Would an ICANN ethics policy break the law?

Calls for a new ethics policy to prevent a “revolving door” between ICANN and the domain name industry stepped up today, with the Association of National Advertisers entering the debate.
But would such a policy be illegal in ICANN’s home state of California?
The ANA and others wrote to ICANN today, in response to a public comment period on the question of whether ICANN should revise its conflicts of interest policy.
ICANN had asked whether the policy should be changed in order to let its board of directors vote to give themselves a salary. They’re currently all unpaid except the chair.
But the responses so far have instead largely focused on the perceived need to stop directors (and to a lesser extent staff) from taking lucrative industry jobs after they quit.
That was perhaps inevitable given the recent mainstream media coverage of former ICANN chair Peter Dengate Thrush, who took a high-paying job with new gTLD applicant Minds + Machines just a few weeks after helping to push through approval of the gTLD program.
The ANA’s president, Bob Liodice, wrote:

There is, at a minimum, legitimate reason for concern that the lack of adequate conflict of interest policies have led to the development of a growing perception that Mr. Thrush (and perhaps other senior staff who recently have left ICANN) may have let future career prospects influence their official duties.

(The other senior staffer he refers to could only be Craig Schwartz, the former chief gTLD registry liaison, who quit ICANN to join a likely .bank applicant in June.
While there are good reasons that Dengate Thrush’s move looks extremely fishy to outsiders, I’ve yet to hear any compelling arguments that Schwartz, who I don’t think had any high-level policy-making power anyway, did anything wrong.)
The ANA is of course the ring-leader of the ongoing campaign to get ICANN to rethink the new gTLD program in its entirety.
Liodice’s letter goes on to outline a number of suggestions, posed as questions, as to how ICANN could improve its conflict of interest policy, such as:

should ICANN consider reasonable restrictions or a moratorium on post‐service employment of ICANN staff by, or the contracting of such staff members with, parties under contract to ICANN, or whose businesses are materially affected by any decision made by the Board during the staff member’s tenure?

In other words: should ICANN staff be banned from joining registrars and registries after they leave?
In two other letters to ICANN today, Coalition for Online Accountability, International Trademark Association and American IP Law Association (collectively) and the French government make similar calls for future employment restrictions, albeit only for ICANN directors rather than staff.
But here’s another question: if the community asked ICANN to institute a revolving-door prevention policy, could it legally do so? A bit of digging suggests it might be tough.
According to the minutes of an August 15 meeting of ICANN’s Board Governance Committee:

The BGC discussed that as a private sector organization, ICANN is limited in its ability to place restrictions on future employment, though there are many things that ICANN can do to address these concerns, such as continued strict adherence and enforcement of confidentiality provisions.

The matter was also discussed by the full board at its retreat last month, and is on the agenda for the public meeting in Dakar, Senegal, at the end of October.
While ICANN does have pseudo-regulatory power (all enforced through contract) it is at the end of the day a California corporation, which is bound by California law.
And in California, it may not be legal to unreasonably restrict employees’ future job opportunities.
I’m not a lawyer, and this may not be applicable to ICANN for any number of reasons, but consider how California law deals with so-called “non-compete clauses” in employment contracts.
The text “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void” is on the California statute books.
And in 2008, the California Supreme Court interpreted this rather strictly, ruling that “non-competition agreements are invalid under section 16600 in California even if narrowly drawn”.
So could ICANN legally prevent staff or directors from jumping into the for-profit sector when they please? Is there any point in the community even debating the subject?
At this point, any members of the California Bar reading this are welcome to throw their $0.02 into the comments section below.

How many brands will lie in their gTLD applications?

The Association of National Advertisers and related groups are currently telling ICANN and anyone who will listen that big brands don’t want new top-level domains.
But many of the ANA’s members, including members of its board, are understood to be currently talking to domain consultants and registries about applying for their own .brand gTLDs.
Assuming that the ANA is not lying, and that its members don’t want .brands, what on earth are these companies going to say in their applications next year?
If they are thinking about applying purely defensively (and I use that word loosely), truly believing that new gTLDs are useless, how will they answer the all-important Question 18(b)?

How do you expect that your proposed gTLD will benefit registrants, Internet users, and others?

The question, which was added to the Applicant Guidebook this year at the request of the Governmental Advisory Committee, is not scored, but is expected to be answered.
The answers will be published, and they will also be used in ICANN’s future reviews of the program.
The ANA is already on-record stating “there are no material or obvious benefits”, so an answer to 18(b) from one of its members that states anything other than: “We don’t think it will benefit anyone.” is going to look like a horrible lie.
And lying isn’t allowed. It’s in the Guidebook’s terms and conditions:

Applicant warrants that the statements and representations contained in the application (including any documents submitted and oral statements made and confirmed in writing in connection with the application) are true and accurate and complete in all material respects

Any company that lies in its application runs the risk of losing its whole $185,000 application fee and having its application rejected.
Okay, I admit, I’m being a bit cheeky here – I don’t really think anyone will be rejected for using a bit of colorful marketing BS in their applications. I doubt the evaluators will even notice.
I am perhaps suggesting that the ANA’s outrage today may not fully reflect the diversity of opinions among its board and general membership.
Either way, it’s going to be fascinating to read the applications filed by ANA members, and to compare their words to the positions they’re allowing ANA management to put forth on their behalf today.

What The X Factor taught me about new gTLDs

Elitist, pseudo-intellectual snob that I am, I rarely watch commercial television. But I make an exception when the The X Factor is on.
I’m not sure I’d even describe the show as a guilty pleasure. It’s just consistently great television.
I’m not alone. According to BARB, which tracks viewing figures in the UK, The X Factor is Britain’s top-rated show, with about 11 million viewers each Saturday night.
It is estimated that a 30-second spot in the latest series costs advertisers £154,000 ($250,000), which will likely increase dramatically as buzz builds toward the December finals.
If a company is willing to spend $250,000 on a single ad spot, I got to wondering how these advertisers use domain names. The price of a new “.brand” gTLD is in the same ball park, after all.
So rather than zoning out during The X Factor‘s commercial breaks last night, I took notes.
Of the 15 brands advertised during the show, five did not promote their online presence at all. Ads for products such as breakfast cereal showed no URLs, search terms or Facebook profiles.
Another three displayed their domains on-screen as footnotes, but with no explicit call to action.
Two advertisers, amazon.co.uk and weightwatchers.co.uk, explicitly encouraged the viewer, on-screen and in the voice-over, to visit their sites.
Barclays was the only advertiser that asked viewers to find it using a search engine. Its call to action was “search Barclays offset mortgage”, with no accompanying URL.
There were also a couple of ads that used call-to-action .co.uk domains.
Mars used bagamillionmovies.co.uk to direct viewers to an M&Ms movie competition, while Microsoft (windows.co.uk/newpc) was the only advertiser to use a directory in addition to its domain.
But the two commercials that interested me the most were those that used alternative or “new” TLDs – the ones that are usually afterthoughts when you’ve already put a .com into your cart.
Mars used getsomenuts.tv to advertise Snickers, and the healthcare giant Johnson & Johnson asked viewers to visit sleepchallenge.info.
That’s right. J&J seems to be spending six-figure sums advertising a .info domain during Britain’s most-watched TV show every Saturday night.
This is noteworthy for, among other reasons, the fact that J&J has a seat on the board of directors of the Association of National Advertisers.
The ANA is of course currently leading the campaign against ICANN’s new gTLD program.
ANA general counsel Doug Wood rubbished .info, albeit only by association, in a video interview with WebProNews on Friday, stating:

The idea of [ICANN’s new gTLD program] being successful and delivering the competition or the innovation that they’re speculating on is clearly questionable to a great degree, based purely on the success or lack of success of the last group they introduced – .biz, .travel, .jobs, etc – none of which has as done anything significant vis-a-vis competition or innovation

I would suggest that the existence of sleepchallenge.info shows how dubious these claims are.
First, sleepchallenge.info redirects to a rather longer URL at johnsonsbaby.co.uk. This indicates that it was registered purely to act as a memorable and measurable call-to-action domain.
The fact that J&J used the .info, rather than sleepchallenge.co.uk, which it also owns, suggests that the company appreciates the additional meaning in the word “info”.
(Mere added semantic value would make a poor definition of innovation, but until now it’s been one of the few things that new gTLD registries have been able to offer.)
The domain sleepchallenge.info was a hand registration in May 2010, according to Whois records, costing J&J just $35 from Network Solutions.
The .com equivalent has been registered since 2007 and would have cost substantially more to acquire from its current registrant, if indeed it was for sale, which it may not be.
Because ICANN introduced competition into the gTLD market 11 years ago, J&J was able to obtain a meaningful domain for a massive ad campaign at a low price.
Watching The X Factor has taught me that Johnson & Johnson is an ANA board member that has already directly benefited from new gTLDs.
I guess commercial TV can be educational after all.

Breaking: Ad industry piles on ICANN

The Interactive Advertising Bureau, which represents over 500 companies including Facebook, Google, eBay and Microsoft, has told ICANN to put a stop to its new top-level domains program.
The cry calls just a couple of weeks after the Association of National Advertisers said it would lobby Congress and may take ICANN to court over the controversial program.
Randall Rothenberg, CEO of the IAB, said in a press release:

ICANN’s potentially momentous change seems to have been made in a top-down star chamber. There appears to have been no economic impact research, no full and open stakeholder discussions, and little concern for the delicate balance of the Internet ecosystem.
This could be disastrous for the media brand owners we represent and the brand owners with which they work. We hope that ICANN will reconsider both this ill-considered decision and the process by which it was reached.

The IAB’s membership is a Who’s Who of leading online media companies, purportedly responsible for selling 86% of online advertising in the US.
It counts AOL, Digg, Amazon, the BBC, Bebo, CNN, Ziff Davis, LinkedIn, Time Warner, Slate, Thomson-Reuters, IDG, the Huffington Post and many other well-known names as members.
Demand Media, too.
If the ANA represents advertisers themselves, the IAB represents the places they spend their advertising money.
It looks like a large portion of corporate America is not happy about new gTLDs. ICANN may have found itself a new, extremely well-funded enemy.

ANA’s response to the Beckstrom letter in full

The Association of National Advertisers has issued statements in response to ICANN president Rod Beckstrom’s admonishment of its attempt to hold up the new top-level domains program.
ANA appeared out of nowhere last week, vaguely threatening to sue ICANN unless it suspended the program, which it believes will cost brand owners billions of dollars.
But yesterday Beckstrom replied, saying the program was developed through a “multi-stakeholder” policy-making process over several years in which ANA had ample opportunity to participate.
He also pointed out that ANA appears to have made faulty assumptions about how the program is supposed to work, particularly with regards “.brand” gTLDs.
This the official response to Beckstrom’s letter from Bob Liodice, ANA’s president and CEO:

We are not surprised by ICANN’s response although disappointed that ICANN chose to defend its process and deny any doubt as to consensus. Rather, ICANN needs to respond to the real concern from the brand owner community.
There is no question that this Program will increase brand owners’ costs by billions of dollars. We should not be debating if 40 or 45 comment periods were held; instead, ICANN should be justifying its economic analysis regarding the Program against the staggering costs to brands.
ANA welcomes further discussions and an opportunity for further economic study to quantify the need for more TLDs and what it will mean for industry and other stakeholders, such as the public interest community who will face the same brand dilution concerns.

ANA general counsel Doug Wood, from the law firm Reed Smith, stated:

Now is not the time for either side to ‘dig in its heels’ much less defend the process, especially in a depressed economy. ANA has raised real concerns regarding economic losses, brand dilution and resultant privacy/cyber-security harms.
In light of our shared goals of a safe and stable global Internet, ICANN should return to the negotiating table and work with all concerned parties, including the ANA and its members, to resolve brand owners’ legitimate concerns in a manner consistent with ICANN’s consensus obligations.

These are of course concerns that have been debated to death for several years in the ICANN community, lately without ANA’s participation.
The organization submitted a couple of comments more than two years ago and then seemed to disappear from the process.
One could argue that’s very odd behavior for an apparently well-funded outfit now loudly claiming that it’s “horrified” by new gTLDs.

Beckstrom strikes back at ANA threat

ICANN president Rod Beckstrom has come out swinging against the latest attack on its new top-levels domains program, promising to “vigorously defend” it.
In his response to a harshly critical missive from the Association of National Advertisers, Beckstrom calls ANA’s claims “either incorrect or problematic in several respects”.
I think “firmly worded” would be an appropriate way to characterize his letter (pdf).
In it, he notes that the new gTLD program has been on the cards since 1998, and has been developed over several years using input from the entire ICANN community, including ANA itself.
He further states that some of the complaints outlined by ANA president Bob Liodice show a lack of research.
As I noted in my interview with Liodice yesterday, ANA seems to think cybersquatting at the top-level will be enabled unless companies defensively apply for their “.brand” gTLDs.
Beckstrom said that these statements “demonstrate a lack of understanding of Program details”.

The letter suggests that companies have no choice but to apply for their own gTLDs. Operating a gTLD means assuming a number of significant responsibilities; this is clearly not for everyone. Indeed, it is hoped that those without an interest in making a contribution to expanded choice or innovation in the DNS will not apply. One clear directive of the consensus policy advice on which the program is built is that TLDs should not infringe the existing legal rights of others. The objection process and other safeguards eliminate the need for “defensive” gTLD applications, because where an infringement of legal rights can be established using these processes, an application will not be approved.

The response goes on to outline some of the mandatory second-level trademark protection mechanisms that have been included in the program’s Applicant Guidebook.
ICANN is arguably on shakier ground here – making use of these mechanisms is still going to cost brand owners time and money, which is the basis of ANA’s objections.
The question now is whether Beckstrom’s responses will be enough to get ANA to call off the dogs.
He has offered to talk to ANA to “to discuss how the ANA might participate more actively in the policy development activities and other ICANN processes going forward”.
That’s specifically not an offer to get into negotiations with ANA about the contents of the Guidebook or to delay the launch of the program.
That was never going to happen, particularly not in response to a thirteenth-hour complaint from an organization that hasn’t commented on the program for the last two years.
Liodice said yesterday that unless ICANN agrees to suspend the program, ANA plans to lobby the US Congress, its Department of Commerce, and may sue.
Reaction from the domain name industry to Beckstrom’s letter has so far been predictably positive.

ANA chief calls for new gTLDs to be suspended

The president of the Association of National Advertisers said the organization may sue ICANN unless it suspends its new top-level domains program.
Speaking to DomainIncite, ANA’s Bob Liodice said that American industry is “horrified” by the program, which he believes will cost his members a “quite humongous sum of money”.
Liodice wrote to ICANN president Rod Beckstrom a week ago, demanding the program be abandoned and dropping major hints that a lawsuit would be the alternative.
ANA’s board of directors, comprised of representatives of 36 of the largest companies in the US, is “unanimous” in its opposition to the program, he told me.
“We’ve had many conversations with our members, brand owners in the US, and nobody supports this to our knowledge,” Liodice said. “If American industry is not supporting the recommendation to do this, then who is? What is the benefit if brands owners are saying they’re horrified?”
ANA’s members simply do not understand why the program has been introduced, Liodice indicated.
“What’s the problem, what is ICANN trying to solve?” he said.
I put it to him that increasing competition in the registry space is in many ways ICANN’s raison d’etre, built into its founding principles.
“Just because this is something that was supposed to be done back in the Clinton days doesn’t mean it has to be done today,” he said. “The world has changed.”
“I think this is more for the benefit of ICANN than for the benefit of the [advertising] industry,” he said. “ICANN will secure substantial revenue for these changes and put incredible burdens on the industry to no benefit for the industry.”
ICANN, which is obviously a non-profit, says it has priced the program on a cost-recovery basis.
Not convinced by .brands
I asked Liodice if any of ANA’s members had expressed interest in “.brand” gTLDs, and put it to him that enjoy.coke or iwantmy.mtv might be innovative ways to advertise.
“That is not an issue right now,” he said. “The brand for the most part is in the URL anyway, what benefit does it get from moving to right of the dot?”
“The industry is in a period of stability and is very satisfied with status quo,” he added.
Liodice was not aware of the .brand announcements from Canon and Hitachi, but expressed skepticism about their reasons for applying.
“Are those companies saying this is important to me and will further my business interests?” he asked.
Canon USA does appear to be a member of ANA, although it does not have a seat on its board. Hitachi is not a member.
ANA’s plan
Last week’s letter gave Beckstrom an August 22 deadline to respond. The first thing ANA intends to do is wait for his reply, Liodice said.
Anything other than an undertaking to suspend the program for talks is likely to see an escalation.
“We first have to ensure this program is suspended,” Liodice said. “We’re trying to halt the introduction at this point in time and suspend it until we can have these conversations.”
ANA also hopes to speak to the US Department of Commerce, which has an oversight relationship with ICANN, as well as to members of Congress.
“We are lobbying members of Congress to make sure they’re aware of the detrimental characteristics of this, particularly at a time when the world is in great disorder with the financial crisis,” Liodice said.
There’s also the possibility of court action.
While stopping short of saying ANA will definitely sue, Liodice did say that the organization’s lawyers are looking into possible causes of action.
“If the reply is not consistent [with ANA’s requests] we will explore that possibility,” he said.
ANA would be represented by the law firm Reed Smith, which has already published its own statement of support for Liodice’s letter on its web site.
It’s good to talk
My feeling is that some of ANA’s concerns are already dealt with by the program’s Applicant Guidebook, and that a conversation explaining this could help reduce tensions.
Liodice, for example, appears convinced that top-level cybersquatting will be possible – that .coke could be registered by somebody other than Coca-Cola.
My view is that such an obvious transgression would be easily (and relatively cheaply) dealt with using the Legal Rights Objection mechanism already in the Guidebook.
That’s assuming, of course, that the $185,000 application fee failed to be a deterrent, and that a registry back-end provider dumb enough to put its name to the bid could be found.
But even if ANA can be convinced that the risk of TLD-squatting is negligible, its concerns about the potential for problems at the second level will be harder to address.
Let’s face it, while estimates of the increased cost of trademark enforcement vary wildly, nobody has disputed that there will be a cost.
One ANA member has estimated that the per-brand cost to companies would be $2 million over 10 years, Liodice said.
ANA does not appear to have spent much time getting involved in the development of the new gTLD program lately — the most recent submission I could find dates from 2009 — but Liodice said its counsel Reed Smith has been representing it in the ICANN process.

Advertisers threaten to sue over new gTLDs

The Association of National Advertisers is threatening legal action unless ICANN “abandons” its recently approved new generic top-level domains program.
Its CEO, Robert Liodice, has written to his ICANN counterpart Rod Beckstrom outlining its litany of concerns about new gTLDs.
ANA’s strongly worded arguments will be familiar territory for anyone who has been following development of the program for the last few years.
It’s worried about cybersquatting, typosquatting, phishing, as well as the cost of defensive registrations and post-launch trademark enforcement.
The organization represents 400 companies that collectively spend $250 billion every year on their brands, according to the letter.
It also claims that ICANN shirked its duties by failing to adequately consider the economic impact of the program, and that it failed to develop it in a transparent, bottom-up manner.
Liodice wrote (pdf), with my emphasis:

ICANN must not ignore the legitimate concerns of brand owners and the debilitating effect on consumer protection and healthy markets its unsupervised actions will cause. Should ICANN refuse to reconsider and adopt a program that takes into account the ANA’s concerns expressed in this letter, ICANN and the Program present the ANA and its members no choice but to do whatever is necessary to prevent implementation of the Program and raise the issues in appropriate forums that can consider the wisdom, propriety and legality of the program.

The letter ends with a bunch of legal blah about ANA’s rights and remedies, a pretty obvious indication that it’s considering its legal position.
ICANN should “abandon” the program until ANA’s concerns have been addressed, Liodice wrote.
That’s not going to happen, of course.
There’s no way ICANN can put a halt to the program without basically admitting ANA’s analysis of it has merit.
If ANA wants to stop new gTLDs from going ahead, it’s going to need to do more than send a letter.
The letter is CC’d to the US Department of Commerce and several Congressmen, which suggests that we may see another Congressional hearing into the program before too long.
But will we see a lawsuit as well?
ICANN, at least, has anticipated the likelihood of having to defend itself in court for some time.
About 30% of the the $185,000 application fee – $30 million in a 500-application round – is allocated to various “risks”, of which a legal defense fund is one component.
I’d be surprised if ICANN’s legal team hasn’t war-gamed potential claims and defenses every time the Applicant Guidebook has been updated.
The next five months are going to be very interesting times.