changes in financial position and changes in ownership or control of the applicant. ICANN reserves the right to require a re-evaluation of the application in the event of a material change. This could involve additional fees or evaluation in a subsequent application round. Failure to notify ICANN of any change in circumstances that would render any information provided in the application false or misleading may result in denial of the application.”
    THE LANGUAGE IS CLEAR: COULD LEAD TO DENIAL OF THE APPLICATION
    Bottom line is that ICANN needs to accept the GAC advice and stop providing loopholes to applicants to unfairly position themselves against other competing applicants who have done their due diligence and homeword. The process should move forward with GAC advice taken into consideration. Applicants took a chance with not employing appropriate safeguards to maximize their investment and return the maximum registrations (emphasis added). The risks were known and I know for a fact numerous entities have posed the issue of copyright protection and sensitive strings in the past (including multi-stakeholder governance which I mentioned dozens of times for Guidebook consideration). This is not new information. Bottom line is that Applicants have to be accountable to their application(s) in a fair, transparent manner.

    Reply
    • Rubens Kuhl says:
      June 1, 2013 at 7:44 pm

      Constantine, there seems to be a reason beneath your position that is evidenced by your comment, that within contention sets with no community applicants changes could be allowed, and the willing to change the community part of the application: the lack of faith in CPEP, so if it community applications – like your own- do not pass it, but originally had GAC-prescribed safeguards, they still should get preference. While you can say that PICs were not part of the AGB, this kind of preference mechanism for communities that fail CPEP was also not in AGB.
      I’m not going to forecast that CPEP will be perfect, but its mechanism looks more like the financial evaluation panel than a string similarity evaluation panel (which has a unanimous assessment of being a disaster), so its outlook don’t need to be assumed to be bad.

      Reply
  4. Peter Young says:
    June 2, 2013 at 4:17 pm

    Mr Roussos,
    Even though you and your affiliated entities filed two objections against our .music application, it appears that you may not have bothered to read our applications. The Governance Council is mentioned in each and every one our applications. For more information, see http://www.governancecouncils.com
    Perhaps it is too much trouble for you to open our application and do a simple word search. However I strongly suspect this is not the case and your intention is to spread misinformation in an ill fated attempt to gain some advantage. Let me be absolutely clear: THERE IS NO AND HAS NOT BEEN ANY MATERIAL CHANGE TO OUR APPLICATIONS.
    The internet is a great forum for freedom of expression. Whilst that is a laudable goal and fundamental human right, and I respect your right to continue to post your rather trite and hypocritical comments in whatever forum you choose, the right is not absolute and is tempered by the competing rights which we have.
    As another applicant pointed out to you recently, in a rather eloquent fashion, “Every time an applicant turns a policy issue into a competition tool on a contention-set, a puppy dies.” This applies equally to “public forums”.
    Peter Young
    Chief Legal Officer
    Famous Four Media Limited

    Reply
  5. Constantine Roussos (.MUSIC) says:
    June 2, 2013 at 5:23 pm

    Peter,
    Yes, you did mention governance councils in all your 60 applications. However I have to voice my concerns that a .MUSIC governance council without appropriate enhanced safeguards or applying as a community-based applicant (especially as an open gTLD without any appropriate restrictions) is rather inconsistent and would place tremendous burden on the Governance Council you want to create including the inherent conflict of interest question. Again this might not apply to the .LOVE and .PARTY Governance Council but it will certainly apply for some sensitive strings such as .MUSIC. This is my thoughts on the matter.
    I applaud your efforts though and give credit where it is due in this instance despite the inefficiencies but I do have some concerns how you can effectively scale appropriate Governance Councils in a transparent, representative manner with such a multitude of 60 gTLDs (including many sensitive strings which have no restrictions and are open). I can tell you from experience that the work for the creation of the .MUSIC multi-stakeholder governance board – one governance board – is not an easy feat and not something you can scale across 60 gTLDs.
    I do wish you the best in your applications. If I am posing questions it is because I have valid concerns. These concerns are shared by many, not just myself.
    Best

    Reply
  6. Icann says:
    June 3, 2013 at 12:32 pm

    Who cares, I decide

    Reply

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