Donuts puts 63 new gTLDs to private auction, but at least 17 are dead on arrival

Donuts has committed 63 of its 307 new gTLD applications to a private auction next month, but at least 17 of them are doomed already because rival Uniregistry won’t take part.
Donuts, which does not want to enter into joint ventures with competing gTLD applicants, has decided to use a private auction managed by Cramton Associates instead of an ICANN auction.
The first round of auctions are due to kick off June 3, but Cramton has set a deadline of next week for applicants to commit the strings they want to bid on.
Donuts has put forward these ones (note that they’re different to those reported elsewhere earlier due to a couple of typos in the original press release):

.apartments, .auction, .audio, .baseball, .boats, .cafe, .church, .college, .construction, .direct, .discount, .fish, .football, .forsale, .furniture, .fyi, .global, .gratis, .guide, .juegos, .jewelry, .legal, .living, .luxury, .phone, .photography, .plus, .red, .run, .storage, .theater, .trading, .vote, .beauty, .broadway, .city, .club, .forum, .garden, .help, .hosting, .hot, .marketing, .media, .memorial, .wedding, .chat, .online, .pizza, .sale, .salon, .school, .search, .show, .soccer, .team, .group, .site, .style, .law, .store, .blog, and .art.

Running the list through the DI PRO database, we quickly discover that 33 of these strings are in two-horse races, 13 have three applicants, nine have four and three have five.
The remaining four contention sets have six, seven, nine and 10 applicants respectively.
Uniregistry, the portfolio applicant run by domainer Frank Schilling, is involved in 17 of the contention sets, and Schilling confirmed to DI today that the company does not intend to participate.
As we’ve previously reported, Uniregistry says it has concerns that private auctions may be illegal under US antitrust law, though substantial doubt has been cast over that assertion since.
Because all applicants in a contention set need to commit for the auction to be meaningful, we can assume that at least 17 of Donuts’ proposed auctions will not go ahead, unless Uniregistry changes its mind.
Top Level Domain Holdings has applied for 13 of the strings Donuts wants to take to auction. TLDH has also expressed concern in the past about the private auction concept.
Directi, Famous Four Media and Google are each involved in eight of the contention sets, while Amazon is involved in five.
According to Cramton, each auction will take place in bidding rounds, with the first round having a maximum bid of $50,000 multiplied by the number of applicants and subsequent rounds increasing that by 10% multiplied by the number of bidders.
If any applicant in a given auction requests privacy, then the winning amount will not be disclosed.

Donuts hires the face of the new gTLD program

Portfolio gTLD applicant Donuts has hired Michele Jourdan, who until last week was head of new gTLD communications at ICANN.
She has joined the company as director of sales and marketing, according to her LinkedIn profile.
Applicants and others following the program closely will remember her from the regular update videos published by ICANN.
She worked for ICANN for almost five years, but only in the last year or so started to take a visible front seat role in interactions with community members. I understand she left ICANN a week ago.
Jourdan is not the first ICANN alum Donuts has taken on.
Its CFO is former ICANN CFO Kevin Wilson, and we recently learned that former new gTLD program manager Kurt Pritz has been recruited, non-exclusively, as a consultant.

Donuts not pursuing new gTLD joint ventures

Following the news that Uniregistry and Top Level Domain Holdings are to work together on the .country new gTLD, larger portfolio applicant Donuts has said it’s not interested in similar arrangements.
While not entirely ruling out joint ventures along the lines of the .country tie-up, company VP of communications Mason Cole told DI that Donuts’ strategy is to completely own each of the new gTLDs it has applied for.
“We aren’t categorically ruling anything out, but any kind of proposal would have to be very compelling,” he said. “Our strategy from the beginning has been, and still is, to secure the strings we applied for and manage them ourselves.”
While TLDH and Uniregistry seem open to such partnerships, Donuts’ stance appears to reduce the likelihood of three-way joint ventures on the four applications for which the three companies are the only applicants.
Donuts is also in two-horse races on an additional 58 strings.
The company, which is believed to have raised $100 million to $150 million in venture capital funding, is a strong supporter of private auctions to settle contention sets.
It originally brought the auctioneer Cramton Associates, which runs ApplicantAuction.com. into the ICANN process.
Cramton, according to a blog post this week, expects to run a mock auction May 23 and start auctions proper five days later.
ICANN does not expect to finish delivering the results of Initial Evaluation until August, so it seems possible some applicants may participate before they know if they’ve passed.

Lawyer asks: how the hell did Demand Media pass the new gTLD cybersquatting test?

A lawyer apparently representing a rival new gTLD applicant has questioned ICANN’s background screening processes after Demand Media managed to get a pass despite its history of cybersquatting.
Jeffrey Stoler, now with the law firm Holland & Knight, last July said ICANN should ban Demand Media and its partner Donuts from applying for new gTLDs under the rules of the program.
This month, he’s written to ICANN, the GAC and the US government to express “alarm” that both companies have managed to pass their background checks. Stoler wrote:

This alarm arises from the overwhelming evidence, as referenced below, that: (a) Donuts is a “front” for Demand Media, Inc. (“Demand Media”), and (b) Demand Media’s status as precisely the kind of proven cybersquatter that ICANN’s rules were designed to weed-out of the gTLD application process.
How ICANN’s background screening panel could — in the teeth of that evidence — approve the continued participation of Donuts in the new gTLD program (the “Donuts Decision”) requires justification. This letter formally requests that ICANN, pursuant to its obligations of accountability and transparency, provide an explanation of how, and on what basis, the Donuts Decision was made.

Both Donuts and Demand Media responded with anger and disdain.
CEO Paul Stahura told ICANN that Donuts has discovered that Stoler, who has still not disclosed which client he’s representing in this matter, is actually on the payroll of a rival.

Donuts suspected his client was a competing applicant seeking to gain commercial advantage, and we have since confirmed this in fact is the case.
Not only do the letters intentionally misrepresent facts, they are a preposterous, extra-­procedural tactic that is a regrettable waste of time and community resources.

David Panos, director of Demand’s applying subsidiary, United TLD Holdco, was similarly dismissive:

Clearly, Mr. Stoler’s client has a substantial commercial interest in the new gTLD program and is seeking to eliminate its competition by mischaracterizing the relationships of other competing applicants and by restating factually inaccurate statements

What’s notable from both the Stahura and Panos letters is that neither company actually addresses Stoler’s allegations directly, resorting instead to mainly fudging and ad hominem arguments.
Stoler probably is seeking a competitive advantage for his mystery client, and his claims about Donuts being a “front” for Demand do come across as a bit of a stretch even for a lawyer, but that doesn’t mean that all of his arguments are wrong.
ICANN’s Applicant Guidebook for the new gTLD program is pretty clear: if you’ve had more than three adverse UDRP decisions, with at least one in the last four years, you’re “automatically disqualified” from the program.
Demand Media, as Stoler alleges and the public record supports, has lost about three dozen UDRP cases through subsidiaries such as Demand Domains, the most recent of which was in 2011.
So how did Demand pass its ICANN background screening?
The Guidebook does say “exceptional circumstances” are enough to get an applicant off the hook, but it’s hard to see how that would apply to Demand’s over 30 UDRP losses.
And Demand doesn’t want to talk about it.
None of its responses to ICANN that have been published to date even attempt to say why Stoler is wrong, and the company declined to comment when we asked for clarification today.
Donuts, which is using Demand as its back-end registry and has given the company the right to acquire interests in over 100 of its new gTLDs (should they be approved) didn’t want to comment either.
Which, some might say, plays right into Stoler’s hands.
If there’s a simple, straightforward explanation for why the background screening rules apparently didn’t apply to Demand Media, is it unreasonable to ask what that explanation is?

Donuts “almost doubles” $100m funding for new gTLD auctions

Somebody thinks new gTLDs will be a money-spinner.
Portfolio applicant Donuts, which is involved in 307 applications, has just announced a second funding round, greatly increasing its new gTLD contention set war-chest.
(UPDATE: This article originally stated, erroneously, that the funding was to the tune of $100 million. The exact amount has not actually been disclosed. Apologies for the error.)
It follows a $100 million funding round last year.
While the new amount was not disclosed, the deal “almost doubled” its funding, according to a press release, strongly suggesting it’s of a similar amount.
Existing investor Generation Partners and new investor Columbia Partners Private Capital were both involved in the round.
The company announced its first $100 million investment last year.
CEO Paul Stahura said the money was earmarked for new gTLD contention sets, many of which will be resolved at auction, and that “Donuts has further access to additional capital should the need arise”.
In a press release, he said:

We intended from the beginning to secure the gTLDs for which we applied. We enjoy tremendous support from our stockholders and lenders. This was an oversubscribed round that nearly doubles our capacity to compete. Our investors believe as strongly as we do that new gTLDs will bring relevance and specificity to registrants who have few usable choices today for Internet identities. This additional capital supports that belief, and we intend to deploy it to bring new gTLDs to market.

Pritz resurfaces with consulting gigs for Donuts and Architelos

Former ICANN chief strategy officer and new gTLDs head honcho Kurt Pritz is doing a spot of industry work, following the expiration of his post-resignation consulting gig with ICANN.
Pritz, we understand, has developed consulting relationships with new gTLD portfolio applicant Donuts and consulting firm Architelos while he looks for a more permanent position.
As you may recall, he quit ICANN last November after disclosing a personal conflict of interest.
While there are no rules preventing ICANN staff going into the domain industry, Pritz’s is prohibited from sharing confidential information he learned while at ICANN, we’re told.
Given his background, we understand he’ll be focusing mainly on policy-related work at both companies.

Did Uniregistry over-sell the auction antitrust risk?

Uniregistry’s revelation that it believes private auctions to resolve new gTLD contention sets may be illegal — based on its talks with the US Department of Justice — has caused widespread angst.
Following yesterday’s news, some commentators — some interested — questioned the company’s motive for revealing that Justice had declined to give private auctions a clean bill of health under antitrust law.
Others wondered whether Justice had been given the full facts, whether it had understood the new gTLD program, and whether Uniregistry had accurately reported Justice’s advice.
Given that yesterday’s piece was straight news, I figured it might be good to delve a little deeper into the situation and, yes, indulge in some quite shameless speculation.
What is it that Uniregistry is saying?
Here’s the argument, as I understand it.
“Bid-rigging” is illegal in many countries, including ICANN’s native US, where the Department of Justice prosecutes it fairly often, securing billions of dollars in damages and sometimes criminal sentences.
More often than not, it seems, the prosecutions are related to government contracts, where agencies are looking for a company to carry out a job of work for the lowest possible price.
Bid-rigging emerges when contractors decide among themselves who is going to win the contract. If two contracts are up for grabs, two companies may agree to submit separate high-ball bids so that they can guarantee getting one contract each.
This, of course, inflates the price the government agency pays for the work. There’s no true competition, so prices are artificially high, harming the tax-payer. That’s why it’s illegal.
The ICANN new gTLD program is a bit different, of course.
First, ICANN isn’t a government agency. While it has quasi-governmental powers, it’s a private corporation. Second, it’s looking for high bids, not low bids. Third, it doesn’t care if it doesn’t see any money.
There can be little doubt that private auctions technically harm ICANN, because the winning bidder’s money would be divided up between applicants rather than flowing into ICANN’s coffers.
Uniregistry seems to believe that a new gTLD applicant signing a private auction agreement — basically, competitors agreeing to pay or be paid to decide who wins a contract — that takes money out of ICANN’s pocket could be considered illegal collusion.
But ICANN has stated regularly that it prefers applicants to work out their contention sets privately, explicitly endorsing private auctions and/or applicant buy-outs.
ICANN, it seems, doesn’t care if it is harmed.
According to Uniregistry, however, that doesn’t matter. Its view, following its conversations with Justice, is that what ICANN says is completely irrelevant: the law’s the law.
As the company said yesterday:

the Department emphasized that no private party, including ICANN, has the authority to grant to any other party exemptions to, or immunity from, the antitrust laws. The decision means that the Department of Justice reserves its right to prosecute and/or seek civil penalties from persons or companies that participate in anti-competitive schemes in violation of applicable antitrust laws.

In other words, just because it’s very unlikely that ICANN would start filing antitrust suits against new gTLD applicants, the DoJ could feasibly decide to do so anyway.
Why would it do so? Well, consider that the thing ICANN is auctioning is a spot in the DNS root server, and the root server is ultimately controlled by the US Department of Commerce…
ICANN may not care about the money, but the thing it is selling off “belongs” to the United States government.
That’s the argument as I understand it, anyway.
Isn’t this all a bit self-serving?
Uniregistry’s press release and DI’s blog post yesterday were met with disappointment (to put it mildly) among some new gTLD applicants, auction providers and others.
They noted that Uniregistry had no documentary evidence to back up information it attributed to Justice. Some accused DI of reporting Uniregistry’s statement without sufficient skepticism.
It seems to be true that the company has not been a big fan of private auctions since the concept was first floated.
Uniregistry has applied for 54 new gTLDs, the majority of which are contested. Its main competitors are Donuts, with 37 contention sets, and Top Level Domain Holdings, with 21.
Who wins these contention sets depends on who has the most money and how much they’re prepared to pay.
Unlike Donuts, Uniregistry hasn’t gone to deep-pocketed venture capital firms. It’s reportedly funded to the tune of $60 million out of CEO Frank Schilling’s own pocket.
And unlike TLDH, which is listed on London’s Alternative Investment Market, Uniregistry doesn’t have access to the public markets to raise money. It seems to be better-funded, however.
Donuts raised $100 million to fund its new gTLD ambitions. It’s more than Schilling claims to have put into Uniregistry, but Donuts has spent much more on application fees.
Donuts is involved in 307 applications, many more than Uniregistry’s 54.
The money remaining for auctions is also spread much thinner with Donuts. It’s also in 158 contention sets, more than three times as many as than Uniregistry’s 45.
Private auctions arguably benefit Donuts because, depending on the auction model, it could reinvest the money it raises by losing an auction into a future auction. Its VC money would last longer.
The same logic applies to all applicants, but it becomes more of a pressing issue if you’re on a tight budget or have a large number of applications.
Uniregistry may have calculated that it stands a better chance of winning more contention sets against Donuts and TLDH if its competitors don’t get the chance to stuff their war chests.
Of course, Uniregistry could have simply refused to participate in private auctions in order to force an ICANN auction in its own contention sets. All new gTLD applicants have that power.
But by publicizing its antitrust concerns too, it may have also torpedoed private auctions for some contention sets that it’s not involved in.
That could limit the amount of money flowing from losing auctions to its competitors.
Another theory that has been put forwards is that Uniregistry went public with its Justice conversations — over-selling the risk, perhaps — in order to give its competitors’ investors jitters.
That might potentially reduce the capital available to them at auction, keeping auction prices down.
So did Uniregistry stand to benefit from playing up the risk of antitrust actions against new gTLD applicants? Probably.
Does it mean that its interpretation of its Department of Justice conversations is not completely accurate? Ask a lawyer.

Defensive registrations with Donuts could be 95% cheaper than normal domains

Portfolio gTLD applicant Donuts plans to offer trademark owners defensive registrations at 5% to 10% of the cost of a normal domain name registration, co-founder Richard Tindal said today.
Speaking at the Digital Marketing & gTLD Strategy Congress here in New York, Tindal also revealed some of Donuts’ current thinking about the Domain Protected Marks List service outlined in its gTLD applications.
DPML, which was created by Donuts rather than ICANN, is a little like ICM Registry’s Sunrise B service for .xxx — trademark owners will be able to block domains related to their trademarks.
DPML domains will not resolve, and there’ll be no annual renewal fee.
But there will likely be several differences with .xxx, as Tindal explained.
How to get a block
Each DPML listing will block a string across all of Donuts’ gTLDs, which could be as many as 307 (if Donuts wins all of its contention sets), potentially reducing administrative headaches for trademark owners.
Second, while ICM only allowed strings to be blocked that exactly matched the trademark, Donuts’ standard will merely be that the blocked domain contains the trademarked string.
Trademark owners will have to buy a DPML listing for each string they want blocked, however. It’s not going to be a “wildcard” system. ING wouldn’t be able to block everything ending in “ing”.
If Microsoft wanted to block microsoft.tlds and microsoftwindows.tlds, it would have to request both of those strings separately, but the blocks would be place across every Donuts TLD.
The standard for inclusion is probably going to be that the trademark is listed in the official Trademark Clearinghouse, and that it would qualify for a Sunrise registration (ie, it’s actually being used).
Trademarks that qualify for the Trademark Claims service but not Sunrise would not, it seems, qualify for DPML.
Un-blocks
There’s also going to be a way for trademark owners to un-block domains that have been blocked by other trademark owners.
If Apple the gadget maker blocked the string “apple” across all Donuts gTLDs, for example, Apple Records would be able to unblock apple.music (if Donuts wins .music) if it had a trademark on “apple” in the TMCH.
The standard again would be that Apple Records qualified for a Sunrise, but the unblocking could actually happen long after the .music Sunrise period was over.
If Apple the gadget maker thought it might want to use apple.tld domains in future, its best best would be to register the domains during Sunrise, Tindal said.
Pricing
DPML listings would be available for either five or 10 years (Donuts hasn’t decided yet, but it’s leaning towards five) and pricing will probably be between 5% and 10% of the cost of registering the domains normally during general availability, Tindal said.
Let’s say, for example, that Donuts wins only a certain number of its contention sets and ends up launching 200 new gTLDs, each of which is priced at $10 per domain per year.
If the 5-10% price estimate holds, trademark owners would have to pay between $0.50 and $1 per string, per gTLD, per year. For a single trademark, that would be between $100 and $200 per year, or $500 to $1,000 over the five-year period of the block.
It doesn’t sound like there’s going to be an option for trademark owners to block their sensitive strings in only selected, relevant Donuts gTLDs using DPML. It’ll be all or none.
Donuts has not yet disclosed its pricing plans for any of its proposed gTLDs, so the numbers used here are of course just examples. They could be higher or lower when the domains come to market.
In addition, if the string in question is a “premium” generic word in one or more of Donuts’ gTLDs, the price of blocking it could head sharply north.
Tindal noted that the plans outlined during today’s conference session represent Donuts’ current thinking and may be subject to change.

Fight over new sports gTLDs gets real ugly

The battle for contested new gTLDs .rugby and .basketball is turning nasty.
Roar Domains, a New Zealand marketing firm whose gTLD applications are backed by the official international bodies for both sports, is promising to pull out all the stops to kill off its competition.
The company, which is partnered with Minds + Machines on both bids, has told rival portfolio applicant Donuts that it will attack its applications for the two TLDs on at least three fronts.
Notably, Roar wants Donuts disqualified from the entire new gTLD program, and plans to lobby to have Donuts fail its background check.
The company told Donuts last month:

while we have no desire to join the chorus of voices speaking out against Donuts, it is incumbent on us to pursue the automatic disqualification of Applicant Guidebook Section 1.2.1, and every opposition and objection process available to us.

Applicant Guidebook section 1.2.1 deals with background checks.
Donuts came under more scrutiny than most on these grounds during the new gTLDs public comment period last year due to its co-founders being involved at the sharp end of domain investment over the last decade.
Demand Media and eNom, where founder Paul Stahura was a senior executive, have lost many UDRP cases over the years.
A mystery lawyer who refuses to disclose his clients started pursuing Donuts last August, saying the company is “unsuited and ineligible to participate in the new gTLD program.”
Separate (pseudonymous?) public comments fingered a former Donuts director for allegedly cybersquatting the Olympics and Disney.
While Roar has not claimed responsibility for these specific previous attacks, it certainly seems to be planning something similar in future.
In addition, Roar and International Rugby Board, which supports Roar’s application for .rugby, say they plan to official objections with ICANN about rival .rugby bids.
The IRB told Donuts, in a letter shortly before Christmas:

As the global representative of the sport and the only applicant vested with the trust and representation of the rugby community, we are unquestionably the rightful steward of .RUGBY.
…
Without the support of the global rugby community your commercialization efforts for .RUGBY will be thwarted. We are also preparing an objection to file against your application in accordance with ICANN rules to which you will be required to dedicate resources to formulate a response.

Roar and the IRB are also both lobbying members of ICANN’s Governmental Advisory Committee, which has the power to file potentially decisive GAC Advice against any application.
Roar told Donuts recently:

Roar serves as the voice and arm for FIBA [the International Basketball Federation] and IRB in the New gTLD area. We are pleased to have obtained four Early Warnings on behalf of our applications, and fully expect the GAC process to be completed to GAC Advice.

The Early Warnings against the two other .rugby applicants were filed by the UK government — the only warnings it filed — while Greece warned the two non-Roar .basketball applicants.
Roar is also involved with the International Basketball Federation (FIBA) on its .basketball bid.
While commercial interests obviously play a huge role, there’s a philosophical disagreement at the heart of these fights that could be encapsulated in the following question:
Should new gTLDs only be delegated to companies and organizations most closely affiliated with those strings?
In response to the UK’s Early Warning, Donut has written to UK GAC representative Mark Carvell asking for face-to-face talks and making the case for a “neutral” registry provider for .rugby.
Donuts told Carvell:

We believe gTLDs should be run safely and securely, and in a manner that is fair to all law-­abiding registrants, not only those predetermined as eligible. A neutral third party, such as Donuts, can be best capable of achieving this outcome.
…
Donuts believes a neutral operator is better able to ensure that the gTLD reflects the full diversity of opinion and content of all Internet users who are interested in the term “rugby.”
As the IRB is a powerful voice in rugby, an IRB‐managed registry might not be neutral in its operations, raising questions about its ability to impartially oversee the gTLD. For example, will IRB/Roar chill free speech by censoring content adversarial to their interests? How would they treat third parties who are interested in rugby but aren’t part of the IRB? What about IRB critics or potential rival leagues?

Despite these questions, no .rugby applicant has said it plans to operate a restricted registry. There are no applications for .basketball or .rugby designated as “Community” bids.
The IRB/Roar application specifically states “anyone can register a .rugby domain name.”
Both .basketball and .rugby are contested by Roar (FIBA/IRB/M+M), Donuts (via subsidiaries) and portfolio applicant Domain Venture Partners (aka Famous Four Media, also via subsidiaries).
Roar is a sports marketing agency that is also involved in bids for .baseball, .soccer, .football and .futbol. The New Zealand national team football captain, Ryan Nelsen, is on its board.
Here are the letters (pdf).

Senior Demand Media exec “fired for suing ICANN”

Long-time Demand Media software architect Chris Ambler claims he was fired when his own company, Image Online Design, sued ICANN over the .web gTLD.
Ambler says he was canned by Demand October 26, eight days after IOD sued ICANN over its unsuccessful 2000-round application for .web.
He told DI on Friday that he believes he was fired unfairly and illegally and, after negotiations with Demand Media broke down last week, has retained a lawyer to explore his options for redress.
“You can’t say you’re firing somebody because they’re suing somebody,” he said. “There are legal options open to me and I am pursuing them.”
Ambler says he was hired by eNom’s then-CEO Paul Stahura in 2003 as its chief software strategist, a role in which he took a lead role in creating NameJet’s proprietary domain name drop-catching software.
When the company was acquired by Demand Media, he took the role of senior software architect.
But in the 1990s, as founder of IOD, he ran .web in an alternative DNS root system. His application to move the gTLD into the official ICANN root in 2000 was not approved.
In October he sued ICANN claiming it was “improper, unlawful and inequitable” for ICANN to solicit more applications for .web while IOD’s bid was still “pending” and unrejected.
While Demand Media is not directly applying for .web, it has an extremely tight relationship with Donuts — the portfolio gTLD applicant founded by Stahura and other former Demand executives — which is.
Demand is Donuts’ back-end registry provider and is believed to have an interest in Covered TLD LLC, the parent company of about 100 of Donuts’ new gTLD applicants, including .web.
Ambler’s contract with Demand Media acknowledged his IOD work and allowed him to pursue it, he claims.
“They’ve known for the past ten years that I was working on this,” he said.
A Demand Media spokesperson said the company does not comment on legal matters.