Here’s how Donuts wants to resolve its 158 new gTLD contention fights

Donuts is backing a private auction model designed and managed by Cramton Associates as its preferred solution for resolving its 158 new gTLD contention sets.
The proposals, spelled out by auction design expert Peter Cramton during private sessions with new gTLD applicants, caused a bit of a buzz — not all of it positive — at the ICANN meeting in Toronto last week.
But Donuts co-founder Jon Nevett told DI today that Cramton has addressed rivals’ concerns and that Donuts wants to handle as many of its contention sets as possible via private auction.
The idea is that private auctions will be faster and cheaper for applicants than the process set out by ICANN as the “last resort” method for resolving contention sets.
In the ICANN model, all of the proceeds of the auction would go to ICANN, to be distributed to worthy causes at a later date. But with a private auction, the winning bidder pays the losers.
This makes it more attractive to applicants, according to Donuts.
“The cost of losing an ICANN auction is greater than the cost of losing a private auction,” Nevett said. “If you lose an ICANN auction you get nothing, zero, you lose your asset.”
But with private auctions, “it doesn’t hurt as much to lose, so the theory is the second-place guys won’t stretch as much,” he said.
Cramton is a professor of economics at the University of Maryland. A long-time auction specialist, he’s been involved in designing processes for selling off wireless spectrum around the world.
For new gTLDs, Cramton proposes an “ascending clock” auction. At each stage, the price is increased by the auctioneer and the bidders/sellers can either commit to pay that amount or drop out.
The last man standing wins the gTLD, paying the amount that the second-highest bidder was willing to pay.
The money would be divided equally between all the losing applicants. According to Cramton, the advantage over proportional distribution is that it does not encourage applicants to over-bid, keeping costs down.
Cramton’s original plan, which left some applicants scratching their heads last week, was to run the auctions in the first quarter of 2013, before ICANN announces the results of Initial Evaluation.
That would mean that losing bidders would get a 70% refund of their ICANN application fee, which may be an attractive percentage in the case of low-value strings.
But it also means that an applicant could win an auction and later discover its application has been rejected. The other applicants would have withdrawn, so the gTLD would just disappear into the ether.
Judging by a series of videos shot last week and published on Cramton’s YouTube account, many applicants are in favor of running the auctions after IE results have been announced.
Another complaint expressed by Donuts’ competitors last week is Cramton’s “all or nothing” approach, in which Donuts’ rivals would have to commit to use the auctions for their entire portfolio of applications.
According to Nevett, that idea is no longer on the table.
“In the beginning he was discussing that it would have to be all your TLDs or none, and I think a lot of applicants told him that was unacceptable, so he changed his view,” he said.
The idea now is that the auctions would proceed on a TLD-by-TLD basis.
Given that winning bidders are giving money to their competitors, another concern is the ordering of the auctions. You don’t necessarily want to give your rivals a big wedge of cash they can use to out-bid you on the next lot.
The preferred solution here appears to be a simultaneous auction, with all the participating contention sets being resolved at the same time.
There was also a deal of suspicion in Toronto about whether Cramton would be biased towards Donuts, given that Donuts is responsible for finding Peter Cramton and introducing him to the gTLD program.
But Nevett said that Donuts has not contracted with Cramton. Peter Cramton showed up in Toronto on his own dime and has not required an up-front payment from Donuts, Nevett said.
“Every applicant has a veto on whether to participate, and it won’t happen unless every applicant wants to do it,” Nevett said. “Our incentive is to have an auction provider who is attractive to every applicant.”
“Our goal is to get as many applicants to participate in a private auction, so we need the auction to be designed in a way that is simple, fair and inclusive,” he said.
But there’s no denying that Donuts has a greater incentive than most to have a consolidated auction. By its own admission, it’s an eight-person operation without the manpower to negotiate 158 contention sets.
Cramton’s materials from last week’s Toronto sessions can be found at applicantauction.com or here.

ICANN 45: Super-Fadi targets Trademark Clearinghouse and RAA talks

There can be no denying that ICANN’s new CEO was well received at the Toronto meeting last week.
From his opening speech, a sleeves-rolled-up address that laid out his management goals, and throughout the week, Fadi Chehadé managed to impress pretty much everybody I spoke to.
Now Chehadé has turned his attention to the formative Trademark Clearinghouse and the Registrar Accreditation Agreement talks, promising to bring the force of his personality to bear in both projects.
“I’m coming out of Toronto with two priorities for this year,” he said during an interview with ICANN’s media relations chief, Brad White, last Friday.
“The first one is obviously to get the Trademark Clearinghouse to work as best as possible, for all parties to agree we have a mechanism that can satisfy the interests of the parties.”
“The second one is the RAA,” he said. “Without question I’m going to be inserting myself personally into both these, including the RAA.”
These are both difficult problems.
Work on the TMCH hit a snag early last week when ICANN chief strategy officer Kurt Pritz told the GNSO Council that the “community consensus” implementation model proposed by registries presented a big problem.
The “live query model” proposed for the Trademark Claims service, which would require the TMCH to sit in the live domain registration path, should be taken “off the table”, he said.
ICANN is/was worried that putting a live database of trademark checks into the registration model that has functioned fairly well for the last decade is a big risk.
The TMCH would become a single point of failure for the whole new gTLD program and any unanticipated downtime, ICANN has indicated, would be hugely embarrassing for ICANN.
“I’m personally concerned that once you put the Clearinghouse in the path for that it’s very difficult to unring the bell, so I’d rather proceed in a way that doesn’t change that,” Pritz said.
His remarks, October 14, angered backers of the community model, who estimated that the live query model would only affect about 10% to 15% of attempted domain registrations.
“Taking it off the table is a complete mistake,” said Jeff Neuman of Neustar, one of the authors of the alternative “community” TMCH model.
“It is a proven fact that the model we have proposed is more secure and, we believe, actually looks out much more in favor of protecting trademark holders,” he said.
He noted that the community model was created in a “truly bottom-up” way — the way ICANN is supposed to function.
NetChoice’s Steve DelBianco, in a rare show of solidarity between the Business Constituency and the registries, spoke to support Neuman and the centralized community model.
“The BC really supports a centralized Trademark Clearinghouse model, and that could include live query,” DelBianco said. “I’m disturbed by the notion that an executive decision took it off the table.”
“My question is, was that the same executive decision that brought us the TAS and its glitches?” he added. “Was it the same executive decision process that gave us Digital Archery that couldn’t shoot straight?”
Pritz pointed out the logical flaw in DelBianco’s argument.
“The group that brought you TAS and Digital Archery… you want to put that in the critical path for domain names?” he said. “Our job here is to protect trademark rights, not change the way we register domain names.”
But Neuman and DelBianco’s dismay was short-lived. Within a couple of hours, in the same room, Chehadé had told the GNSO Council, in a roundabout sort of way, that the live query model was not dead.
Chehadé’s full remarks are missing from the official transcript (pdf), and what remains is attributed to GNSO Council chair Stephane Van Gelder, but I’ve taken a transcript from my own recording:

The very first week I was on the job, I was presented with a folder — a very nice little folder — and little yellow thing that said “Sign Here”.
So I looked at what I’m signing, as I normally do, and I saw that moving forward with a lot of activities related to the Trademark Clearinghouse as really what I’m being asked to move forward with.
And I’ll be frank with you, my first reaction was: do all the people who will be affected by this agreement… did we hear them all about this before we sign this? Are they all part of the decision-making that led us here?
And the answer was muddled, it was “Yes… and…”. I said: No, I want to make sure that we use the time we have in Toronto make sure we listen to everybody to make sure before I commit any party — any party — to anything, that this party is very much part of the process and part of the solution.

I know I wasn’t the only person in the room to wonder if the anecdote described an incident in which an ICANN executive attempted to pull a fast one on his new, green boss.
A day later, after private discussion with ICANN board and staff, supporters of the community TMCH model told me they were very encouraged that the live query model was still in play.
The problem they still face, however, is that the Intellectual Property Constituency — ostensibly representing the key customers of the TMCH — is publicly still on the fence about which model it prefers.
Without backing from the IPC, any TMCH implementation model would run the risk of appearing to serve contracted parties’ cost and risk requirements at the expense of brand owners.
Getting the IPC to at least take a view will likely be Chehadé’s first priority when it comes to the TMCH.
Finding common ground on the Registrar Accreditation Agreement could be an even more complex task.
While the bulk of the work — integrating requests from certain law enforcement agencies and the Governmental Advisory Committee into the contract — has been completed, Whois remains a challenge.
European registrars claim, in the light of correspondence from a EU privacy watchdogs, that implementing ICANN’s demanded Whois data re-verification and retention rules would make them break the law.
Registrars elsewhere in the world are less than impressed with ICANN’s proposed ‘opt-out’ solution, which would essentially create a two-tier RAA and may, they say, have some impact on competition.
Privacy advocates in Toronto told ICANN that if certain governments (largely, I suspect, the US) want their own local registrars to retain and re-verify Whois data, they should pass laws to that effect, rather than asking ICANN to enforce the rule globally.
The GAC told ICANN’s board of directors last Tuesday that the privacy letters emerging from the EU did not represent the views of the European Commission or the GAC, and nothing more was said on the matter.
How ICANN reacts to the European letters now seems to be rest with ICANN’s executive negotiating team.
While everyone at ICANN 45 seemed to be super-impressed by Chehadé’s competence and vision for sorting out ICANN, the other recurring meme is that actions speak louder than words.
During his first 40 days in the job he managed to persuade India into an about-face on its support for an intergovernmental replacement for ICANN, an impressive feat.
Can he chalk up more early wins by helping resolve the TMCH and RAA deadlocks?
“There’s frankly universal agreement that if I participate personally in these activities I would help these activities come to hopefully a reasonably conclusion that we can bank on,” he said in the White interview.

Soon Verisign could sell .com domains direct

With little fanfare, ICANN last week formally approved new rules that could allow incumbent registry operators to own registrars that sell domains in their own gTLDs.
The policy would give the likes of Verisign, Neustar and Afilias the right to become affiliated with registrars that sell .com, .biz and .info names respectively.
These registries would have to sign up to the standard new gTLD registry agreement first, or submit to contract renegotiation in order to drop their current cross-ownership bans.
In either case, they would become bound by the new registry Code of Conduct, preventing them from offering preferential terms to their affiliated registrars.
The new rule came into effect following the ICANN board meeting on Thursday, at which this resolution was passed.
ICANN had already dropped cross-ownership restrictions for new gTLD registry operators, but held back from bringing in the same rules for incumbents due to concerns from competition authorities.
After exchanges of letters with the European Commission and US Department of Commerce, these concerns appear to have dried up, however. ICANN said in its resolution:

it appears that there is no longer any reason against extending the approved process to existing registry operators for their own TLDs.
This action will be an advantage for the ICANN community, as it will provide the opportunity for treating all registry operators equally with respect to cross-ownership restrictions.

Registries would have their requests for contract changes referred to competition authorities for comment before ICANN would approve them.
Based on previous comments, Verisign might have a struggle with respect to .com but the other incumbents might have an easier time renegotiating their deals.
Neustar has been particularly outspoken in its desire to get rid of the contractual language preventing it owning a .biz registrar, so we might see that company first to get into talks.
Both .biz and .info contracts are up for renewal before the end of the year.

Dengate Thrush quits TLDH

Peter Dengate Thrush, executive chairman of new gTLD portfolio applicant Top Level Domain Holdings, has decided to quit not much more than a year into the job.
According to a press release, Dengate Thrush will leave the company in January 2013, to be replaced by original chair Fred Krueger.
No reason for the departure was given.
When he joined TLDH, his share option package envisaged him sticking around until at least July 2014.
Dengate Thrush will continue to advise some of TLDH’s new gTLD applicant clients after he leaves, according to the press release.
His decision to join TLDH in July 2011, just a few weeks after helping to push through approval of the new gTLD program as ICANN’s chairman, was a nodal point in ICANN’s recent evolution.
It led directly to strict conflict of interest rules being put in place on ICANN’s board, which are now being criticized by some contracted parties for removing vital expertise from the board.
It also gave plenty of ammunition to those who criticize ICANN for being too focused on enriching its insiders.
TLDH has applied for 70 gTLDs, and its Minds + Machines subsidiary is the named back-end provider for several more.

Original .web gTLD applicant sues ICANN

Image Online Design, which unsuccessfully applied for the .web gTLD all the way back in 2000, has sued ICANN, alleging trademark infringement and breach of contract.
IOD, which says it has over 20,000 .web domains under management in an alternate root, says ICANN never officially rejected its .web bid, and that it should not have allowed other companies to apply for it.
It’s looking for an injunction preventing ICANN awarding .web to any other company, as well as seeking ICANN’s “profits” resulting from the alleged infringement of its mark.
There are seven .web applicants in the current round, but IOD is not among them.
The company paid $50,000 for its application in 2000, but it’s not happy with the $86,000 discount ICANN offered 2000-round applicants on their $185,000 fees if they wanted to resubmit their applications.
The IOD complaint claims:

Allowing other entities to file applications for a .web TLD while IOD’s .WEB TLD application was still pending is improper, unlawful and inequitable.

The complaint cites the November 2000 ICANN meeting in Marina Del Rey, during which the first proof-of-concept gTLDs were approved by ICANN’s board of directors.
It notes that then-chair Vint Cerf steered the board away from approving .web applications filed by Afilias and others because IOD was already operating .web in an alternate root at the time.
You can watch a video of that meeting here.
The complaint also alleges tenuous conflicts of interest between two .web applicants (Afilias and Google) and members of ICANN’s board of directors (current chair and vice-chair Steve Crocker and Bruce Tonkin in the case of Afilias, and long-gone chair Vint Cerf in the case of Google).
The suit comes just a few days after IOD’s fellow 2000 applicant and alternate root player, Name.Space, sued ICANN on similar grounds, trying to prevent 189 gTLDs being approved.
Here’s the IOD complaint.

EU plays down “unlawful” Whois data worries

The European Commission yesterday gave short shrift to recent claims that ICANN’s proposed Whois data retention requirements would be “unlawful” in the EU.
A recent letter from the Article 29 Working Party — an EU data protection watchdog — had said that the next version of the Registrar Accreditation Agreement may force EU registrars to break the law.
The concerns were later echoed by the Council of Europe.
But the EC stressed at a session between the ICANN board of directors and Governmental Advisory Committee yesterday that Article 29 does not represent the official EU position.
That’s despite the fact that the Article 29 group is made up of privacy commissioners from each EU state.
Asked about the letter, the EC’s GAC representative said:

Just to put everyone at ease, this is a formal advisory group concerning EU data privacy protection.
…
They’re there to give advice and they themselves, and we as well, are very clear that they are independent of the European Union. That gives you an idea that this is not an EU position as such but the position of the advisory committee.

The session then quickly moved on to other matters, dismaying privacy advocates in the room.
Milton Mueller of the Internet Governance Project tweeted:

By telling ICANN that it can ignore Art 29 WG opinion on privacy, European commission is telling ICANN it can ignore their national DP [data privacy] laws

Registrars hopeful that the Article 29 letter would put another nail into the coffin of some of ICANN’s more unpalatable and costly RAA demands also expressed dismay.
ICANN’s current position, based on input from law enforcement and the GAC, is that the RAA should contain new more stringent requirements on Whois data retention and verification.
It proposes an opt-out process for registrars that believe these requirements would put them in violation of local law.
But registrars from outside the EU say this would create a two-tier RAA, which they find unacceptable.
With apparently no easy compromise in sight the RAA negotiations, originally slated to be wrapped up in the first half of this year, look set to continue for many weeks or months to come.

Company files for injunction against 189 new gTLDs

Alternate root player Name.Space has sued ICANN for trademark infringement and anti-competitive behavior, saying “insiders” have conspired to keep it out of the new gTLD program.
If successful, the suit would prevent dozens of new gTLD applicants from having their applications approved.
The lawsuit, filed in California this week, follows a warning the company fired at ICANN this March.
While only ICANN is named as a defendant, the suit alleges that the new gTLD program was crafted by and is dominated by “ICANN insiders” and “industry titans”.
It wants an injunction preventing ICANN delegating any of the 189 gTLD strings that it claims it has rights to.
It also fingers several current and former ICANN directors, including current and former chairs Steve Crocker and Peter Dengate Thrush, over their alleged conflicts of interest.
Name.Space has been operating 482 diverse TLDs — such as .news, .sucks, and .mail — in a lightly used alternate root system since 1996.
Most people can’t access these zones and are unaware that they exist.
The company applied to have 118 of these strings added to the root in ICANN’s “proof of concept” gTLD expansion in 2000, when the application fee was $50,000, but was unsuccessful.
Now, the company claims the new gTLD program is “an attack on name.space’s business model and a mean by which to create and maintain market power in the TLD markets”.
The complaint (pdf) states:

Rather than adopting a procedure to account for the pending 2000 Application and facilitate the expansion of TLD providers in the DNS, ICANN has adopted a procedure so complex and expensive that it once again effectively prohibited newcomers from competing. It instead has permitted participation solely by ICANN insiders and industry titans.

If it had applied for all 118 again in this year’s round, it would have cost almost $22 million (though it would have qualified for an $83,000 discount on a single bid).
Name.Space is asking for damages and an injunction preventing ICANN from approving 189 gTLDs that match those it currently operates in its alternate root.
The full list of affected applications is attached to the complaint.

Hey, domainers, watch Frank Schilling tell you why ICANN is cool

I think this is the first time I’ve seen noted domainer Frank Schilling appearing in an ICANN-related video.
It was produced by Google during ICANN’s meeting in Prague a few months ago, and published on YouTube this week.
Alongside many familiar faces from the ICANN-policy-wonk side of the industry, you’ll also see Schilling, who is of course behind portfolio gTLD applicant Uniregistry, telling you:

What I like about ICANN is just that: it’s not controlled by anyone, yet it’s controlled by you. You control it just by contributing to the process. And it’s open to anyone in any language, anywhere in the world

I think the video pretty much nails it.
ICANN 45 starts in Toronto, Canada this weekend. You don’t need to be there to get involved.

Council of Europe has Whois privacy concerns too

The Council of Europe has expressed concern about the privacy ramifications of ICANN’s proposed changes to Whois requirements in the Registrar Accreditation Agreement.
In a letter this week (pdf), the Bureau of the Consultative Committee of the Convention for the Protection of Individuals with regard to Personal Data (T-PD) said:

The Bureau of the T-PD took note of the position of the Article 29 Data Protection Working Parking in its comments of 26 September 2012 on the data protection impact of the revision of these arrangements concerning accuracy and data retention of the WHOIS data and fully shares the concern raised.
The Bureau of the T-PD is convinced of the importance of ensuring that appropriate consideration be given in the ICANN context to the relevant European and international privacy standards

The letter was sent in response to outreach from ICANN’s Non-Commercial Users Constituency.
The Article 29 letter referenced said that EU registrars risked breaking the law if they implemented ICANN’s proposed data retention requirements.
Earlier today, we reported on ICANN’s response, which proposes an opt-out for registrars based in the EU, but we noted that registrars elsewhere are unlikely to dig a two-tier RAA.

ICANN says EU registrars could be exempt from stringent new Whois rules

Registrars based in the European Union could be let off the hook when it comes to the Whois verification requirements currently under discussion at ICANN.
That’s according to ICANN CEO Fadi Chehade, who this week responded to privacy concerns expressed by the Article 29 Working Party, a EU-based quasi-governmental privacy watchdog.
The Working Party said last month that if ICANN forced EU registrars to re-verify customer data and store it for longer than necessary, they would risk breaking EU privacy law.
Those are two of the many amendments to the standard Registrar Accreditation Agreement that ICANN — at the request of governments and law enforcement — is currently pushing for.
In reply, Chehade noted that ICANN currently plans to give registrars an opt-out:

ICANN proposes to adapt the current ICANN Procedures for Handling Whois Conflicts with Privacy Law, to enable registrars to seek an exempton from these new RAA WHOIS and data protection obligations in the even that the obligations would cause registrars to violate their local laws and regulations.

He also said that the Governmental Advisory Committee has “endorsed” the provisions at question, and encouraged the Working Party to work via the GAC to have its views heard.
I understand that registrars based in the US and elsewhere would not respond favorably to what would essentially amount to a two-tier RAA.
Some of the RAA changes would have cost implications, so there’s an argument that to exempt some registrars and not others would create an un-level competitive playing field.
The Article 29 Working Party is an advisory body, independent of the European Union, comprising one representative from the data privacy watchdogs in each EU state.
Some GAC representatives said during the ICANN meeting in Prague this June that they had already factored privacy concerns into their support for the RAA talks.
It’s going to interesting to see how both registrars and the GAC react to the Article 29 developments at the Toronto meeting, which begins this weekend.