Chehade to play hard-ball over unilateral right to amend?

ICANN CEO Fadi Chehade has reportedly indicated that the unilateral right to amend powers ICANN wants to put in its registry and registrar contracts are non-negotiable.
Speaking at a meeting of the Association of National Advertisers last week, Chehade is reported to have said: “I’m not going to back off this one.”
He is understood to have been referring to the changes ICANN wants to impose on the base new gTLD Registry Agreement and the Registrar Accreditation Agreement.
Amy Bivins of Bloomberg BNA’s Electronic Commerce & Law Report caught the speech live and tweeted the following:

Chehade quotes on RAA: “I cannot live with a perpetual agreement,” and “I’m not going to back off this one.”

— Amy E. Bivins (@AmyEBivins) March 20, 2013

Bivins’ full report is available behind BNA’s paywall.
The unilateral right to amend is just about the most controversial thing ICANN has proposed in a while.
It would give ICANN’s board of directors the power to make changes to both agreements in situations where registrars or registries cannot agree among themselves to a “special amendment” but there’s agreement by other community members that the change is required.
Registries and registrars argue that a contract in which one party has the power to change the agreement without the consent of the other is not really a contract at all.
But ICANN says the powers are needed, partly to redress existing imbalances: the fact that the RAA and RA both last for 10 years and that the RA has a presumptive right of renewal.
Without the right to change the RA over the protests of the registries, it’s possible that in future proposed changes could be vetoed by registries whose interests are not aligned with the “public interest”, ICANN argues.
ICANN says that it’s impossible to know how consolidation, future new gTLD rounds and power shifts in the ICANN community will affect the balance of power, meaning it needs a way to resist a registry choke-hold should the situation arise.
I suspect the fact that it’s taken about three years to get close to adding the recommendations of law enforcement relating to registrar conduct to the RAA may also have something to do with it.

Five interesting nuggets from the first batch of gTLD evaluations

ICANN gave many in the industry cause for celebration on Friday when it released its first batch of 27 new gTLD applications that have passed Initial Evaluation.
The plan is to release 30 per week, ramping up to 100 at some point in future, but three applications in the first 30 still have change requests or clarifying questions being processed.
Here are some interesting bits of information we’ve gleaned from the first batch.
Donuts has passed its background checks
Donuts has had the first of its new gTLD applications approved. This means that the evaluation team doing background screening found no reason to be fail the company due to its executives’ track records.
During the public comment period last year, Donuts’ opponents said the company should be barred from getting any new gTLDs because of its close ties to Demand Media, a company with a record of adverse UDRP decisions.
It was also claimed that a Donuts director was involved in cybersquatting the Olympic and Disney brands, but it turned out the director in question had left the company in late 2011.
But ICANN’s evaluation team appears to have given Donuts the all clear.
The Donuts application that has passed Initial Evaluation, for .商店 (shop/store), is one of 199 applications, each filed by unique corporate shells, that share a parent, Dozen Donuts LLC.
The balance of Donuts’ applying companies are owned by Covered TLD LLC, believed to be its joint venture with Demand Media. All 307 are signed up to use Demand Media’s registry back-end.
Seven IDN scripts passed IE
New gTLDs in seven internationalized domain name scripts — Chinese, Arabic, Japanese, Hindi, Korean, German, Cyrillic — have passed through Initial Evaluation.
Transliterations of .com/.net are apparently fine
Some of Verisign’s applications for transliterations of .com and .net in scripts such as Chinese and Hindi have passed IE, meaning the evaluators weren’t worried about possible clashes with their legacy equivalents.
There’s been some concern from some parts of the world that because the applied-for strings are meaningless in the relevant languages, but sound like “com” and “net” when spoken, that it could cause confusion.
New back-end providers have cause for celebration
While there was little doubt that back-end providers Verisign, Neustar, Afilias and CORE would receive passing grades by ICANN — they all run gTLDs already — new market entrants did not have reasons for the same confidence.
However, ARI Registry Services, Demand Media, CentralNIC, KISA, KSRegistry and KNET are all named back-ends for passing applications in the first batch.
This should come as a cause for celebration for these companies, and a relief for their clients.
Because many applications used the same boilerplate back-end text, there’s good reason to believe that other bids using these registry providers are likely to pass the technical portion of Initial Evaluation too.
Afilias doesn’t have any passes yet
Top-three player Afilias, so far, does not have any passing apps.
One of its clients is at position #7 in the priority queue, but it’s one of the three applications in the top 30 to be still chasing follow-up questions or change requests with ICANN.
Probably nothing to worry about here.

Trademark Clearinghouse lowers prices

The Deloitte-managed Trademark Clearinghouse has slashed its bulk submission prices in response to feedback from registrars.
A newly revised TMCH price list leaves the basic fees of $145 to $95 per mark per year untouched, but makes it much easier for large trademark owners and brand protection companies to qualify for discounts.
The system for securing bulk discounts is based on “Status Points” that accumulate as trademarks are submitted, with five pricing tiers available.
The changes mean submission agents need to rack up 1,000 points in order to become eligible for the first discount tier, instead of 3,000. The cheapest tier is accessible at 90,000 points instead of 100,000.
The TMCH has also doubled the number of bonus points awarded for submitting trademarks during the “early bird” phase, which runs until the first new gTLD sunrise period begins, making it easier to hit discount milestones.
According to the Trademark Clearinghouse Cost Calculator, which has been updated with the new numbers, savings could be substantial.
For example, a submission agent that submits 10,000 marks for five-year registrations during the early bird period will pay $5,232,125, which is $742,950 cheaper than under the old pricing scheme.
That would be an average cost of $104.64 per mark per year, compared to $119.50 under the old regime.
A listing in the TMCH is a prerequisite if a trademark owner wants to participate in new gTLD sunrise periods or take advantage of the Trademark Claims cybersquatting alert service.
We gather that the price reductions came largely as a result of feedback from registrars that plan to act as submission agents, rather than from trademark owners themselves.

ICANN to adopt most of the new gTLD “strawman”

ICANN has given a boost to trademark owners by saying it will implement most of the controversial “strawman” solution to extend protections under the new gTLD program.
In a video just posted to ICANN’s web site, CEO Fadi Chehade said that Claims 2 and the Limited Preventative Registrations proposals have been thrown out for the moment as matters requiring policy work.
But many more aspects of the strawman have been classed as “implementation” and will go ahead.
This means:

• A mandatory 30-day notice period before sunrises begin.
• Trademark Claims extended from 60 to 90 days.
• Tradermark owners will be able to add up to 50 confusingly similar strings to each of their Trademark Clearinghouse records, provided the string had been part of a successful UDRP complaint.

Chehade said:

We are going to implement a 30 day notice period before each sunrise. We’re also going to extend the Trademark Claims period from 60 to 90 days. The Claims 2 period which was discussed frankly did not receive a lot of support from many of you so we’re going to let that go for now.
And then finally there was a lot of discussion about extending the Trademark Claims protection to abuse names and after much debate on whether this is a new program or an extension of what we’re doing we came to the conclusion it is an implementation extension and we will move forward with that.

In the video, Chehade also says that ICANN is on track to start publishing the first results of new gTLD initial evaluations this Friday, as expected.
But he warned that if applicants and registrars do not agree on the proposed Registry Agreement and Registrar Accreditation Agreement, ICANN might miss its April 23 deadline for approving the first gTLDs.
He said:

Let me be clear: if we do not come together towards an agreement on these things we might experience a delay in the program, which I have committed to you that we will be ready for on April 23rd. So from an ICANN staff standpoint and operations standpoint we remain ready to request new gTLDs for delegation on April 23rd. But without these agreements we might experience a delay.

He directly referenced the massive sticking point in these discussions: the fact that ICANN wants to introduce a unilateral right of amendment into both contracts.
Here’s the full video:

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.

DoJ says new gTLD private auctions might be illegal

Companies hoping to resolve their new gTLD contention sets via private auction are about to get a rude awakening: according to the US Department of Justice, they might be illegal.
Portfolio applicant Uniregistry, the company founded by domainer Frank Schilling, said today that the DoJ has told it that:

arrangements by which private parties agree to resolve gTLD string contentions solely to avoid a public auction present antitrust issues.

The company contacted the department last October to get a “business review” decision, basically asking the DoJ for an assurance that it would not be prosecuted if it participated in a private auction.
The DoJ refused to give that assurance.
Uniregistry counsel Bret Fausett told DI that private auctions might be seen as “bid rigging”, an illegal practice in which competitors fix the awarding of contracts.
Schilling said that Uniregistry asked the DoJ for its advice because “we don’t want to go to jail”.
According to the company:

On March 18, 2013, Uniregistry was informed that the Department of Justice has declined to issue a business review of various private gTLD contention resolution mechanisms. In making its decision, 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.

New gTLD applicants are now being advised to consult their own lawyers before participating in a private auction.
The news will come as a huge blow to companies such as Right Of The Dot and Cramton Associates, which have been at the forefront of pushing the private auction concept to applicants.
It’s also going to be a massive blow to any company that had banked on getting a pay-off to withdraw their applications following a private auction.
The benefit of private auctions — over the ICANN-managed auctions of last resort — is that the losing applicants get a share of the winning applicant’s winning bid.
In an ICANN auction, all the money goes to ICANN, which has promised to use to money to fund worthy causes.
Uniregistry has issued a press release on its talks with the DoJ here (pdf).

Del Monte v Del Monte is the first new gTLD trademark objection

Two companies trading under the name Del Monte are involved in the first-to-be-revealed Legal Rights Objection, over the .delmonte gTLD, under the new gTLD program.
The World Intellectual Property Organization revealed the LRO — expected to be the first of many — this evening.
The applicant for .delmonte is a subsidiary of Fresh Del Monte Produce, Inc. The objector is Del Monte Corp.
Both companies are primarily known for canning fruit. According to Wikipedia, Fresh Del Monte was spun off from Del Monte in 1989 and continues to have a licensing arrangement to use the brand.
The deal apparently doesn’t extend to playing nicely over gTLDs, however.
Del Monte does business at delmonte.com, while Fresh Del Monte lives at freshdelmonte.com.
Legal Rights Objections allow trademark owners to challenge gTLD applications that look too much like their marks. It looks like Del Monte has a pretty good case, on the face of it.

At-Large votes to object to .health gTLD bids, but Afilias gets a pass

ICANN’s At-Large Advisory Committee has voted to object to three of the four applications for the .health gTLD.

Afilias, which is one of the applicants, will not receive an ALAC objection. By a single vote, ALAC decided not to go after its application.
Fourteen of the 15-member ALAC panel voted on Tuesday. For DotHealth LLC’s bid, the yes/no/abstain vote was 8/3/3; dot Health Ltd’s was 10/3/1, and Donuts’ was 10/3/1.
Afilias managed to get one extra “no” vote (its result was 7/4/3). so with only 50% of the voters voting “yes”, the motion to object failed.
The ALAC did not vote on .健康, which means “healthy” or “wellness” in Chinese, despite earlier indications that it would.
The identities of the voters and the way they voted does not appear to have been revealed.
The objections will be of the Community or Limited Public Interest variety, and paid for by ICANN.
Healthcare-related gTLDs are already the most controversial of those being applied for.
Each .health bid received four Governmental Advisory Committee Early Warnings late last year, and earlier this week the Independent Objector’s list of 24 objections was dominated by medically oriented strings.

Amazon and Google hit as Independent Objector files 24 new gTLD objections

Alain Pellet, the new gTLD program’s Independent Objector, has filed 24 official objections against new gTLD applications.
Five of its 13 Community Objections are against dot-brands that have geographical meanings — Amazon’s .amazon and three translations, an outdoor clothing maker’s bid for .patagonia and a Mumbai cricket team’s application for .indians.
Other recipients are the two applications for .charity and the one for the Chinese translation .慈善.
Every other objection is related in some way to health.
The remaining six Community Objections target .med, .health, .healthcare and .hospital bids.
Limited Public Interest Objections have also been filed against the four .health applications, .healthcare, the four .med bids and the one .hospital.
That’s right, the .hospital and .healthcare applications, both filed by Donuts subsidiaries, have been hit twice.
Donuts is not the only one: Google’s .med bid has a Community Objection and a Limited Public Interest objection too.
The reasons for the objections do not appear to have been published yet.
The objections stand to delay each of the target apps by about five months, according to ICANN’s timetable.
The full list of IO objections can be found here.

Google-backed new gTLD industry group appears at WhatDomain.org

The formative domain name industry trade association that DI has blogged about a few times recently has found itself a web site.
The Google-backed initiative can be found now at WhatDomain.org, which currently carries a bit of brief information about the organization’s rough plans and a call for potential members to get in touch.
The site states:

We are organizing to help educate the world on the coming changes in the domain landscape and to support the interests of the domain name industry. We are inviting any organization with a similar interest in domains to join us in working to create and launch an organization that will enable us to work together to achieve these objectives.

The association will eventually have membership tiers and fees, but those details have yet to be arranged.
We understand that while new gTLD applicant Google is doing most of the “heavy lifting” getting the project off the ground, the company wants to go as arms-length as possible very quickly.
The first informal meeting of what may or may not become officially known as WhatDomain took place at during an intersessional ICANN meeting in Amsterdam this January.
The idea is to promote new gTLDs and domain names in general, raise the reputation of the industry and promote the universal acceptance of TLDs among software developers.
During a session here at the Digital Marketing & gTLD Strategy Congress in New York yesterday, ICANN head of stakeholder engagement Sally Costeron seemed to commit ICANN to help support the initiative.