ICANN reveals gTLD objections appeals process

Two new gTLD applicants would get the opportunity to formally appeal String Confusion Objection decisions that went against them, under plans laid out by ICANN today.
DERCars and United TLD (Rightside), which lost SCOs for their .cars and .cam applications respectively, would be the only parties able to appeal “inconsistent” objection rulings.
DERCars was told that its .cars was too similar to Google’s .car, forcing the two bids into a contention set. But Google lost similar SCO cases against two other .cars applicants.
Likewise, Rightside’s .cam application was killed off by a Verisign SCO that stated .cam and .com were too similar, despite two other .cam applicants prevailing in virtually identical cases.
Now ICANN plans to give both losing applicants the right to appeal these decisions to a three-person panel of “Last Resort” operated by the International Centre for Dispute Resolution.
ICDR was the body overseeing the original SCO process too.
Notably, ICANN’s new plan would not give Verisign and Google the right to appeal the two .cars/.cam cases they lost.

Only the applicant for the application that was objected to in the underlying SCO and lost (“Losing Applicant”) would have the option of whether to have the Expert Determination from that SCO reviewed.

There seems to be a presumption by ICANN already that what you might call the “minority” decision — ie, the one decision that disagreed with the other two — was the inconsistent one.
I wonder if that’s fair on Verisign.
Verisign lost two .cam SCO cases but won one, and only the one it won is open for appeal. But the two cases it lost were both decided by the same ICDR panelist, Murray Lorne Smith, on the same grounds. The decisions on .cam were really more 50-50 than they look.
According to the ICANN plan, there are two ways an appeal could go: the panel could decide that the original ruling should be reversed, or not. The standard of the review is:

Could the Expert Panel have reasonably come to the decision reached on the underlying SCO through an appropriate application of the standard of review as set forth in the Applicant Guidebook and procedural rules?

The appeals panelists would basically be asked to decide whether the original panelists are competent or not.
If the rulings were not reversed, the inconsistency would remain in place, making the contention sets for .car, .cars and .cam stay rather confusing.
ICANN said it would pay the appeals panel’s costs.
The plan (pdf) is now open for public comment.

Famous Four says that Demand Media’s .cam should be rejected

Demand Media’s application for .cam should be rejected because it lost a String Confusion Objection filed by .com registry Verisign, according to rival applicant Famous Four Media.
“The process in the applicant guidebook is now clear: AC Webconnecting and dot Agency Limited proceed to resolve the contention set, and United TLD’s application cannot proceed,” chief legal officer Peter Young told DI.
dot Agency is Famous Four’s applicant for .cam, which along with AC Webconnecting survived identical challenges filed by Verisign. United TLD is the applicant subsidiary of Demand Media.
Serious questions were raised about the SCO process after two International Centre for Dispute Resolution panelists reached opposition conclusions in the three .cam/.com cases last month.
Demand Media subsequently called for an ICANN investigation into the process, with vice president Statton Hammock writing:

String confusion objections are meant to be applicant agnostic and have nothing to do with the registration or use of the new gTLD.

However, Famous Four thinks it has found a gotcha in a letter (pdf) written by a lawyer representing Demand which opposed consolidation of the three .cam cases, which stated:

Consolidation has the potential to prejudice the Applicants if all Applicants’ arguments are evaluated collectively, without regard to each Applicant’s unique plan for the .cam gTLD and their arguments articulating why such plans would not cause confusion.

In other words, Demand argued that the proposed usage of the TLD should be taken into account before the ICDR panel ruled against it, and now it saying usage should not have been taken into account.
Famous Four’s Young said:

Whether or not one ascribes to the view that usage should not be taken into account, and we believe that it should (otherwise we would not have argued it), the fact is that United TLD were very explicit prior to the publication that usage should indeed be taken into account.

The SCO debate expanded yesterday when the GNSO Council spent some time discussing .cam and other SCO discrepancies during its regular monthly meeting.
Concerns are such that the Council intends to inform the ICANN board of directors and its New gTLD Program Committee that it is looking into the issue.
The NGPC, has “Update on String Similarity” on its agenda for a meeting on Tuesday, which will no doubt try to figure out what, if anything, needs to be done.

String confusion in disarray as Demand’s .cam loses against Verisign’s .com

Demand Media is demanding an ICANN review of its objections policy, after its applied-for new gTLD .cam was beaten in a String Confusion Objection by .com registry Verisign.
A International Centre for Dispute Resolution panelist has ruled (pdf) that .cam and .com are too confusingly similar to coexist, meaning Demand’s bid for .cam must be rejected by ICANN.
But the ruling by Urs Laeuchli conflicts with two other ICDR panel decisions on .cam, which both found that the string is NOT confusingly similar to .com and therefore can be delegated.
So while Demand’s .cam bid, under a strict reading of the rules, is now supposed to be rejected, applications for identical strings filed by AC Webhosting and dotAgency can go ahead.
ICANN has been thrown a curve ball it is not yet fully prepared to deal with.
As Akram Atallah, president of ICANN’s Generic Domains Division, told DI last week, it’s possible that the policy or the implementation of that policy may need to be revisited by ICANN and the community.
United TLD, the Demand Media subsidiary that applied for .cam, is now calling for precisely that, with vice president of business and legal affairs Statton Hammock writing today:

String confusion objections are meant to be applicant agnostic and have nothing to do with the registration or use of the new gTLD. What matters in string confusion objections is whether a string is visually, aurally or, according to ICANN’s Applicant Guidebook, otherwise “so nearly resembles another that it is likely to deceive or cause confusion.” Individuals may disagree on whether .CAM and .COM are similarly confusing, but there can be no mistake that United TLD’s .CAM string, AC Webhosting’s .CAM string, and dotAgency Limited’s .CAM string are all identical. Either all three applications should move forward or none should move forward.

The .cam cases are not alone in presenting ICANN with SCO problems.
Last week, Donuts’ bid for .pets was ruled confusingly similar to Google’s .pet, despite previous ICDR cases finding that plurals and singulars are not too confusing to coexist.
Where the .cam panelists disagreed
While there were three .cam cases, two of them were decided by the same panelist. It seems that both panelists were provided with very similar sets of evidence in all three cases.
It’s relevant to note that neither panelist — unlike some of their colleagues in other cases — thought it was appropriate to apply trademark law such as the DuPont factors in their decisions.
They did, however, consider the expected use cases of .cam.
All three applicants take .cam as short for “webcam” or “camera” and would target registrants interested in those fields (a lot of the use will likely be pornographic — AC Webconnecting is a porn firm after all).
But all three applicants also want to run “open” gTLDs, with no registration restrictions.
ICDR panelist Murray Smith was in charge of both the AC Webconnecting and dotAgency cases. He addressed expected usage explicitly in dotAgency, and explained why:

It is not just the visual, phonetic and conceptual similarity between the words that must be taken into account. In my view the greater emphasis should be focused on the use of the disputed extensions in the context of modern Internet usage. It is this context that compels the conclusion that an average Internet user would not be confused and would know that a .com website is probably a commercial website while a .cam websites would be something more focused in a particular field.

In AC Webconnecting, he wrote:

I agree that a consumer would quickly realize that a .cam website is likely associated with photography or camera use and is different than a .com website in use generally by a myriad of commercial entities.

So he’s putting the “greater emphasis” on usage — a factor that is not explicitly mentioned in the Applicant Guidebook’s description of the SCO and which may quite often differ between applicants.
Right there, in Smith’s interpretation of his task, we have a reason why SCOs will produce different results for identical strings.
I find Smith’s thinking baffling for a couple of reasons.
First, “a consumer would quickly realize that a .cam website is likely associated with photography” seems to ignore the existence of a bazillion .com web sites that are also associated with photography.
When did “commercial entities” and “photography or camera use” become mutually exclusive? Is photographyblog.com not confusingly similar to photographyblog.cam?
Second, he ignores the fact that basically anyone will be able to register a .cam web site for basically any purpose. None of the applicants want to restrict the gTLD to camera-related stuff.
ICDR panelist Laeuchli, in the Demand Media .cam case, raised this precise point, saying:

“.com” and “.cam” would use the same channels appealing to a broad audience. Even though according to Applicant, its envisioned TLD will “likely appeal” to a specific audience, it plans to operate “.cam” as an open gTLD. This would lead to extensive overlap.

Panelist Smith has some other notions about confusion that seem to defy common sense. He wrote in the AC Webconnecting case:

The .com TLD is the most widely recognized string in the Internet world. No reasonable Internet user would fail to recognize the .com TLD. The very reputation of the .com name serves to limit the potential for an average Internet user to be confused by the proposed .cam TLD. It is indeed unlikely that an online consumer would confuse a .com website with a .cam website.

Does this not strike anyone else as bad thinking?
It seems to me to be a little like saying that it’s perfectly okay to market a brand of carbonated beverage called Cuke, because Coke is so famous that nobody could possibly be confused. I don’t know where the law stands on that issue, but I’m pretty sure Coke wouldn’t be happy about it.
There’s also some weirdness in Laeuchli’s decision in the Demand case.
He puts some weight on the similarity scores produced by the controversial Sword algorithm in his decision, but apparently without doing even the basic research. He writes in his findings:

No matter what the standards and purpose the ICANN SWORD algorithm includes, it has comparative value.
…
Since pairs such as “God” and “dog” (85%) reach similarity scores of 84% and higher, how much more similar would “cxm” and “cxm” be (x being replaced with a vowel)!

The answer is that, according to Sword, they’re less similar. Sword scores “cam” v “com” at 63%.
Laeuchli knows it’s 63%, because he makes reference to that fact in his summary of Verisign’s evidence. He doesn’t need to speculate about the number based on what “god” v “dog” scores (and if he did the “dog” v “god” query himself, why on earth didn’t he just query “com” v “cam” too?)
His finding that .cam and .com will cause probable confusion seems to be based largely on expert witness testimony provided by both Verisign and Demand, in which he found Verisign’s more persuasive.
This evidence seems to have largely comprised the opinions of linguists, examining mouth shapes and acoustic frequencies, and market research looking into internet user behavior. As none of it has been published, it’s difficult to judge which side had the better arguments.
But it’s undeniably about the similarity of the strings, rather than the proposed usage, which makes Demand Media’s statement today — that SCOs “are meant to be applicant agnostic and have nothing to do with the registration or use of the new gTLD” — quite confusing.
Demand lost its case based on the string similarity, whereas the other two applicants won theirs based on the usage.
Perhaps Demand senses that its .cam application will not be immediately rejected if ICANN reopens the debate about string similarity. If think it’s probably correct.

Verisign lays out ‘buy once’ IDN gTLD plans

Verisign has finally clarified how it proposes to let existing registrants of internationalized domain names grab the matching domains in its 12 forthcoming IDN gTLDs.
The company has applied for transliterations of .com in nine non-Latin scripts and .net in three, but its applications were light on details about existing registrants’ rights.
But today Verisign senior vice president Pat Kane outlined precisely how name allocations will be handled.
At first glance it sounds like good news for existing IDN registrants, particularly domainers whose investments in IDN .com and .net domains are about to become much more valuable.
If you already own a .com domain that is an IDN at the second level, you will have exclusive rights to that IDN string in all other .com transliterations, but not .net transliterations.
That works the other way around too: if you own the IDN .net domain, you get the matching second level in all of Verisign’s .net transliterations.
Owning the Chinese word for “beer” in Latin .com would not give you rights to the Thai word for “beer” in the Thai transliteration of .com, but you could buy the Chinese equivalent.
The rules seem to apply to future registrations too.
You could register the Hebrew for “beer” in the Hebrew transliteration of .com and you would also get the exclusive right to that Hebrew string in Latin .com.
There would be no obligation, and you wouldn’t lose your right to register matching domains if you chose not to immediately exercise it, Kane said. He wrote:

Two primary objectives in our strategy to implement new IDN gTLDs are, where feasible, to avoid costs to consumers and businesses from purely defensive registrations in these new TLDs, as well as to avoid end-user confusion.

It all sounds pretty fair to me, based on Kane’s blog post.
There’s a hint that trademark rights protection mechanisms may complicate matters, which has apparently been discussed in a letter to ICANN, but if it’s been published anywhere I’ve been unable to find a copy.

Surprise! Verisign to increase .net fees

Verisign has just announced that it will increase its .net registry fee by 10% next year.
The changes, which will become effective July 1, 2013, see the charge for a one-year registration increase from $5.11 to $5.62.
The increase, which is permitted under Verisign’s contract with ICANN, was inevitable given the fact that the company has just lost the right to increase .com prices.
US Department of Commerce intervention in .com means that prices there are frozen for the next six years, so Verisign can be relied upon to seize every alternative growth opportunity available to it.
The last time .net’s fee was increased was January 2012, when it went up by 10% to the current $5.11.

Verisign’s IDN gTLDs “could increase phishing” say Asian registries

It’s a bad day for Verisign.
As the company pins its growth hopes partially on its applications for IDN gTLDs — in the wake of losing its price-raising powers over .com — ccTLD registries from Asia-Pacific have raised serious concerns about its bids.
The Asia Pacific Top Level Domain Association says that many of its members reckon the proposed IDN transliterations of .com “could give rise to an increased risk of phishing and other malicious abuses”.
Verisign has applied for a dozen transliterations of .com and .net in scripts such as Hebrew, Cyrillic and Arabic. The strings themselves are meaningless, but they sound like “com” and “net”.
It’s for this reason that APTLD reckons they could cause problems. In an October 1 letter to ICANN, published today, the organization said:

In addition to the potential for user confusion, some [Working Group] members also noted that the creation of transliterated TLDs, without the development of adequate registration and eligibility polices and procedures, could give rise to an increased risk of phishing and other malicious abuses of the new spaces.
…
The WG notes that this potential problem manifests itself at the second level, and is not unique to tranlisterated TLDs, but would argue that the very nature of these TLDs, and their close similarity to existing TLDs, makes them particularly high-risk targets.

The letter does not single out Verisign, and does not represent a consensus APTLD view.
There are also worries among APTLD members about the application for .thai in Latin script, which could clash with Thailand’s IDN ccTLD, and various translations of “.site”.
APTLD notes that the new gTLD evaluation process only contains checks for visual similarity between TLDs.
The only way to block an application based on phonetic confusion is to file a String Confusion Objection, but the only entity eligible to object to Verisign’s applications is Verisign itself.

Winners and losers in the new .com pricing regime

Today’s shock news that Verisign will be subject to a .com price freeze for the next six years will have broad implications.
The US Department of Commerce has told the company it will have to continue to sell .coms at $7.85 wholesale until 2018, barring exceptional circumstances.
Here’s my initial take on the winners and losers of this new arrangement.
Domain investors
Volume .com registrants are of course the big winners here. A couple of dollars a year for a single .com is pretty insignificant, but when you own tens or hundreds of thousands of names…
Mike Berkens of Most Wanted Domains calculated that he’s saved $170,000 $400,000 over the lifetime of the new .com deal, and he reckons fellow domainer Mike Mann will have saved closer to $800,000 $2 million.
Brand owners
The other big constituency of volume registrants are the brand owners who spend tens or hundreds of thousands of dollars a year maintaining defensive registrations — mostly in .com — that they don’t need.
Microsoft, for example, owns over 91,000 domain names, according to DomainTools. I’d hazard a guess that most of those are defensive and that most are in .com.
Registries
There’s potentially trouble on the horizon for new gTLD applicants and existing registry operators. Verisign is looking for new ways to grow, and it’s identified its patent portfolio as an under-exploited revenue stream.
The company says it has over 200 patents either granted or pending, so its pool of potential licensees could be quite large.
Its US portfolio includes patents such as 7,774,432, “Registering and using multilingual domain names”, which appear to be quite broad.
Verisign also owns a bunch of patents related to its security business, so companies in that field may also be targeted.
Registrars
Verisign’s registrars will no longer have to pass their cost increases on to consumers every year.
While this may help with renewal rates, it also means registrars won’t be able to sneak in their own margin increases whenever Verisign ups its annual fees.
IDN buyers
Another area Verisign plans to grow is in internationalized domain names, where it’s applied to ICANN for about a dozen non-Latin variants of .com and .net.
Those registry deals, assuming they’re approved by ICANN, will not be governed by the .com pricing restrictions. Now that Verisign’s growth is getting squeezed, we might expect higher prices for IDN .com variants.
ICANN
ICANN may have suffered a small reputational hit today, with Commerce demonstrating it has the balls to do what ICANN failed to do six years ago, but money-wise it’s doing okay.
The new .com contract changes the way Verisign pays ICANN fees, and Commerce does not appear to have made any changes to that structure. ICANN still stands to get about $8 million a year more from the deal.
The Department of Commerce
Unless you’re a Verisign shareholder, Commerce comes out of this deal looking pretty good. It played hard-ball and seems to have won a lot of credibility points as a result.

Verisign loses right to increase .com prices

Verisign has sensationally lost the right to increase .com prices under a new deal struck with the US Department of Commerce.
In a statement to the markets just now, the company announced that the .com contract approved by ICANN earlier this year has now also been approved by Commerce, but with no more price increases:

Verisign’s current pricing of $7.85 per domain name registration will continue for the six-year term of the Agreement. Second, Verisign no longer has the right to four price increases of up to seven percent over the six-year term.

The company will only be able to increase prices with prior Commerce approval in response to “extraordinary” circumstances such as a security problem, or when the competitive landscape changes.
For example, if .com loses its “market power”, pricing restrictions could be lifted entirely, subject to Commerce approval.
Similarly, if ICANN approves a Consensus Policy that changes Verisign’s cost structure, the company could apply for price-increasing powers.
The deal is a huge blow for Verisign’s shareholders, wiping tens — potentially hundreds — of millions of dollars from the company’s top line over the coming six years.
Its share price is sure to nose-dive today. It’s already trading down 15% before the New York markets open.
It’s also an embarrassment to ICANN, which seems to have demonstrated that it’s less capable of looking after the interests of registrants than the US government.
That said, the new contract appears to have kept ICANN’s new fee structure, meaning the organization will be about $8 million a year richer than before.
In a Securities and Exchange Commission filing, Verisign said the new pricing provisions came in Amendment 32 to its Cooperative Agreement with Commerce:

Amendment 32 provides that the Maximum Price (as defined in the 2012 .com Registry Agreement) of a .com domain name shall not exceed $7.85 for the term of the 2012 .com Registry Agreement, except that the Company is entitled to increase the Maximum Price of a .com domain name due to the imposition of any new Consensus Policy or documented extraordinary expense resulting from an attack or threat of attack on the Security or Stability of the DNS as described in the 2012 .com Registry Agreement, provided that the Company may not exercise such right unless the DOC provides prior written approval that the exercise of such right will serve the public interest, such approval not to be unreasonably withheld. Amendment 32 further provides that the Company shall be entitled at any time during the term of the 2012 . com Registry Agreement to seek to remove the pricing restrictions contained in the 2012 .com Registry Agreement if the Company demonstrates to the DOC that market conditions no longer warrant pricing restrictions in the 2012 .com Registry Agreement, as determined by the DOC. Amendment 32 also provides that the DOC’s approval of the 2012 .com Registry Agreement is not intended to confer federal antitrust immunity on the Company with respect to the 2012 .com Registry Agreement and extends the term of the Cooperative Agreement through November 30, 2018.

On a conference call with analysts, Verisign CEO Jim Bidzos said that the deal was in the best interests of the company. It still gives the company the presumptive right for renewal, he said.
Growth, he said, will come in future from an expansion of its .com installed base, new IDN gTLD variants, and providing back-end registry services to other new gTLDs.
“We’re still a growth company,” he said.
“We have a patent portfolio we haven’t really exploited,” he said, referring to about 200 patents granted and pending. “We think there’s a revenue opportunity there.”
Larry Strickling, assistant secretary at Commerce, said in a statement:

Consumers will benefit from Verisign’s removal of the automatic price increases. At the same time, the agreement protects the security and stability of the Internet by allowing Verisign to take cost-based price increases where justified.

The full Amendment 32 is posted here.

Verisign defends .com price increases

Verisign has assured investors that it is confident its .com registry agreement is not in jeopardy, after seeing its stock plummet due to uncertainties over the deal.
In a statement yesterday, the company also defended the planned continuation of its price-raising powers.
It emerged last week that the US Department of Commerce is looking into the pricing arrangements of the new .com deal, which ICANN approved back in June.
Commerce has the right — in consultation with the Department of Justice and others — to approve or reject the contract based on its security/stability and pricing terms.
Whatever happens, it’s virtually unthinkable that Verisign will lose the contract. The company said:

While the review process with the Commerce Department may extend beyond Nov. 30, 2012, it could also be concluded by Nov. 30, 2012. In either case, Verisign expects to continue to run the .com registry.

It also said that its ability to increase prices by 7% in four of the six years of the contract is in fact in the public interest, saying in a lengthy statement:

The .com registry has an unequaled record of achievement, with full availability of DNS resolution in .com for more than 15 consecutive years. The economic activity supported by the .com registry is significant by any measure in an environment where the consequences of a failure of even a very short duration or degradation of the Domain Name System (DNS) resolution service, due to either a cyber attack or failure of hardware, software, or personnel, would have significant economic and non-economic impacts to the global economy.
The level of security and stability offered by Verisign is only possible with investments in overcapacity and redundancy, network security, intellectual property (IP) and in human capital: The engineers and employees at Verisign who operate the .com registry and ensure its security and stability. The pricing terms of the .com Registry Agreement enable Verisign to make these investments, develop the necessary IP, know-how and purpose-built systems, respond to new threats to stability as they emerge, and recruit and retain the specialized talent necessary to maintain our network, including dozens of globally distributed constellation sites and data centers in the U.S. and elsewhere.

In essence, Verisign is saying that the security and stability record — which Commerce evidently has already reviewed to its satisfaction — are inextricably linked to its ability to raise prices.
The company’s share price fell 18% in the aftermath of last week’s news, but recovered slightly yesterday — gaining about 11% — after the statement was released.

US probing Verisign price hikes, .com contract may be extended

The US Departments of Commerce and Justice are investigating the price increase provisions of Verisign’s .com registry agreement.
Verisign CEO Jim Bidzos disclosed the “review” on a conference call with financial analysts tonight.
It is likely that it will last beyond November 30 2012, the date the current .com agreement expires, he said.
“There’s a possibility it will not be complete by November 30,” he said.
A special six-month extension is likely to be triggered, he said.
“The status of our ability to operate .com is not an issue here,” he said.
He declined to comment on questions related to the likelihood that the company would be forced to change its pricing plans.
Verisign has spent $3.9 million in legal and other fees related to the US review, it emerged during the call.
ICANN approved the contract, which gives Verisign the right to increase its .com registry fees by 7% in four of the next six years, in June.
ICANN will see an extra $8 million in revenue from Verisign as a result.
Due to the special nature of .com, Justice and Commerce approval is required before the contract can be renewed. Verisign had previously expected that to come before November 30.
Verisign shares are trading down 14% in after-hours trading following the news.