Donuts Fights ICANN’s Lawsuit Waiver in .Web Domain Case

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By Alexis Kramer

Domain name registry Donuts Inc. told a federal appeals court Aug. 30 that it should be allowed to sue the nonprofit entity that manages domain names for allegedly failing to investigate the winning applicant in the auction for the .web domain ( Ruby Glen LLC v. Internet Corp. for Assigned Names & Numbers , 9th Cir., No. 16-56890, opening brief filed 8/30/17 ).

Donuts subsidiary Ruby Glen LLC sued the Internet Corporation for Assigned Names and Numbers (ICANN) after Nu DotCo LLC won the .web internet domain at a July 27, 2016, auction for $135 million. VeriSign Inc., the operator of the .com and .net domains, announced days after the auction ended that it had provided funds for Nu Dotco’s bid and plans to acquire the rights to the domain.

A decision for Donuts would allow the case to proceed and could slow VeriSign’s planned .web acquisition. The Justice Department’s antitrust division sent VeriSign a civil investigative demand in January over its potential operations of .web. The CID remains ongoing, VeriSign spokesman David Nieland told Bloomberg BNA Aug. 31.

The case also could impact a significant piece of the legal framework underlying ICANN’s expansion of the domain name space—a “covenant not to sue” found in its new domain applications. Two California courts so far have upheld the covenant not to sue as valid and not unreasonable.

Covenant Is Void, Donuts Says

The lower court said the covenant not to sue contained in Donuts’ .web application barred the lawsuit. The covenant requires applicants to pursue claims against ICANN by using its accountability mechanisms rather than going to court.

Donuts told the U.S. Court of Appeals for the Ninth Circuit that the covenant is void because it is contained in an agreement affecting a matter of public interest—assigning new internet domains for the global internet community’s benefit.

Donuts also argued that the covenant violates a provision of the California Civil Code, which invalidates contractual releases from liability for fraud, willful injury, or willful or negligent violation of a law. The lower court had said Donuts’ complaint didn’t seek to impose liability on ICANN for those types of conduct. Donuts argued to the Ninth Circuit that the substance of its claims is irrelevant to the covenant’s enforceability.

The covenant is void under all circumstances and was “of no legal effect the moment ICANN conditioned Ruby Glen’s participation in the .WEB gTLD process on its consent to” that covenant, Donuts said.

An ICANN spokesman didn’t immediately respond to a request for comment.

Cozen O’Connor PC is representing Donuts. Jones Day is representing ICANN.

To contact the reporter on this story: Alexis Kramer in Washington at aKramer@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

For More Information

Full text of the opening brief is available at http://src.bna.com/r85.

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