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ICANN.WTF? FTC & OCA Asked Whether .SUCKS is a Law Breaker (Part I)

On April 9, 2015 ICANN took the unprecedented step of asking two national consumer protection agencies whether the .Sucks registry, one of the new gTLDs it has approved and which is currently in its sunrise registration period, has a business plan which violates any laws or regulations those agencies enforce.

This is the equivalent of sending a message stating, “Dear Regulator: We have lit a fuse. Can you please tell us whether it is connected to a bomb?”

With this action ICANN has opened a Pandora’s Box. As in the Greek myth, multiple evils have been released, but hope may still remain—if we can understand the lessons of this event.


The major points made in this two-part article are:

  • ICANN’s outreach to the FTC and OCA regarding the legality of a contracted party’s conduct is an unprecedented action that raise major questions about its future relationship with governments.
  • There are no clear criteria justifying the two consulted jurisdictions. But ICANN appears to have just set the precedent that each and every contracted party is potentially subject to US law enforcement regardless of where it is headquartered or the geographic scope of its operations.
  • If the FTC were to determine that Vox Populi is indictable under criminal law than every registrar that represents it, as well as ICANN, could potentially be charged as a co-conspirator.
  • However, it is unlikely that the FTC and OCA will provide any definitive response—especially since only the courts can determine the legality of conduct in the US.
  • Companies and individuals that refrain from registering their trademarks in .Sucks are unlikely to see those websites used for infringement, and have effective redress if they are. That does not mean that .Sucks’ business plan is ethical, as it may constitute a new means of monetizing potential corporate and celebrity cyberbullying (but the line between abusive conduct and legitimate criticism is subject to debate).
  • Notwithstanding its claimed helplessness, ICANN could readily target the excessive fees being charged by multiple registries for Trademark Clearinghouse registered terms through a Section 7.6 Special Amendment that limited their pricing to “cost recovery”. It may have other recourse under the Registry Agreement as well.
  • ICANN needs to define whether the “public interest” it protects is bounded solely by the limits of law and regulation, or by broader ethical standards and reputational concerns.
  • The approval of Vox Populi as the .Sucks registry manager notwithstanding past financial issues raises questions about the efficacy of the new gTLD program’s applicant evaluation process.
  • The failure to take proactive steps in regard to .Sucks despite receipt of a letter of concern from the Chairman of the US Senate’s Commerce Committee in March 2014 undermines the claim that ICANN has become a “mature” organization. It also suggests that enhanced accountability measures may fall short until a culture of accountability is established within ICANN.
  • The .sucks controversy places the new gTLD program back in the spotlight and illuminates its current problems and challenges.
  • One of the chief ongoing concerns for the new gTLD program is “Universal Acceptance”, a term denoting that many new gTLDs fail to fully function as intended and marketed. This is an issue squarely within the jurisdiction of consumer protection agencies like the FTC. It is also an issue known to ICANN for a dozen years and the failure to effectively address it is again symptomatic of inadequate institutional foresight and responsibility.
  • The fallout from the .Sucks controversy should be addressed for any future round of new gTLDs, especially in regard to whether for-profit entities will be permitted to apply for and operate pejorative “strings”.

Unprecedented Outreach Raises Jurisdictional and Timing Matters

The unprecedented letter in which ICANN made this request was dispatched by ICANN General Counsel and Secretary John Jeffrey to Edith Ramirez, Chair of the U.S. Federal Trade Commission (FTC) and John Knubley, Deputy Minister for Canada’s Office of Consumer Affairs (OCA). After some introductory paragraphs explaining and defending ICANN’s vetting process for new gTLD applicants, the justification for and nature of the request is stated:

On March 27, 2015, ICANN received a formal letter from Gregory Shatan, President of ICANN’s Intellectual Property Constituency (IPC), on behalf of the constituency (whose membership may be found at the following link (http://www.ipconstituency.org/current-membership/), setting out a number of concerns of intellectual property rights holders related to Vox Populi’s proposed rollout. The IPC described the proposed business practices and actions of Vox Populi, as “illicit” and also “predatory, exploitive and coercive”.

ICANN, through its registry agreement, may seek remedies against Vox Populi if the registry’s actions are determined to be illegal. ICANN is concerned about the contentions of illicit actions being expressed, but notes that ICANN has limited expertise or authority to determine the legality of Vox Populi’s positions, which we believe would fall within your respective regulatory regimes.

Accordingly, I am forwarding a copy of the March 27, 2015 IPC letter to you and hereby request that the United States’ Federal Trade Commission and Canada’s Office of Consumer Affairs consider assessing and determining whether Vox Populi is violating any laws or regulations enforced by your respective offices. We note that should the FTC or the OCA make a determination of illegal activity, it could be that Vox Populi will also be in breach of its registry agreement, and ICANN could then act consistently with its public interest goals and consumer and business protections to change these respective practices of the registry through its contractual relationship. ICANN is also currently evaluating other remedies available under the registry agreement. We are very concerned about any possible illegality resulting from the alleged illicit actions of the registry and accordingly reach out to you to see if you can offer guidance on this matter. (Emphasis added)

The letter concludes by noting that the .Sucks sunrise registration period ends and sales to the general public begins on May 29th and requesting at least an informal appraisal from the agencies by that date.

This letter immediately raises several questions of considerable importance. Up to now, ICANN has deferred to governmental opinions only in regard to policy matters when governments reach consensus within the Governmental Advisory Committee (GAC) by supermajority with no objection. In addition, Section 2.9(b) of the new gTLD Registry Agreement provides ICANN with the right, but not the obligation, to refer questions to “relevant competition authorities” where a registry operator becomes an affiliate or reseller of an ICANN accredited registrar or subcontracts the provision of any registry service to a registrar or reseller. While the FTC does have antitrust responsibilities ICANN is requesting its feedback on the legality of the business practices of the .Sucks registry, and not a competition matter.

So ICANN’s action raises the questions of whether we are now witnessing a new practice by which ICANN will selectively seek the legal opinions of select regulators within select nations, and what that implies for the jurisdictional and freedom from governmental control issues currently being considered by the IANA transition and enhanced accountability working groups. And does ICANN truly have “limited expertise” to evaluate the business plan enabled by the contract that it signed with Vox Populi, especially given that a substantial portion of the more than $300 million it collected in new gTLD application fees was reserved for legal contingencies?

As one industry blogger characterized the action:

Basically ICANN just “ratted out” one of its own applicants to the Feds, asking them to investigate whether a contract that ICANN signed with a registry operator is legal.

ICANN spent Over $4 Million in legal fees according to its tax return they filed this week for their fiscal year ending in June 2014 and they say they “lacks the expertise” to determine whether an application has run afoul of federal law.

And why are only the US and Canada being consulted? Of course, ICANN is headquartered in the US and the largest owner of the Vox Populi registry, operator of .Sucks, is Momentous, a Canadian company. But it has been reported that “its IANA record lists an address in Bermuda for its technical contact and Uniregistry’s office in Grand Cayman as its administrative address”, so why weren’t those jurisdictions contacted as well?

Indeed, as Mr. Jeffrey’s letter notes, .Sucks domains are being marketed “throughout the world” and therefore any abuses to rights holders would likewise be global:

They are in the process of selling registrations of second-level domain names, such as EXAMPLE.SUCKS, through registrars that sell directly to consumers. The distribution model will allow registrations of second-level domain names through registrars, located and selling registrations in the United States, Canada and throughout the world. (Emphasis added)

The general approach to Internet jurisdiction is that a company is not subject to national jurisdiction by simply having a website accessible via the Internet, but that once it takes affirmative steps to disseminate content to and do business with a jurisdiction it has sufficient ties to be subject to a nation’s laws. Under that approach, if Vox Populi has indeed forged registrar relationships that make .Sucks domains available for registration “throughout the world” then why hasn’t ICANN solicited the views of EU consumer protection experts in Brussels to see whether they think their companies and citizens may be subject to illegal practices? The argument for EU involvement is further bolstered by the fact that the .Sucks registration fees being objected to are targeted at TMCH-registered terms, the TMCH is headquartered in Brussels, Belgium, and its Terms of Service Agreement for Registries and Registrars (TOS) requires those parties to “acknowledge that ICANN has selected International Business Machines of Belgium BVBA, a company under laws of Belgium (“IBM”), as its subcontractor to provide the Services to Registries and Registrars” and further advises all signatories that “Your use of the Trademark Clearinghouse and the Services, including any Registration Content you submit, will comply with this Agreement and all applicable local, state, national and international laws, rules and regulations”. (Emphasis added)

Given the global sale of .Sucks domain names and that provision of the TMCH TOS, why hasn’t ICANN solicited the views of the Australians, Russians, Japanese, Chinese, Saudis, Iranians, Brazilians, and Swiss, ad infinitum? By no means is this author advocating that they do so—only highlighting that once ICANN embarks on this slippery slope of soliciting advisory opinions from national regulators regarding activities of contracted parties it is very difficult to draw the line on relevant jurisdictions.

The IPC Letter

As noted, the current situation was triggered by a March 27, 2015 letter from IPC President Gregory Shatan to Akram Atallah, President of ICANN’s Global Domain Division (GDD). It begins:

By this letter, the Intellectual Property Constituency is formally asking ICANN to halt the rollout of the .SUCKS new gTLD operated by Vox Populi Registry Inc. (“Vox Populi”), so that the community can examine the validity of Vox Populi’s recently announced plans to: (1) to categorize TMCH-registered marks as “premium names,” (2) charge exorbitant sums to brand owners who seek to secure a registration in .SUCKS, and (3) conspire with an (alleged) third party to “subsidize” a complaint site should brand owners fail to cooperate in Vox Populi’s shakedown scheme. The TMCH Sunrise period is an integral part of Vox Populi’s scheme, and is slated to open on March 30, 2015. Thus, we seek ICANN’s immediate action on this matter PRIOR to the launch of the .SUCKS TMCH Sunrise period.

Vox Populi has announced that it will charge trademark owners $2,499 and up to register domain names in the TMCH Sunrise period. Vox Populi’s incredibly high fees will prevent many trademark owners from being able to take advantage of the TMCH Sunrise period, a mandatory Rights Protection Mechanism (“RPM”) intended to protect the rights of trademark owners. This makes it more likely that trademark owners’ marks will be registered by cybersquatters for much lower (potentially subsidized) fees at the launch of general availability. We recognize that there could be significant non-infringing uses of .SUCKS domain names, and the goal of preventing the launch of .SUCKS under the current predatory scheme is in no way an attempt to stifle legitimate criticism of trademark owners. In fact, in some cases, legitimate criticism can be useful to TM owners in helping them improve their products and services and differentiating them from their competitors. However, by discouraging trademark owners from using a key RPM, we believe that the registry operator’s actions in establishing this predatory scheme are complicit in, and encourage bad faith registrations by third parties at the second level of the .SUCKS gTLD, and thus drastically increase the likelihood of trademark infringement, all for commercial gain.

Other key points made in the IPC letter (all exact quotes):

  • Faced with the concept of potentially hundreds of new gTLD registries each performing their own validations, intellectual property owners—through the Implementation Review Team (“IRT”) in 2009—introduced the notion of a Trademark Clearinghouse (“TMCH”) whereby their marks could be validated once for all of the new gTLDs, as opposed to countless times for each individual gTLD… Given that Registries no longer had to perform the validations (the most expensive part of registering Sunrise Domain names), it was believed by intellectual property owners that the costs of obtaining a Sunrise Registration would be substantially reduced.
  • For some new gTLDs, this turned out to be the case. In .NYC for example, the cost of a Sunrise Registration charged by the Registry to the Registrars was only an additional $15 above the cost of a normal registration. In most cases, however, new gTLD Registries continued to charge a few hundred dollars despite the fact that this did not represent a “cost recovery” pricing model. In essence, Registries were charging more simply because they could and they knew that some trademark owners would be forced to pay those exorbitant prices to protect their marks.

    In no case has this practice become more abusive than with respect to .SUCKS. Commencing on March 30, 2015, Vox Populi will charge trademark owners over 250 times more than what it will charge most ordinary consumers for domain names upon the launch of general availability.
  • Vox Populi’s strategy is obvious—to ensure that those trademark owners who have invested in protecting those trademarks by registering in the TMCH and registering domain names in other sunrise periods, and who are most likely to want to protect their trademarks by registering in .SUCKS, cannot avoid paying at least $2,499 per year, no matter when they register. This will have a chilling effect on TMCH registrations and consequently discredit all of the New gTLD Program RPMs in the eyes of brand owners, whose buy-in and adoption of new gTLDs is widely acknowledged to be critical to the success of the new gTLD program. Importantly, where brand owners are discouraged from using the TMCH due to this Registry Operator’s scheme, this will lead to additional cybersquatting, confusion and fraud in the domain name space, with significant effects on consumers as well as brand owners. In other words, Vox Populi’s predatory “get rich quick” scheme affects more than just its own registry; its actions threaten the integrity and validity of the TMCH and RPMs generally.
  • We believe that Vox Populi’s practices discussed above can best be described as predatory, exploitative and coercive. Not only does the intellectual property community believe this to be the case, even domain investors and industry insiders who rarely agree with intellectual property owners on anything, agree that this practice is punitive in nature and should not be accepted.
  • This scheme constitutes an abuse and a perversion of the mandatory RPMs approved by the ICANN community, solely to make money off the backs of brand owners, and appears to violate the Registry Agreement as well as numerous Consensus Policies. It creates a mockery of the new TLD process and calls into question the very ability of ICANN as an organization to be able to administer the new gTLD program. This issue is particularly timely, given the accountability debate in which ICANN is embroiled.
  • Finally, we recently learned of a peculiar (and apparently unique) provision in Vox Populi’s Registry Agreement. The .SUCKS Registry Agreement calls for Vox Populi to pay ICANN (i) a one-time fixed “registry access fee” of US$100,000 as of the Effective Date of the Agreement, and (ii) a “registry administration fee” of US$1.00 for each of the first 900,000 Transactions. Thus, if Vox Populi’s scheme succeeds, ICANN will receive $1 million more from .SUCKS than from any other registry with comparable success. The IPC is at a loss to understand why ICANN stands to receive this unique payout from .SUCKS. (Emphasis added)

These are extremely strong charges—but are still just amplifications and additional details of the concerns expressed by Senate Commerce Committee Chairman Jay Rockefeller a year prior. The major innovations introduced by .Sucks appear to be sunrise pricing that exceeds mere “cost recovery” to a degree that is far beyond the profiteering of other new gTLDs, and creation of a “Sunrise premium” list that targets TMCH names for high pricing regardless of when they are registered. The registry has also entered into a third party agreement with an Everything.Sucks entity that will be permitted to host unclaimed TMCH terms sold at far lower subsidized pricing to the general public.

.Sucks and Potential Trademark Infringement

This author is inclined to question the IPC’s concerns that a company or individual’s failure to secure relevant .Sucks domains during sunrise registration will lead to their acquisition for trademark infringing cybersquatting during general registration.

The traditional UDRP and new URS arbitration procedures offer potent and relatively low cost means for stopping activities at .Sucks domains that are used for infringement rather than the intended purpose of legitimate criticism. Besides, as one domain services provider observed, buying your company.sucks domain will be useless in preventing legitimate criticism websites:

Anybody who thinks this through will finally realize how ludicrous the idea is. If my company is doing something badly enough to warrant a protest domain, message board, discussion forum or protest website about us, they aren’t going to not do it because we already own the easyDNS.SUCKS domain.

If they really want to incorporate the name of our company and “sucks” into a domain name, there are now, thanks to ICANN, about 1000 other variations to choose among… There’s no heading it off, it’s just going to happen.

Many .Sucks registrations may in fact be doubly defensive—both for the rights holder and for its legal staff or advisors—not against infringement but acute embarrassment. As one brand protection expert told World Trademark Review:

“My personal view on ‘.sucks’ is that no brands should seek a sunrise registration. I’d like to see people boycotting that particular registry. If they did—and I realise that this is unlikely—then the registry model is not looking so good. I do recognise that that is a difficult thing when you are an in-house lawyer sitting within a company and know people will be screaming at you if a ‘.sucks’ registration on your brands then materialises. But from my perspective I’d like to see no one register in ‘.sucks’.” The reality, though, is that the concern over being screamed at is overriding cost anxieties - on the presumption that registrations are indeed defensive rather than viewed as an opportunity to host a discussion site centered on the respective brands.

Indeed, under the “WIPO Overview 2.0” published by the World Intellectual Property Organization for the guidance of legal experts presiding over UDRP domain disputes, legitimate criticism websites housed at .Sucks domains might readily withstand infringement charges—especially if registered by US-based entities. Here’s the relevant standard:

2.4 Can a criticism site generate rights and legitimate interests?

This section only concerns sites that practice genuine, noncommercial criticism. There are many UDRP decisions where the respondent argues that the domain name is being used for a free speech purpose but the panel finds that it is primarily a pretext for commercial advantage…In the event that a domain name identical or confusingly similar to a trademark is being used for a genuine noncommercial free speech website, there are two main views. In cases involving only US parties or the selection of a US mutual jurisdiction, panelists tend to adopt the reasoning in View 2 (though not universally).


View 1:

The right to criticize does not necessarily extend to registering and using a domain name that is identical or confusingly similar to the complainant’s trademark. That is especially the case if the respondent is using the trademark alone as the domain name (i.e., <trademark.tld>) as that may be understood by Internet users as impersonating the trademark owner. Where the domain name comprises the protected trademark plus an additional, typically derogatory term (e.g., <trademarksucks.tld>), some panels have applied View 2 below.


View 2:

Irrespective of whether the domain name as such connotes criticism, the respondent has a legitimate interest in using the trademark as part of the domain name of a criticism site if such use is fair and noncommercial. (Emphasis added)

This WIPO guidance also lists additional considerations that might weigh in favor of a .Sucks domain registrant, including whether “it is immediately apparent to Internet users visiting the website at the domain name that it is not operated by the owner of the mark” (as would likely be the case for a .Sucks domain featuring harsh criticism of a company or its products, or of a celebrity). That would be particularly true if most rights holder registrations of .Sucks domains are for the defensive purpose of keeping the website “dark” rather than using it as a platform for engagement with customers.

Overall, while the IPC protest is grounded in ostensible concerns about cybersquatting activities for trademark-related domains that are not defensively registered, it is quite possible that .Sucks websites being used for legitimate criticism would withstand UDRP arbitrations and even court proceedings alleging trademark infringement.

That doesn’t mean that Vox Populi’s business plan is entirely ethical, especially as it targets a list compiled through a new gTLD RPM for exorbitant registration fees—but rather than it might be viewed as an extreme form of a new species of brand cyberbullying possibly unaddressed by existing law.

Given these considerations, it seems more likely that the unprecedentedly high pricing set by this pejorative word gTLD was simply the straw that broke the camel’s back for an IP community that never supported the unlimited scope of the new gTLD program. Already frustrated by registry practices viewed as “predatory, exploitative and coercive”, they were, per the movie Network’s famous primal scream, sick and tired and weren’t going to take it anymore when .Sucks unveiled its pricing.

But that view raises a question for ICANN. Section 3.2 of the new gTLD Registry Agreement states:

Equitable Treatment. ICANN shall not apply standards, policies, procedures or practices arbitrarily, unjustifiably, or inequitably and shall not single out Registry Operator for disparate treatment unless justified by substantial and reasonable cause. (Emphasis added)

ICANN has clearly singled out .Sucks for disparate treatment by requesting that two national regulators opine on the legality of its operation, so what is the “substantial and reasonable cause” justifying that action? If it is the pricing of TMCH registered terms at levels substantially above “cost recovery” then many registries are doing the same, with .Sucks simply being more aggressive in that regard.

Additional ICANN Communications

In addition to Mr. Jeffrey’s letter to the US and Canadian regulators, other ICANN communications were issued in close proximity that provide further insights into the organization’s perspective on the .Sucks situation.

The first is an April 9th letter from GDD President Atallah to IPC President Shatan advising him of the communication to the FTC and OCA “asking them to consider assessing and determining whether Vox Populi is violating any laws or regulations enforced by their respective offices” and further stating that “should the FTC or the OCA make such a determination, ICANN could seek remedies pursuant to the registry agreement requiring Vox Populi to comply with applicable laws, and ICANN could take additional actions within the public interest and consistent with consumer and business protections to change the practices of the registry through our contractual provisions.” This appears to imply that if no such determination is made—and, as observed above, it is the US courts rather than the FTC which determines whether US laws are being broken—that ICANN’s hands may be tied in regard to taking additional actions in the public interest.

But is the public interest in the Domain Name System (DNS) satisfied solely by refraining from acts which are illegal, or does ICANN have a responsibility to act in the public interest and intervene against acts by contracted parties that are perceived by significant portions of its community and the general public to be of questionable ethicality; indeed, to be ““predatory, exploitative and coercive”?

Potential Use of the Section 7.6 Special Amendment Power or Contractual Remedies

In this regard, ICANN fought hard to obtain Section 7.6 (Amendments and Waivers) of the new gTLD Registry Agreement which provides its Board with the power to approve Special Amendments governing Applicable Registry Operators. Indeed, even if the Applicable Registry Operators reject the Special Amendment the Board can still adopt it if, among other requirements, it is “justified by a Substantial and Compelling Reason in the Public Interest”. The term “Substantial and Compelling Reason in the Public Interest” is defined to mean “a reason that is justified by an important, specific, and articulated public interest goal that is within ICANN’s mission and consistent with a balanced application of ICANN’s core values as defined in ICANN’s Bylaws”.

Is ICANN now taking the position that a Special Amendment curbing Vox Populi’s behavior will only be justified if third party regulators affirmatively find that behavior to be illegal? Or does this situation implicate important public interest goals that are broader than the four corners of law and regulation? As Mr. Jeffrey’s letter stated that “ICANN is also currently evaluating other remedies available under the registry agreement”, perhaps it is taking a broader view of the meaning of “Public Interest”.

A Section 7.6 Special Amendment could indeed address not just the alleged .Sucks shakedown but the substantially marked up prices of TMCH terms at other new gTLDs by limiting pricing to “cost recovery” plus a modest markup. That would return the TMCH to the status of an RPM that actually protects rights holders rather than targeting them for price gouging. Such an amendment would need to be narrowly drawn to prevent registry abuse of that RPM, while refraining from setting a broad precedent for ICANN to act as a price control or competition authority.

Another possible means of legal redress arises under Section 5.6 of the TMCH TOS, which states:

License for the Services. We grant you a limited, personal, non-commercial, non-exclusive, non- sublicensable, non-assignable license to access and use the Services. You will not access or use the Services or Clearinghouse Content for purposes other than those stated in this Agreement, the Functional Specifications or the TMCH Requirements. (Emphasis added)

If it were determined that Vox Populi is in breach of this restriction on the use of TMCH content by using that data for objectionable pricing purposes then ICANN might have grounds for determining that it is in breach of Section 1 of Specification 7 of the Registry Agreement requiring that, “Registry Operator shall implement and adhere to the rights protection mechanisms (“RPMs”) specified in this Specification”, including the requirements of the TMCH.

What contractual means of addressing this situation is ICANN considering, and will the Board consider a Special Amendment if none can be found? Time will tell—not that much time remains before the .Sucks floodgates open wide.

Absence of New gTLD Price Limitations

The Atallah letter continues with a discussion of why there are no pricing limitations for new gTLDs:

As you will recall, there was extensive discussion of whether price caps or controls should be included in new gTLD registry agreements when the new gTLD program was formulated. In furtherance of such discussions, ICANN engaged an expert economic consultant to study the issue. The expert concluded that price caps or ceilings were not necessary or desirable, that the imposition of price caps might inhibit the development and marketplace acceptance of new gTLDs, and that trademark holders rights could be protected through alternate rights protection mechanisms, such as the Uniform Rapid Suspension System (URS), the Uniform Domain Name Dispute Resolution Policy (UDRP), or the trademark post-delegation dispute resolution procedure (Trademark PDDRP), which you reference in your letter. Both before and after the study was released, this issue was thoroughly discussed and debated by the members of the global multistakeholder community, and ultimately the determination was made not to impose price caps or price controls in the new gTLD registry agreements.

Left unstated in that explanation is that many in the community felt that the economic studies that ICANN commissioned in conjunction with the new gTLD program were less than rigorous, especially those justifying a program of unlimited dimensions. Should the decision to refrain from pricing limitations be revisited now that experience has shown that many registries are targeting TMCH terms for high prices?
This response also fails to mention the TMCH or express any concern that one of the two key rights protection mechanisms (RPMs—the other being URS) is being used to target trademark owners for exorbitant fees rather than providing broad protection. One can safely wager that price limits on registration fees charged for TMCH-registered terms will likely be a focus of debate as revisions of the gTLD program are discussed in contemplation of a second round.

Finally, the Atallah letter attempts to explain the “peculiar (and apparently unique) provision in Vox Populi’s Registry Agreement” unearthed by the IPC, resulting in potential additional fees of $1 million going to ICANN. It states:

I would like to address your question about certain specific contractual provisions in the .SUCKS registry agreement relating to fees payable to ICANN. As we have publicly stated on this issue, during the due diligence phase regarding this application and preparation for contracting, we noted that some affiliates of Momentous, which is the majority owner of Vox Populi Registry, had previously defaulted on payments to ICANN. Although these previous related company defaults did not give us authority to reject entering into an agreement with a Momentous affiliated company, given this previous experience, ICANN requested and negotiated special contract provisions in the Vox Populi registry agreement to provide additional financial assurances. Those provisions were added solely for that reason and were not related to the nature of this specific TLD.

That rationale still leaves room for many to believe that ICANN should have rejected this application based upon the applicant’s past history of non-payment, and that ICANN is now seeking to recover past due monies owed by registrar affiliates of Momentous from this new registry, with Vox Populi likely building those additional costs into its domain pricing model. After all, these “additional financial assurances” are designed to extract funds from Vox Populi that are substantially larger than the standard fees charged to new gTLD registries. It would also be useful to know whether these “financial assurances” provisions were approved at the staff or Board level.

As one trademark publication observed:

However, this explanation itself throws up some additional questions. ICANN doesn’t explicitly say that the additional fees were negotiated to make up previous losses, but rather suggests that they were designed to provide additional financial assurances with regards Vox Populi. Yet applicants are required to implement a ‘continued operations instrument’ to ensure that key registry functions will continue in the event that a registry fails, such instruments taking the form of deposits into an escrow account or a letter of credit from a financial institution. Was this, therefore, not enough in Vox Populi’s case? In many respects, applicants should be treated equally but in this instance the registry was subject to additional financial requirements. Importantly, one could argue that a by-product of additional payments to ICANN (which could ultimately add up to $1 million) is higher registration fees as it would then make commercial sense for Vox Populi to seek to recoup these costs from customers.

The Grogan Blog

The final portion of ICANN’s trifecta of .Sucks explanations and actions is an April 9th blog post, “Beyond the Contract: Partnering to Strengthen Business and Consumer Protections”, by Allen Grogan, ICANN’s Chief Contract Compliance Officer.

It explains:

ICANN’s enforcement ability lies within a contractual framework. We can enforce the terms and conditions of our contracts with registries, but it is the responsibility of governmental regulatory agencies, law enforcement and the courts to police illegal activity. ICANN is not a regulator and we have limited expertise or authority to assess the legality of Vox Populi’s activities…

When I was appointed to the position of Chief Contract Compliance Officer last October, I made a commitment to look for ways that ICANN can help safeguard Internet users and registrants that may go beyond the contractual enforcement tasks for which we are responsible. Asking the FTC and OCA for their assistance in this matter is one example of how we can work with others to strengthen our consumer and business protections and enhance our ability to meet public interest goals. Let’s continue to work together as a multistakeholder community to build trust and advance the reputation of our industry.

As can be seen, the outreach to the FTC and OCA is characterized as going beyond contractual enforcement, but so far ICANN has abstained from asserting any breach for which it could seek enforcement. And this again begs the question of what the scope is of the public interest that ICANN can be trusted to safeguard.

Meantime, in the wake of these actions and explanations, domain registrations at .Sucks continue apace. As one publication reported on April 7th:

Amongst the recent registrations highlighted on the registry’s website this morning are: ‘adp’, ‘aflac’, ‘andreessenhorowitz’, ‘applestore’, ‘baml’, ‘benefitsonline’, ‘bet365’, ‘bce’, ‘blogger’, ‘cam4’, ‘cargill’,  ‘cashmanagementaccount’, ‘classen’, ‘converse’, ‘countrywide’, ‘dollarbank’, ‘finalcutpro’, ‘gumtree’, ‘hamptonbay’, ‘hdx’, ‘hollandamerica’, ‘homedecoratorcollections’, ‘homedepot’, ‘hotmail’, ‘intuit’, ‘ipodtouch’, ‘kijiji’, ‘kohler’, ‘landsafe’,  ‘lifesbetterwhenwereconnected’, ‘lillypulitzer’, ‘loquo’, ‘mac’, ‘macintosh’, ‘mantis’, ‘merrilllynchwealthmanagement’, ‘msn’, ‘nokia’, ‘patagonia’, ‘samsclub’, ‘sidley-austin’, ‘siri’, ‘slalom’, ‘smartmatic’, ‘standardbank’, ‘sunbrella’, ‘telusmobility’, ‘surface’, ‘telus’, ‘traderinstinct’, ‘trafficmaster’, ‘tsn’, ‘ufc’, ‘ustrust’, ‘veranda’, ‘vissani’, ‘wellsfargo’, ‘windowsphone’, ‘wordpress’ and ‘xbox’. Over on Domain Incite, Kevin Murphy identifies other brands which have been registered, including Instagram, WordPress, Bank of America and Wal-Mart, and celebrities such as Kevin Spacey and Taylor Swift… staying with finances, the registrations to date will have made a healthy contribution to Vox Populi Registry’s balance sheet. Just the 65 registrations mentioned above, using the registry’s $1,999 portion of the sunrise registration fee, will have resulted in a $129,935 contribution to the company’s coffers. Responding to the current level of registrations, [.Sucks CEO] Berard told World Trademark Review: “The sunrise registration numbers are strong, consistent and beyond my modest expectations.”

So the good news for .Sucks is that the money is pouring in. The bad news is that it may be needed for legal defense fees.

Yet this is a brash registry that has issued a promotional video that invokes the legacy of Martin Luther King and features the endorsement of longtime consumer advocate and marginal past U.S. Presidential candidate Ralph Nader, and continues to feature it notwithstanding harsh criticism. One should anticipate that its defensive actions won’t suck when it comes to tenacity.

The March 2014 Rockefeller .Sucks Letter

It was hardly a secret that the proposed gTLD was quite controversial. Indeed, On March 12, 2014 Sen. Jay Rockefeller, the then-Chairman of the U.S. Senate Commerce Committee, issued a press release in which he “expressed his concern about allowing websites to use names that end in “.sucks”, explaining that the only apparent purpose of these websites is to extract “defensive registration” payments from Internet users, and unfairly defame individuals, non-profit organizations, and businesses”. That letter was sent just two days prior to NTIA’s announcement that it intended to transition IANA functions stewardship to the global multistakeholder community, so ICANN might have been particularly sensitive to the views of US lawmakers that week.

In a contemporaneous letter sent to ICANN Board Chairman Steve Crocker, Rockefeller opined:

I believe any potential this gTLD might have to increase choice or competition in the domain name space is overwhelmed by the ways it will be used to unfairly defame individuals, non-profit organizations, and businesses. It is clear that the companies competing to operate this gTLD view it primarily as an opportunity to generate income through “defensive registrations.” In my opinion, it is not in the public interest to approve this gTLD.

Approving “sucks”, a gTLD with little or no public interest value, will have the effect of undermining the credibility ICANN has slowly been building with skeptical stakeholders. Three companies—Donuts Inc., Momentous Corporation, and Top Level Spectrum Inc.—have applied for this gTLD, claiming that it will foster debate and benefit consumers. I view it as little more than a predatory shakedown scheme. The business model behind this gTLD seems to be the following: force large corporations, small businesses, non-profits, and even individuals, to pay ongoing fees to prevent seeing the phrase “sucks” appended to their names on the Internet.

... One applicant, for example, Vox Populi Registry, owned by the Canadian company Momentous, has started soliciting defensive registrations before it has even secured the right to operate the “sucks” gTLD. According to its website, the company is accepting payments of $2,500 for trademark reservation, which will rise to $25,000 during a 30-day sunrise period and remain at that level annually for trademark owner. Vox Populi claims that the reduced $2,500 fee is a bargain, saying that “Incurring registration fees of $25,000 in Sunrise is a waiting game not worth the prize.”

As a committed supporter of the multi-stakeholder model of global Internet governance, I feel a responsibility to speak up when I see ICANN considering steps that could damage its reputation. A gTLD like “sucks” has little or no socially redeeming value and it reinforces many people’s fears that the purpose of gTLD expansion is to enrich the domain name industry rather than benefit the broader community of Internet users. I respectfully request that you consider my comments as you review this application. (Emphasis added)

So why did ICANN allow .Sucks to proceed to delegation despite Chairman Rockefeller’s charge that the gTLD was “little more than a predatory shakedown scheme” in March 2014, yet solicit the views of two national consumer protection regulators after receipt of a letter from ICANN’s Intellectual Property Constituency (IPC) making essentially the same charge one year later? (While Vox Populi has moderated its pricing of “standard” Trademark Clearinghouse terms to only $2499 per year since the $25,000 solicitation referenced by the Senator, it has placed no price limit on “Premium” TMCH terms purchased at any time.)

ICANN’s decision to let a year pass without considering whether action was required to prevent perceived abuses by .Sucks, and protect its own reputation as well as that of the new gTLD program, is symptomatic of an organization mindset that tends to sweep problems under the rug or kick them down the road rather than proactively engage to defuse problems before they reach critical mass, and that then pleads helplessness while asking others to assume responsibility. Regardless of what enhanced accountability measures are recommended to accompany the IANA functions transition, until ICANN cultivates a culture of accountability it is unlikely to be fully effective in instilling the sense of responsibility that reduces the need for community-imposed restraints.

(Part II of this article explores additional ramifications of ICANN’s decision to request two national regulators to review the legality of the .Sucks registry’s operation.)

By Philip S. Corwin, Senior Director and Policy Counsel at Verisign

He also serves as Of Counsel to the IP-centric law firm of Greenberg & Lieberman. Views expressed in this article are solely his own.

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