ICANN Asks Court to Toss Suit Over .Web Domain Auction

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By Alexis Kramer

Oct. 27 — The non-profit corporation that coordinates the internet domain name system didn’t breach its bylaws or auction rules when it allowed an auction for the .web domain to proceed, according to an Oct. 26 court filing ( Ruby Glen LLC v. Internet Corp. for Assigned Names & Numbers , C.D. Cal., No. 2:16-cv-05505, motion to dismiss filed 10/26/16 ).

After applicant Nu Dotco LLC won .web for $135 million (21 ECLR 30, 8/3/16), VeriSign Inc. announced that it had provided the funds for NuDotco’s bid and plans to acquire the rights to .web. VeriSign, operator of the .com and .net domains, hadn’t applied for .web.

The case creates uncertainty as to whether the results of the auction are final and whether VeriSign will succeed in acquiring .web.

Competing applicant Donuts Inc. sued the non-profit Internet Corporation for Assigned Names and Numbers over its failure to properly investigate NuDotCo prior to the auction (21 ECLR 32, 8/17/16). ICANN, in moving to dismiss the claims Oct. 26, also argued that even if the allegations were true, Donuts was bound by a contractual provision not to sue.

“Donuts learned of evidence of this backdoor arrangement after the ICANN auction was scheduled,” Jon Nevett, Donuts co-founder and executive vice president for corporate affairs, told Bloomberg BNA Oct. 27. “The discovery is fully relevant and deserved to be raised no matter when it came to light.”

No Breach of Rules, ICANN Says

Domain registry Donuts alleged that prior to the auction it contacted ICANN about a potential change of ownership over Nu Dotco that could disqualify the applicant. After ICANN declined to postpone the auction to investigate, Donuts submitted a request for an independent review process (IRP), a pre-established mechanism to check ICANN actions. The IRP was still pending at the time of the auction.

Donuts said that ICANN breached its promise that it wouldn't proceed with an auction if any active participant has a pending challenge under one of ICANN's mechanisms.

ICANN argued that Donuts misstated the auction rules. The rules provide that all pending accountability mechanisms must be resolved “prior to the scheduling of an auction,” ICANN said. Donuts initiated an IRP request in July, but the auction was scheduled in April, ICANN said.

ICANN also said that Donuts failed to allege that ICANN breached its duties of accountability and transparency, as set out in the corporation's bylaws. Donuts had alleged that ICANN failed to engage in a thorough, open and transparent investigation, but the bylaws require transparency “only to the extent ‘feasible,'” ICANN said. Donuts also failed to cite any bylaws provision requiring ICANN to investigate claims made by one applicant against another, ICANN said.

Covenant Not to Sue

ICANN argued that Donuts' claims are barred regardless because the .web application contained a “covenant not to sue,” which requires applicants to pursue claims using ICANN's accountability mechanisms rather than in court.

ICANN argued that this provision is valid and fair. “The Covenant Not to Sue has a well-founded business justification, namely to prevent a dispersed flood of court litigation that would threaten to disrupt the orderly operation of the entire New gTLD Program,” ICANN said.

The federal district court assigned to this case previously ruled, in a case over the .africa domain, that “serious questions” existed over the enforceability of the covenant not to sue (21 ECLR 563, 4/20/16). That decision is on appeal in the U.S. Court of Appeals for the Ninth Circuit.

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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