ICM hires Fausett to help with YouPorn antitrust case

ICM Registry has hired new lawyers to help it fend off the antitrust lawsuit filed against it by YouPorn owner Manwin Licensing.
Gordon & Rees senior partner Richard Sybert is taking over as lead counsel in the case, which relates to the launch of .xxx last year.
Notably, the new team includes long-time ICANN legal expert Bret Fausett of Internet.Pro, who represented the Coalition For ICANN Transparency in its antitrust case against ICANN and Verisign.
That’s a bit of a coup for ICM. Manwin’s recent legal arguments have relied heavily on the antitrust precedents Fausett helped set in the CFIT case.
Gordon & Rees replaces Wilmer Cutler Pickering Hale and Dorr as ICM’s outside counsel, due to the recent departure of Wilmerhale’s ICANN guru and ICM defender, Becky Burr.
Burr joined Neustar as its chief privacy officer in May.
Manwin sued ICM and ICANN last October, arguing that the launch of .xxx was little more than a shake-down.
Earlier this month, a California District Court judge ruled that ICANN is not immune from competition law and that the litigation can proceed.
The case will turn in part on the question of whether there’s a market for “defensive registrations” under competition law and whether ICANN and ICM illegally exploited it.

Court rules YouPorn can sue ICANN for alleged .xxx antitrust violations

A California court today ruled that ICANN is subject to US antitrust laws and therefore the lawsuit filed by YouPorn.com owner Manwin Licensing over the .xxx gTLD can proceed.
In a mixed ruling, the Central District of California District Court granted some parts of ICM Registry and ICANN’s motions to dismiss the case and rejected others.
Here’s what it had to say on the subject of antitrust law, which ICANN argued back in January did not apply to it because it “does not engage in trade or commerce”:

The Court finds the transactions between ICANN and ICM described in the First Amended Complaint are commercial transactions.
ICANN established the .XXX TLD. ICANN granted ICM the sole authority to operate the .XXX TLD. In return, ICM agreed to pay ICANN money.
This is “quintessential” commercial activity and it falls within the broad scope of the Sherman Act. Even aside from collecting fees from ICM under the contract, ICANN’s activities would subject it to the antitrust laws.

That’s a pretty definitive knock-back for ICANN’s ballsy opening manoeuvre.
The court is allowing Manwin’s claims against ICANN to proceed. Manwin has until September 9 to amend and re-file its complaint.
As you may recall, Manwin sued ICANN and ICM last November, alleging that they conspired to break competition law by, among other things, forcing companies to defensively register .xxx domains.
ICM and ICANN filed separate motions to dismiss the case on seven grounds, but according to today’s ruling only two of these requests were successful.
What strikes me as particularly interesting on a first read are the definitions of the relevant domain name markets.
Under the Sherman Act, antitrust allegations have to be based on a defined “market”. Manwin’s complaint was based on the markets for “defensive registrations” and “affirmative registrations”.
The court ruled today that the company failed make the case that “affirmative registrations” is a market — because Manwin is happily running hundreds of porn sites in .com:

The Court finds Plaintiffs have failed to adequately plead the affirmative registration market. Plaintiffs have not alleged why other currently operating TLDs are not reasonable substitutes to the .XXX TLD for hosting adult entertainment websites. To the contrary, Plaintiffs allege that Manwin’s own website YouPorn.com is the most popular free adult video website on the internet.

However, the court found that “defensive registrations” is a market for the purposes of this case.
I am not a lawyer, but my sense is that this (pdf) is important stuff.
Lawyers: do feel free to chip in in the comments or via email.

YouPorn’s .xxx settlement talks extended

YouPorn owner Manwin, .xxx manager ICM Registry and ICANN have asked a California court for a few more weeks to settle Manwin’s antitrust lawsuit.
According to a court filing yesterday, the three want to extend ICANN and ICM’s window to respond to Manwin’s complaint extended from April 17. The submission reads:

The parties’ settlement discussions have not yet finished. In order to complete those discussions, the parties stipulate to extend, by an additional about three weeks until May 8, 2012, the deadline for Defendants to respond to Plaintiffs’ First Amended Complaint.

By May 8 the world is going to know whether ICM and/or Manwin have applied to ICANN for other adult-oriented gTLDs (.sex, .porn, etc), which could change the picture considerably.
Manwin sued ICANN and ICM in November, alleging that they colluded on .xxx to deliver “monopolistic conduct, price gouging, and anti-competitive and unfair practices”.
ICM and ICANN have denied the allegations.

ICANN: antitrust law does not apply to us

ICANN says it “does not engage in trade or commerce” and therefore US antitrust laws do not apply to its approval of the .xxx top-level domain, according to court documents.
The organization and .xxx operator ICM Registry yesterday submitted their coordinated responses to the antitrust lawsuit filed by YouPorn owner Manwin Licensing.
ICANN claims it cannot be held liable under antitrust law and ICM has accused Manwin of filing a nuisance lawsuit because it missed its opportunity to secure some premium .xxx domain names.
Manwin sued in November, alleging ICANN and ICM illegally colluded to deliver “monopolistic conduct, price gouging, and anti-competitive and unfair practices”.
The company, which runs the largest porn sites on the internet, claims ICANN should have opened the .xxx contract to competitive bidding and that ICM’s sunrise policies amounted to “extortion”.
It wants a California District Court to shut down .xxx entirely.
But ICANN has now argued that Manwin’s antitrust claims cannot possibly apply to it because it is a charitable, public-interest organization:

ICANN cannot, as a matter of law, be liable under the antitrust laws with respect to the conduct alleged in the Complaint because ICANN does not engage in “trade or commerce.”
…
[ICANN] does not sell Internet domain names, it does not register Internet domain names, and it certainly is not an Internet pornographer. ICANN does not make or sell anything, it does not participate in any market, and its Bylaws expressly forbid it from participating in any of the markets referenced in the Complaint.

Its motion to dismiss (pdf) goes on to say that the introduction of .xxx is actually pro-competition, and that Manwin only sued because it is scared of losing market share.

Plaintiffs claim to be upset with the manner in which ICM is operating the new .XXX registry, but since Plaintiffs already operate (by their own admission) some of the most successful pornographic websites on the Internet, websites that will continue to operate irrespective of anything ICM might do, what the Plaintiffs are really complaining of is the potential competition that their websites may face from the operation of .XXX.

ICM Registry makes similar arguments in its motion to dismiss (pdf):

what Plaintiffs are really complaining about is the fact that they lost the opportunity to purchase the least expensive defensive registry options offered by ICM because they missed the deadline

But ICM also says that the lawsuit falls foul California’s laws against so-called SLAPPs (“strategic lawsuits against public participation”), basically nuisance suits designed to suppress speech.
Declarations from CEO Stuart Lawley (pdf) and marketing director Greg Dumas (pdf) detail conversations between Manwin and ICM in the run-up to the gTLD’s approval and launch.
Manwin managing partner Fabian Thylmann offered to invest in ICM in July 2010, but Lawley declined, according to an ICM exhibit (pdf).
By October 2010 these offers had turned to legal threats, according to Dumas’ declaration:

Manwin saw the introduction of the .XXX sTLD as a threat to Manwin’s dominance over the adult Internet industry. At that time, Thylmann said that he would do whatever he could to stop .XXX. Specifically, Thylmann said that if ICANN approved the .XXX sTLD, Manwin would file a lawsuit against ICM to disrupt its ability to conduct business

Shortly after ICANN’s December 2010 meeting in Cartagena concluded with an ambiguous resolution on .xxx’s future, Thylmann rebuffed Dumas’ overtures about the .xxx Founders Program.
He predicted in an email to Dumas that ICANN’s Governmental Advisory Committee would force ICANN to reject .xxx, adding “the .xxx domain is useless even if it comes to market”, according to an ICM exhibit.
In September 2011, when the .xxx launch was already well underway, Manwin demanded thousands of free premium .xxx domains and a veto over some registry policies, according to Dumas:

Manwin demanded that ICM: allocate a minimum of several thousand .XXX domain names to Manwin free of charge; commit to prevent IFFOR from making any policies that ban or restrict the operation of user-generated content “tube” sites on .XXX domains; grant across-the-board discounts on all .XXX domain registrations; and allow Manwin to operate certain ‘premium’ or high value domain names, such as “tube.xxx,” through a revenue sharing arrangement between Manwin and ICM.

ICM says that these demands were accompanied by legal threats.
The lawsuit and Manwin’s boycott of companies using .xxx domains has harmed ICM’s business, according to the company’s court filings.
The case continues.

YouPorn imposes embargo on .xxx sites

Manwin, the company behind YouPorn, has stepped up its fight against ICM Registry by saying it will not do business with any .xxx web site.
Reported in the adult press this weekend, the ban seems to extend to webmasters hoping to promote their sites on Manwin’s “tube” sites, including YouPorn.
It also won’t allow its content to be used on .xxx sites, according to Xbiz.
Manwin is of course already suing ICM and ICANN under US monopoly laws, and has demanded an ICANN independent review, claiming the .xxx launch amounted to “extortion”.
The domain YouPorn.xxx is currently on ICM’s Registry Reserved list, meaning it was not acquired during sunrise and will not become available when .xxx opens its doors on Tuesday.
YouPorn is one of the web’s top 100 sites, according to Alexa.

YouPorn sues ICANN and ICM over .xxx

One of the biggest porn companies in the world has filed an antitrust lawsuit against ICANN and ICM Registry over the introduction of the .xxx top-level domain.
Luxembourg-based Manwin Licensing and California-based Digital Playground allege “monopolistic conduct, price gouging, and anti-competitive and unfair practices”.
Manwin runs YouPorn, Brazzers and, under license, several Playboy-branded web sites, while Digital Playground is among the largest porn production companies in the world.
Together they are demanding an injunction on .xxx altogether, for ICANN to be forced to impose price constraints on ICM, and to open up the .xxx contract for competitive rebidding.
The complaint, apparently filed in California today, essentially alleges that everything ICM has done to date, from its application with ICANN to its sunrise period policies, is wrong and bad.
It claims ICM’s sunrise period amounted to extortion and that ICANN willfully created a monopoly by agreeing to a registry contract with presumptive renewal but no price caps.
ICM, the complaint says, reacted to the approval of .xxx earlier this year “with the anti-competitive behavior expected of a monopolist”.

It has, for example, improperly exploited the newly created market for .XXX defensive registrations by making such registrations unreasonably expensive and difficult, and by placing onerous burdens on parties seeking to protect their intellectual property rights.

Manwin claims that the recently ended sunrise period, which saw over 80,000 defensive registrations, was priced too high given that ICM handed out free domain blocks to thousands of celebrities.
It also claims that ICM should have enabled companies to defensively block typos of their trademarks, and that porn companies without trademarks should have been able to block their brands.
It takes ICANN to task for not operating a competitive bidding process for .xxx, and claims ICM used “misleading predatory conduct and aggressive litigation tactics” to push through its approval.
I’m not a lawyer, but often antitrust cases swing on the way the court decides to define the relevant “market”.
Manwin claims .xxx is the market, whereas it could be argued that because porn sites are free to use .com or almost any other TLD, that the domain industry as a whole is the market.
The complaint states:

The market for blocking services or defensive registrations in the .XXX TLD is a distinct and separate market in part because there is no reasonable substitute for such registrations. For example, blocking or preventing others’ use of names in a non-.XXX TLD is not such a substitute. Blocking use of a name in a non-.XXX TLD does not prevent use of the name in the .XXX TLD.
…
ICM has a complete monopoly in the market for the sale of .XXX TLD blocking or defensive registration services through registrars.

I’m not sure if my legal thinking holds water, but this sounds rather like arguing that BMW has a monopoly on making BMWs or Coca-Cola has a monopoly on Cherry Coke.
But Manwin says that .xxx is the only porn gTLD and ICANN has basically ruled out the creation of any future porn-centric TLDs with clauses in ICM’s registry contract.
It also notes that .sex and .porn would be unlikely to be approved in the next round of new gTLDs due to the restrictions on controversial strings imposed by the Governmental Advisory Committee.
ICM president Stuart Lawley said in a statement:

The claims are baseless and without merit and will be defended vigorously. They also show an apparent lack of understanding of the ICANN process and the rigorous battle we went through with ICANN over eight years in full public scrutiny to gain approval.

The .xxx story really is the gift that keeps on giving.

VeriSign scores big win in .com pricing lawsuit

VeriSign has successfully had an antitrust lawsuit, which claims the company has been raising .com domain name prices anti-competitively, dismissed by a California court.
While it’s encouraging news if you’re a VeriSign shareholder, the Coalition for ICANN Transparency, which filed the suit, will be allowed to amend and re-file its complaint.
The basis for the dismissal (pdf) goes to the central irony of CFIT – the fact that, despite its noble name, it’s not itself a particularly transparent organization.
CFIT was set up in 2005 in order to sue ICANN and VeriSign over their deal that gave VeriSign the right to raise the price of .com and .net domains, and to keep its registry contracts on favorable terms.
While it was cagey about who was backing the organization, those of us who attended the ICANN meeting in Vancouver that year knew from the off it was primarily a front for Momentous.ca, owner of Pool.com and other domainer services.
In dismissing the case last Friday, Judge Ronald Whyte decided that CFIT’s membership is vague enough to raise a question over its standing to sue on antitrust grounds. He wrote:

By failing to identify its purported members, CFIT has made it impossible to determine whether the members are participants in the alleged relevant markets, or whether they have suffered antitrust injury. Because the [Third Amended Complaint] identifies no members of CFIT, it must be dismissed.

While CFIT had disclosed some time ago Pool.com’s involvement, it recently tried to add uber-domainer Frank Schilling’s Name Administration Inc and iRegistry Corp to the list of its financial supporters.
But Whyte was not convinced that the two companies were CFIT “members” with standing to sue.
Whyte decided that CFIT’s complaint, “fatally fails to allege facts showing that iRegistry or Name Administration were financial supporters or members at the time the complaint was filed”.
He also denied CFIT’s demand for a jury trial.
CFIT wants VeriSign to return all the excess profits it has made on .com registrations since it started raising its prices above $6.
If CFIT were to win, it would severely curtail VeriSign’s ability to grow its registry business, and could lead to billions being wiped off its accounts.
The organization has been given leave to file a fourth amended complaint, so it’s not over yet.