Afilias leftovers rebrand as Altanovo

The non-registry bits of Afilias that were not acquired by Donuts in the acquisition deal announced last December have been rebranded as Altanovo Inc.

The new Delaware company owns the registrar 101domain, the mobile device software company DeviceAtlas, and the Irish new gTLD application vehicle Afilias Domains No. 3 Ltd, now renamed Altanovo Domains Ltd.

Altanovo Domains is the entity currently fighting ICANN and Verisign for the right to run the .web gTLD.

Afilias’ registry business, including .info, its portfolio of new gTLDs and its .org-running registry back-end business, joined Donuts earlier this year.

Altanovo means “new height”, the company says on its new web site.

.web ruling hands Afilias a chance, Verisign a problem, and ICANN its own ass on a plate

ICANN has lost yet another Independent Review Process case, and been handed a huge legal bill, after being found to have violated its own rules on transparency and fairness.

The decision in Afilias v ICANN has failed to definitively resolve the issue of whether the auction of the .web gTLD in 2016, won by a shell applicant called Nu Dot Co backed by $135 million of Verisign’s money, was legit.

ICANN’s now urging NDC, Afilias and other members of the .web contention set to resolve their beefs privately, which could lead to big-money pay-days for the losing auction bidders at Verisign’s expense.

For ICANN board and staff, the unanimous, three-person IRP panel decision is pretty damning, with the ruling saying the org “violated its commitment to make decisions by applying documented policies objectively and fairly”.

It finds that ICANN’s board shirked its duty to consider the propriety of the Verisign/NDC bid, allowing ICANN staff to get perilously close to signing a registry contract with an applicant that they knew may well have been in violation of the new gTLD program rules.

Despite being named the prevailing party, it’s not even close to a full win for Afilias.

The company had wanted the IRP panel to void the NDC/Verisign winning bid and award .web to itself, the second-highest bidder. But the panel did not do that, referring the decision instead back to ICANN.

As the loser, ICANN has been hit with a $1,198,493 bill to cover the cost of the case, which includes Afilias’ share of $479,458, along with another $450,000 to cover Afilas’ legal fees connected to an earlier emergency IRP request that ICANN “abusively” forced Afilias into.

The case came about due to a dispute about the .web auction, which was run by ICANN in July 2016.

Six of the seven .web applicants had been keen for the contention set to be settled privately, in an auction that would have seen the winning bid distributed evenly among the losing bidders.

But NDC, an application vehicle not known to be particularly well-funded, held out for a “last resort” auction, in which the winning bid would be deposited directly into ICANN’s coffers.

This raised suspicions that NDC had a secret sugar daddy, likely Verisign, that was covertly bankrolling its bid.

It was not known until after NDC won, with a $135 million bid, that these suspicions were correct. NDC and Verisign had a “Domain Acquisition Agreement” or DAA that would see NDC transfer its .web contract to Verisign in exchange for the money needed to win the auction (and presumably other considerations, though almost all references to the terms of the DAA have been redacted by ICANN throughout the IRP).

Afilias and fellow .web applicant Donuts both approached ICANN before and after the auction, complaining that the NDC/Verisign bid was bogus, in violation of program rules requiring applicants to notify ICANN if there’s any change of control of their applications, including agreements to transfer the gTLD post-contracting.

ICANN has never decided at the board level whether these claims have merit, the IRP panel found.

The board did hold a secret, off-the-books discussion about the complaints at its retreat November 3, 2016, and concluded, without any type of formal vote, that it should just keep its mouth shut, because Afilias and Donuts had already set the ball rolling on the accountability mechanisms that would ultimately lead to the IRP.

More than half the board was in attendance at this meeting, and discussions were led by ICANN’s top two lawyers, but the fact that it had even taken place was not disclosed until June last year, well over three and a half years after the fact.

Despite the fact that the board had made a conscious, if informal, choice not to decide whether the NDC/Verisign bid was legit, ICANN staff nevertheless went ahead and started contracting with NDC in June 2018, taking the .web contention set off its “on-hold” status.

Talks progressed to the point where, on June 14, ICANN had sent the .web contract to NDC, which immediately returned a signed copy, and all that remained was for ICANN to counter-sign the document for it to become binding.

ICANN VP Christine Willett approved the countersigning, but four days later Afilias initiated the Cooperative Engagement Process accountability mechanism, the contract was ripped up, and the contention set was placed back on hold.

“Thus, clearly, a registry agreement with NDC for .WEB could have been executed by ICANN’s Staff and come into force without the Board having pronounced on the propriety of the DAA under the Guidebook and Auction Rules,” the IRP panel wrote.

This disconnect between the board and the legal staff is at the core of the panel’s criticism of ICANN.

The board had decided that Afilias’ claim that NDC had violated new gTLD program rules was worthy of consideration and had informally agreed to defer making a decision, but the staff had nevertheless gone ahead with contracting with a potentially bogus applicant, the panel found.

In the opinion of the Panel, there is an inherent contradiction between proceeding with the delegation of .WEB to NDC, as the Respondent [ICANN] was prepared to do in June 2018, and recognizing that issues raised in connection with NDC’s arrangements with Verisign are serious, deserving of the Respondent’s consideration, and remain to be addressed by the Respondent and its Board, as was determined by the Board in November 2016. A necessary implication of the Respondent’s decision to proceed with the delegation of .WEB to NDC in June 2018 was some implicit finding that NDC was not in breach of the New gTLD Program Rules and, by way of consequence, the implicit rejection of the Claimant’s [Afilias’] allegations of non-compliance with the Guidebook and Auction Rules. This is difficult to reconcile with the submission that “ICANN has taken no position onw hether NDC violated the Guidebook”.

The upshot of the panel’s ruling is to throw the issue back to ICANN, requiring the board to decide once and for all whether Verisign’s auction gambit was kosher.

If you’ll excuse the crude metaphor, ICANN’s board has been told to shit or get off the pot:

The evidence in the present case shows that the Respondent, to this day, while acknowledging that the questions raised as to the propriety of NDC’s and Verisign’s conduct are legitimate, serious, and deserving of its careful attention, has nevertheless failed to address them. Moreover, the Respondent has adopted contradictory positions, including in these proceedings, that at least in appearance undermine the impartiality of its processes.

…

[The panel r]ecommends that the Respondent stay any and all action or decision that would further the delegation of the .WEB gTLD until such time as the Respondent’s Board has considered the opinion of the Panel in this Final Decision, and, in particular (a) considered and pronounced upon the question of whether the DAA complied with the New gTLD Program Rules following the Claimant’s complaints that it violated the Guidebook and Auction Rules and, as the case may be, (b) determined whether by reason of any violation of the Guidebook and Auction Rules, NDC’s application for .WEB should be rejected and its bids at the auction disqualified;

At the same time as the decision was published last night — shortly after midnight UTC and therefore helpfully too late to make it into today’s edition of ICANN’s godawful new email subscriptions feature — ICANN issued a statement on the outcome.

“In its Final Declaration, the IRP panel ruled that the ICANN Board, and not an IRP panel, should decide which applicant should become the registry operator for .WEB,” CEO Göran Marby said.

“The ICANN Board will consider the Final Declaration as soon as feasible, within the timeframe prescribed in the Bylaws, and remains hopeful that the relevant .WEB applicants will continue to seek alternatives to resolve the dispute between them raised during the IRP,” the statement concludes.

That should be of concern to Verisign, as any non-ICANN resolution of the .web battle is inevitably going to involve Verisign money flowing to its competitors.

But my first instinct strikes me that this a is a low-probability outcome.

It seems to me much more likely at first glance that ICANN will rule the NDC/Verisign ploy legitimate and proceed to contracting again.

For it to declare that using a front organization to bid for a gTLD is against the rules would raise questions about other applications that employed more or less the same tactic, such as Automattic’s successful bid, via an intermediary, for .blog, and possibly the 100-ish applications Donuts and Rightside cooperated on.

The ICANN bylaws say the board has to consider the IRP’s findings at its next meeting, for which there’s currently no published date, where feasible.

I should note that, while Donuts acquired Afilias last December, the deal did not include its .web application, which is why both the panel’s decision and this article refer to “Afilias” throughout.

Verisign hopeful after decision reached in .web gTLD case

The fate of .web has been decided, over 20 years after it was first applied for, and Verisign thinks it might emerge triumphant.

The company said last night that the ICANN Independent Review Panel handling the case of Afilias v ICANN reached a decision May 20 and delivered it to Verisign the following day.

Verisign says the panel “dismissed Afilias’ claims for relief seeking to invalidate the .web auction and to award the .web TLD to Afilias, concluding that such issues were beyond its jurisdiction.”

Sounds good for Verisign so far. Afilias wanted its $135 million bid for .web, submitted via an intermediary called Nu Dot Co, thrown out due to claims that ICANN violated its own bylaws by not sufficiently vetting the bidder.

But Verisign goes on to say “the panel’s ruling recommends that ICANN’s Board of Directors consider the objections made about the .web auction and then make a decision on the delegation of .web”.

It adds that the panel found that ICANN violated its fairness and transparency commitments:

With respect to ICANN, the ruling finds that certain actions and/or inaction by ICANN in response to Afilias’ objections violated aspects of ICANN’s bylaws related to transparency and fairness. These findings are particular to ICANN’s actions and not conduct by Verisign. Verisign anticipates that ICANN’s Board will review the panel’s ruling and proceed consistent with the panel’s recommendation to consider the objections and make a decision on the delegation of .web.

Based on Verisign’s statements, it seems that ICANN lost, but Afilias didn’t win.

The revelation was buried in a Securities and Exchange Commission filing on an unrelated financial matter last night. Hat tip to @jintlaw for spotting and tweeting about it.

It’s the most eagerly anticipated IRP ruling since 2011’s .xxx case, but in stark contrast to Rod “let’s draft this tweet” Beckstrom-era ICANN, where the decision was posted in a matter of hours, the 2021 org has not yet posted the panel’s findings or made a public statement acknowledging the ruling.

Verisign says it intends to “vigorously pursue” .web, but “can provide no assurance” as to which way the ICANN board of directors will swing.

ICANN throws out another challenge to the Donuts-Afilias deal

ICANN is set to reject a plea for it to reconsider its decision to allow Donuts to buy Afilias last December.

Its Board Accountability Mechanisms Committee recently threw out a Request for Reconsideration filed by Dot Hotel and Domain Venture Partners, part of a multi-pronged assault on the outcome of the .hotel gTLD contention set.

The RfR was “summarily dismissed”, an infrequently used way of disposing of such requests without considering their merits. BAMC concluded that the requestors had failed to sufficiently state how they’d been harmed by ICANN’s decision, and therefore lacked standing.

The requestors, both applicants for .hotel, had said that they were harmed by the fact that Donuts now owns two applications for .hotel — its own open, commercial one and Afilias’ successful community-based one.

It also said that ICANN’s seemingly deliberate opacity when it came to approving the deal broke its bylaws and sowed confusion and risk in the registry industry.

At some point before the December 17 board meeting that approved the acquisition, ICANN staff briefed the board on its decision to approve the deal, but no formal resolution was passed.

By exploiting this loophole, it’s not clear whether the board actually voted on the deal, and ICANN was not obliged by its bylaws to publish a rationale for the decision.

But BAMC, acting on the advice of ICANN’s lawyers, decided (pdf) that the statements of alleged harm were too vague or seemed to rely on potential future harms.

DVP and Dot Hotel are also party to a lawsuit and an Independent Review Process case against ICANN related to .hotel.

A Documentary Information Disclosure Request related to the Afilias acquisition was also thrown out in March.

BAMC’s dismissal will be rubber-stamped by ICANN’s full board at a later date.

Decision on $135 million .web auction expected in weeks

ICANN, Verisign, Donuts, and the other applicants for .web will find out who gets to control the fiercely contested gTLD by the first week of June at the latest, according to Verisign’s CEO.

Jim Bidzos told analysts tonight that the Independent Review Process panel currently handling a complaint filed by Afilias declared its case closed April 7, and said that a decision will come within 60 days.

Afilias, now owned by Donuts, came second in an ICANN “auction of last resort” in which a Verisign-backed company called Nu Dot Co agreed to pay $135 million for the coveted string.

Afilias wants the auction declared invalid because ICANN, it claims, did not sufficiently pursue allegations that NDC was being secretly bankrolled by Verisign, which it says broke ICANN bylaws and new gTLD application rules.

This is denied by ICANN, as well as NDC and Verisign, which have filed legal documents with the IRP panel despite not being parties.

Afilias and others suspect that Verisign wants .web in order to bury it, keeping what could be a strong .com competitor weak, which Verisign also denies.

The IRP panel held a seven-day virtual hearing last August, but has continued to receive briefs from ICANN and Afilias since then.

Verisign says it needs .web because .com is running out of names

Verisign’s affinity for cognitive dissonance has emerged yet again — it’s now claiming that it needs to be awarded the .web gTLD because it’s running out of .com domains to sell.

In legal documents released by ICANN yesterday, Verisign’s lawyers say: “The undisputed evidence is that Verisign needs a TLD like .WEB for growth given the decreased name availability in .COM”.

The admission/claim/lie (delete according to preference) came in a joint post-hearing filing by Verisign and Nu Dot Co, the .web applicant to which Verisign loaned $135 million to bid for the gTLD on its behalf at a record-breaking ICANN auction in 2016.

Afilias, now owned by Donuts, was the second-highest bidder and since November 2018 has been trying to get the auction result cancelled via ICANN’s quasi-judicial Independent Review Process.

The IRP’s final hearing was held over seven days last June, and we’ve been waiting with baited breath for a ruling ever since.

At some point over the last 48 hours, ICANN published three sets of post-hearing arguments — one from itself, one from complainant Afilias and an amicus (non-party, friend of the court) filing from Verisign/NDC.

The Verisign filing (pdf) attempts to rubbish Afilias’ claims across the board, but its rebuttal of the argument that it only wants .web in order to bury it and protect .com’s dominance is particularly interesting:

Verisign Has Every Incentive To Grow .WEB Aggressively. Afilias’ Amended IRP Request asserts without evidence that Verisign seeks to acquire .WEB in order to eliminate a potential competitor for .COM and that Afilias would make a better operator of .WEB. Afilias presented no evidence to support this claim prior to the IRP, and none was presented at the hearing. In fact, the evidence before this Panel refutes Afilias’ claims. The undisputed evidence is that Verisign needs a TLD like .WEB for growth given the decreased name availability in .COM. Even Afilias’ own experts concede that the .COM TLD now has limited name availability. Moreover, the undisputed evidence establishes that Verisign is well-positioned to maximize .WEB’s potential, while Afilias’ recent track record suggests that it would be a less effective operator of .WEB.

In June last year, Verisign had submitted to the IRP panel:

Verisign needs a new TLD like .WEB for growth. Verisign’s growth rate has declined in recent years, largely due to many names in .COM already having been taken and increased competition from new gTLDs and ccTLDs that have superior name availability.

Even Afilias’ own experts concede that the .COM name space effectively is taken. Numerous other industry participants have noted that most of the “good” names in .COM already are taken.

While Verisign had a applied for a few non-English transliterations of .com in the 2012 new gTLD application round, it had avoided getting involved with potential competitors to .com.

But, according to its brief, in 2014 it had just sold off the remainder of its non-domain businesses and, realizing its growth now needed to come from a pure domains strategy, tasked VP Paul Livesay with figuring out how it could worm its way back into the new gTLD program.

Many of the details of Livesay’s research and decision making have been redacted by ICANN (purportedly at Verisign’s request), but it seems he came to the conclusion that the best way to benefit from the program long after the application window closed would be to secretly financially back NDC’s participation in the .web auction, with the provision that the .web contract would be transferred to Verisign should it win.

Quite apart from its regular postings touting .com availability over the last few years, the same year that Verisign was coming to the conclusion that .com was becoming saturated and it needed new growth opportunities in other TLDs, it sued XYZ.com for false advertising for having the gall to suggest that it was hard to find available .com domains. It lost.

Because Verisign apparently enjoys nothing more than holding two diametrically opposed positions simultaneously, its October amicus filing also claims that .web isn’t nearly as awesome as Afilias and others claim.

On the same page that it insists that .web is needed to drive growth, Verisign poo-poos the notion that .web could be a significant competitor to .com, relying on an “expert report” commissioned by Verisign and compiled by University of Chicago economist Kevin Murphy.

(Murphy’s report is redacted in its entirety (pdf) by ICANN, but his 1,119 pages of unredacted exhibits (pdf) prominently include screenshots from this blog, so I feel the need to point out that he’s a different Kevin Murphy — he’s not me, and I’d never even heard of the dude until this morning. On a personal level, the fact that I’m apparently not even the best Kevin Murphy when it comes to the .web story that I’ve been covering for the last two decades is, as you might imagine, as depressing to me as it is presumably amusing to you.)

While his report is redacted, reading around the edges it appears that Murphy reckons .web will not be an exceptional competitor to .com.

Verisign’s October filing states:

.WEB’s Valuation Shows It is Not Particularly Competitively Significant. The Murphy Report models multiple economic scenarios to assess Afilias’ claim that the $135 million price paid for .WEB at the public auction shows that .WEB will be a substantial competitor. None of these scenarios indicate that .WEB is likely to gain a significant market share. Instead, each scenario shows that .WEB is likely to have no more than a 2–3% market share.

Because of the redactions, it’s not clear what market Murphy was referring to, but a 3% market share of the current universe of domain names across all TLDs works out to over 10 million domains. In other words, .web could be a top-five gTLD, up alongside the likes of .org.

But elsewhere in its IRP filings, Verisign cites Murphy to support its argument that .web will have “registrations in the low single digit millions”. That would still be enough to make it one of the best-selling new gTLDs.

This relatively low expected turnout of course begs the question of why Verisign needs .web to grow. It added 4 million net new names across .com and .net last year alone, with .net pretty static, according to its financial filings.

I’m no Kevin Murphy, but here’s a table I’ve thrown together showing Verisign’s domain growth over the last decade.

[table id=64 /]

Its revenue has consistently grown year over year, from $681 million in 2010 to $1.27 billion in 2020. It’s considered one of the most profitable companies in the world, and its share price has tripled since 2011.

And that was without .web.

EFF rages as Ethos closes Donuts buy

The Electronic Frontier Foundation thinks the acquisition of Donuts by “secretive” private equity group Ethos Capital represents a risk to free speech.

The deal, which sees Ethos buy a controlling stake from fellow PE firm Abry Partners, closed earlier this week, having apparently received no official objection from ICANN.

But the EFF now wants ICANN to force Donuts to change its gTLD registry contracts to make it harder for the company to engage in what it calls “censorship-for-profit”.

The group’s senior staff attorney, Mitch Stoltz, raised the issued at the Public Forum session of last week’s ICANN 70 virtual public meeting, and expanded upon his thinking in a blog post this week. He wrote:

Donuts already has questionable practices when it comes to safeguarding its users’ speech rights. Its contracts with ICANN contain unusual provisions that give Donuts an unreviewable and effectively unlimited right to suspend domain names—causing websites and other internet services to disappear.

He pointed to Donuts’ trusted notifier program with the Motion Picture Association, which streamlines the takedown of domains used for pirating movies, as an example of a registry’s power to censor.

Donuts runs gTLDs including ones with social benefit meanings that the EFF is particularly concerned about, such as .charity, .community, .fund, .healthcare, .news, and .university.

Stoltz also makes reference to the Domain Protected Marks List, a Donuts service that enables trademark owners to block their marks, and variants, across its entire portfolio of 240+ gTLDs.

In effect, this lets trademark holders “own” words and prevent others from using them as domain names, even in top-level domains that have nothing to do with the products or services for which a trademark is used. It’s a legal entitlement that isn’t part of any country’s trademark law, and it was considered and rejected by ICANN’s multistakeholder policy-making community.

The DPML is not unique to Donuts. Competitors such as UNR and MMX have similar services on the market for their gTLDs.

When Stoltz raised the EFF’s concerns at last week’s ICANN meeting, CEO Göran Marby basically shrugged them off, saying he didn’t understand why one PE firm buying an asset off another PE firm was such a big deal.

I have to say I agree with him.

Ethos came under a lot of scrutiny last year when it tried to buy .org manager Public Interest Registry, turning it into a for-profit entity, generating cash for Ethos’ still-undisclosed backers.

(This week, Ethos disclosed in a press release that its investors include massive hedge funds The Baupost Group and Neuberger Berman “among others”, which appears to be the first time these names have been mentioned in connection with the company).

But a pretty good case could be made that .org is a unique case, that has had a non-profit motive baked into its DNA for decades. That does not apply to Donuts, which was a profit-making venture from the outset.

It’s not entirely clear why the EFF is suddenly concerned that Donuts will start exercise its contractual right-to-suspend more frequently under Ethos than under Abry. Stoltz wrote:

As we learned last year during the fight for .ORG, Ethos expects to deliver high returns to its investors while preserving its ability to change the rules for domain name registrants, potentially in harmful ways. Ethos refused meaningful dialogue with domain name users, instead proposing an illusion of public oversight and promoting it with a slick public relations campaign. And private equity investors have a sordid record of buying up vital institutions like hospitals, burdening them with debt, and leaving them financially shaky or even insolvent.

Even with the acquisition passing through ICANN easily, the EFF wants Donuts to change its contracts to make it more difficult for the company to suspend domain names on a whim.

I believe the language causing the controversy comes from anti-abuse policies in the Public Interest Commitments found in almost all Donuts’ contracts with ICANN, which state in part:

Registry Operator reserves the right, at its sole discretion and at any time and without limitation, to deny, suspend, cancel, or transfer any registration or transaction, or place any domain name(s) on registry lock, hold, or similar status as it determines necessary for any of the following reasons:

a. to protect the integrity and stability of the registry;

b. to comply with any applicable laws, government rules or requirements, requests of law enforcement, or any dispute resolution process;

c. to comply with the terms of this Registry Agreement and the Registry Operator’s Anti-Abuse Policy;

d. registrant fails to keep Whois information accurate and up-to-date;

d. domain name use violates the Registry Operator’s acceptable use policies, or a third party’s rights or acceptable use policies, including but not limited to the infringement of any copyright or trademark; or

e. as needed during resolution of a dispute.

As a voluntary PIC, this language is unique to Donuts, though other registries have similar provisions in their registry agreements.

ICANN refuses to say why it allowed Donuts to buy Afilias

ICANN appears determined to make its decision-making process when it comes to industry consolidation as opaque as possible.

The Org has denied a request from two rival registries for information about how it approved the acquisition of Afilias by Donuts last December, apparently exploiting a loophole in its bylaws.

The transaction got the nod from ICANN after its December 17 board of directors meeting, at which the board discussed the deal and gave CEO Göran Marby the nod to go ahead and process the request.

What it didn’t do was pass a formal resolution approving the deal, which seems to have given it the room to wriggle out of its transparency requirements, such as publishing its rationale and briefing materials.

It’s a trick it also used last year when it decided to bar Ethos Capital from acquiring Public Interest Registry.

In response to a Documentary Information Disclosure Process request (pdf) last month, filed by Dot Hotel and Domain Venture Partners, ICANN said:

ICANN org makes available, as a matter of due course, on the ICANN website the resolutions taken, preliminary report, minutes, and the Board briefing materials for each Board meeting… ICANN org has already published all materials for the 17 December 2020 Board meeting.

No new information was published.

The DIDP was filed by two applicants for the new gTLD .hotel, which are competing with applications originally filed by both Donuts and Afilias.

They’d also asked for ICANN’s rationale for allowing Donuts to own two .hotel applications post-acquisition, but ICANN said it had no documents reflecting that rationale.

The .hotel contest is also the subject of an Independent Review Process case and a lawsuit, in which DVP is a plaintiff.

Donuts adds another TLD to its stable as Richemont finally bows out of new gTLD program

Luxury goods maker Richemont, an early and strong proponent of the new gTLD concept, has got rid of the final string of the 14 it originally applied for.

According to ICANN records, the registry agreement for .watches was officially transferred to Afilias at the end of December, one day before it was in turn acquired by Donuts.

The domain nic.watches current resolves to a placeholder bearing the Afilias branding.

Richemont, the company behind luxury brands such as Cartier and Piaget, now has no TLDs left.

It had applied for nine dot-brands, along with five generic dictionary terms that it at first intended to maintain as single-registrant spaces, before that use case was banned by ICANN.

At the start of the decade, the company was an enthusiastic endorser of new gTLDs, even sending speakers to conferences to promote the concept.

Richemont was also the first registrant of second-level domains in third-party new gTLDs, when it registered Arabic versions of some of its famous brands in December 2013.

But its enthusiasm waned gradually over the last eight years.

Its dot-brands were discarded in tranches, either during the application process or after contracting. Donuts beat it to .jewelry at auction, and it terminated its contracts for Chinese versions of .jewelry and .watches last year.

There’s not much money in internationalized domain names, so now it seems likely these Chinese IDNs were shopped around but failed to find a buyer.

.watches, however, is right in Donuts’ wheelhouse, a niche generic English string related to a specific product or service.

Last month, I reported that Donuts had acquired .markets, .forex, .broker and .trading from Boston Ivy as it exited the new gTLD game, while letting the less-attractive .spreadbetting die on the vine.

.hotel battle lands ICANN in court over accountability dodges

ICANN’s accountability mechanisms, or lack thereof, have landed the Org in court.

Three applicants for the .hotel new gTLD have sued in California’s Superior Court in LA, claiming ICANN has consistently failed to provide true accountability, refusing for over seven years to implement fundamental mechanisms required by its bylaws.

They want the court to force ICANN to stick to its bylaws and to also temporarily freeze an Independent Review Process case related to .hotel.

The registries in question are Fegistry, Domain Venture Partners and Radix. They filed their complaint at the end of October, but ICANN did not publish it until the end of January, after its terse reply, and an administrative ruling, had also been filed with the court.

While the endgame is presumably to get the .hotel contention set pushed to auction, the lawsuit barely mentions the gTLD at all. Rather, it’s a broad-ranging challenge to ICANN’s reluctance to submit to any kind of accountability at all.

The main beef is that ICANN has not created a so-called “Standing Panel” of judges to preside over IRP cases, something that its bylaws have required since 2013.

The Standing Panel is meant to comprise seven legal experts, trained up in all things ICANN, from which the three panelists presiding over each IRP would be selected.

It would also operate as a final appeals court for IRP rulings, with all seven panelists involved in such “en banc” challenges.

The idea is to have knowledgeable panelists on a retainer to expedite IRPs and ensure some degree of consistency in decision-making, something that has often been lacking in IRP decisions to date.

Despite this requirement being in the bylaws since 2013, ICANN has consistently dragged its feet on implementation and today there still is no Standing Panel.

The .hotel plaintiffs reckon ICANN has dodged $2.7 million in fees by refusing to pick a panel, all the while offloading certain fees onto complainants.

It didn’t get the ball rolling until January 2018, but the originally anticipated, rather streamlined, selection process quickly devolved into the usual mess of ICANN bureaucracy, red tape and circular community consultation.

The latest development was in November 2020, when ICANN announced that it was looking for volunteers for a cross-community “IRP Community Representatives Group”, a team similar to the Nominating Committee. which would be responsible for picking the Standing Panel members.

The deadline to apply was December 4, and we’ve not heard anything else about the process since.

The .hotel litigants also have beef with the “sham” Request for Reconsideration process, which is notorious for enabling the board to merely reinforce its original position, which was drafted by ICANN staff lawyers, based on advice provided by those same ICANN staff lawyers.

They also take aim at the fact that ICANN’s independent Ombudsman has recused himself from any involvement in Reconsideration related to the new gTLD program, for unclear reasons.

The lawsuit (pdf) reads:

ICANN promised to implement these Accountability Mechanisms as a condition of the United States government terminating its formal oversight of ICANN in 2016 — yet still has wholly failed to do so.

Unless this Court forces ICANN to comply with its bylaws in these critical respects, ICANN will continue to force Plaintiffs and any other complaining party into the current, sham “Reconsideration” and Independent Review processes that fall far short of the Accountability Mechanisms required in its bylaws.

The plaintiffs say that ICANN reckons it will take another six to 12 months to get the Standing Panel up and running. The plaintiffs say they’re prepared to wait, but that ICANN is refusing and forcing the IRP to continue in its absence.

They also claim that ICANN was last year preparing to delegate .hotel to HTLD, the successful applicant now owned by Donuts, which forced them to pay out for an emergency IRP panelist to get the equivalent of an injunction, which cost $18,000.

That panelist declined to force ICANN to immediately appoint a Standing Panel or independent Ombudsman, however.

The .hotel plaintiffs allege breach of contract, fraud, deceit, negligence and such among the eight counts listed in the complaint, and demand an injunction forcing ICANN to implement the accountability mechanisms enshrined in the bylaws.

They also want an unspecified amount of money in punitive damages.

ICANN’s response to the complaint (pdf) relies a lot on the fact that all new gTLD applicants, including the plaintiffs in this case, signed a covenant not to sue as part of their applications. ICANN says this means they lack standing, but courts have differed of whether the covenant is fully enforceable.

ICANN also claims that the .hotel applicants have failed to state a factual case for any of their eight counts.

It further says that the complaint is just an effort to relitigate what the plaintiffs failed to win in their emergency hearing in their IRP last year.

It wants the complaint dismissed.

The court said (pdf) at the end of January that it will hold a hearing on this motion on DECEMBER 9 this year.

Whether this ludicrous delay is related to the facts of the case or the coronavirus pandemic is unclear, but it certainly gives ICANN and the .hotel applicants plenty of time for their IRP to play out to conclusion, presumably without a Standing Panel in place.

So, a win-by-default for ICANN?