Donuts Suit Over .Web Domain Auction Tossed

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By Alexis Kramer

Nov. 29 — A lawsuit challenging the fairness of the .web internet domain auction was dismissed by a federal judge who found that plaintiff Donuts Inc. shouldn’t have taken its complaint to court ( Ruby Glen LLC v. Internet Corp. for Assigned Names & Numbers , C.D. Cal., No. 2:16-cv-05505, 11/28/16 ).

A “covenant not to sue” contained in the .web application isn’t unreasonable and bars the entire suit, Judge Percy Anderson of the U.S. District Court for the Central District of California ruled Nov. 28.

The decision upholds an important piece of the legal framework underlying the Internet Corporation for Assigned Names and Numbers’ expansion of the domain name space. It diverges from a previous ruling by the same court, in a case over the .africa domain, that “serious questions” existed over the enforceability of the litigation waiver. The court in the .web case said it didn’t find that preliminary analysis persuasive.

Jon Nevett, Donuts co-founder and executive vice president for corporate affairs, told Bloomberg BNA Nov. 29 that it was “unfortunate that the auction process for .web was mired in a lack of transparency and anti-competitive behavior.” He said Donuts will “continue to utilize the tools at its disposal to address this procedural failure.”

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

Litigation Waiver Enforceable

Donuts, a domain name registry, had sued ICANN, the non-profit that coordinates the domain name system, over its alleged failure to properly investigate the winning .web applicant prior to the auction. ICANN argued that Donuts’ claims were barred by the covenant not to sue, which requires applicants to pursue claims using ICANN’s accountability mechanisms rather than in court.

The court rejected Donuts’ argument that the covenant not to sue violated Section 1668 of the California Civil Code, which invalidates contractual releases from liability for fraud, willful injury or willful or negligent violation of a law. The court said that Donuts’ complaint didn’t seek to impose liability on ICANN for those types of conduct.

The court said the provision is reasonable because without it, “any frustrated applicant could, through the filing of a lawsuit, derail the entire system” ICANN developed to process applications for new top-level domains.

Cozen O’Connor PC represented Donuts. Jones Day represented 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

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