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ICA Statement on ADO.com UDRP Decision: Overreaching Panelists and Interference With Domain Market

[UPDATE: On December 21, 2018, the US District Court for the District of Colorado ordered that WIPO vacate the UDRP decision, with the UDRP complainant acknowledging in a settlement that “Plaintiff’s interests in respect of the ado.com are legitimate; Plaintiff did not register or use the ado.com domain name in bad faith; and Plaintiff’s registration and current use do not violate Defendant’s rights under the ACPA”. Accordingly, the ado.com domain name remains with the rightful registrant and the wrongful UDRP decision has now been set aside. The ICA is pleased that this wrongful transfer order has been reversed and that justice has prevailed. The ICA hopes and expects that UDRP panelists will learn from this outcome and in the future, refrain from issuing unsupported, speculative, and incorrect decisions that purport to take away a rightful owner’s valuable property and interfere with the lawful domain name marketplace. See: Ado.com domain dispute settled]

In the recent ado.com UDRP decision, [1] the panel made the speculative and factually incorrect finding that a “high” asking price indicated bad faith targeting of a trademark. The UDRP is intended to address clear-cut cases of cybersquatting, not to second guess the asking prices set on inherently valuable domains in an open and competitive marketplace. This overreaching decision undermines ownership rights to domain names as an investment asset class and destabilizes the multi-billion-dollar aftermarket in domain names.

A well-functioning UDRP requires that UDRP panelists exercise decisional restraint, stick to the evidence rather than relying on speculation and follow the Policy itself. Overall, the UDRP works well because most panelists fulfill their duties and obligations admirably and exercise sound judgment. These panelists are the unsung heroes of the UDRP. They have enabled the policy to be used successfully for the adjudication of tens of thousands of domain name disputes since its inception in 1999.

On the other hand, panelists who overreach and attempt to unilaterally expand the scope of the UDRP or introduce radical departures from the Policy bring the UDRP into disrepute and undermine its integrity. A panelist’s mandate is to order a transfer in “clear cases of abusive domain name registrations.” [2] He or she is not expected to be able to determine the rightful outcome of all cases since some cases, particularly where the facts are disputed, or there are complex legal issues, are best left to the courts.

In Autobuses de Oriente ADO, S.A. de C.V. v. Private Registration / Francois Carrillo, WIPO Case No. D2017-1661, Respondent, Mr. Carrillo, a well-known domain investor residing in France, operated Catchy.com which offered catchy, short domains available for purchase. The Complainant was a Mexican bus company which is only one of dozens of commercial users of the term “ado” throughout the world. Mr. Carrillo never contacted the Complainant but rather offered ado.com for sale for $500,000 via his website. His site also offered several four-letter dot-com domains for sale at prices ranging from $20,000 to $80,000.

The Panel erred in using the asking price of ado.com as compelling evidence of bad faith. The panel compared the asking price of ado.com to the asking prices of four-letter domains, opining that the advertised asking price of USD $500,000 was “so much higher than the respondent paid for the domain name and was so much higher in comparison with the respondent’s four-letter domain names”, that it must have been registered and used in bad faith. The panel apparently expected ado.com, an extremely rare and particularly sought-after three-letter dictionary-word dot-com domain, [3] to be priced in the same range as meaningless four-letter domains, also offered for sale on Catchy.com, which are vastly more abundant and not nearly as desirable. In drawing this conclusion, the panel revealed its ignorance of domain name values and exemplified the danger of panelists using their personal and highly subjective views as a basis for finding bad faith. The price disparity accurately reflected market conditions, and not, as the panel found, evidence that the domain owner was targeting the Complainant’s relatively obscure trademark.

There have been dozens of sales of three-letter dot-com domains at the six-figure level and higher to companies with no trademark rights to the matching acronym, demonstrating that such domains have an intrinsic value at the six-figure level. An asking price in the six-figure range is not, therefore, an indication that the price was set to profit from the goodwill created by any particular trademark owner. Ironically, the panel’s determination that the $500,000 asking price was “too high” was demonstrated to be wholly erroneous on the very day that the ado.com decision was published, for that same day a leading domain name aftermarket announced that it had sold the three-letter dot-com domain name, dax.com, for $500,000. [4]

The panel also relied on a finding of logo similarity to find bad faith, but the logos are not similar. The panel made the perplexing finding that a mockup logo that the respondent used for promoting his domain name for sale, was “so similar” to the complainant’s logo as to serve as “evidence” of bad faith use—this despite the logos being entirely dissimilar except for both being colored red, and despite the evidence that there were other parties who also used red in their own ‘ADO’ logos, for their own, unrelated businesses. The reader can determine for him or herself whether Mr. Carrillo’s logo, on the left, indicates an attempt to pass off as the Complainant’s logo, on the right.

An in-depth analysis of the many flaws in this “decision that is inconsistent with UDRP jurisprudence” is provided by Mr. Gerald Levine, a close observer of the UDRP and a leading domain name legal scholar, in his article entitled “What’s so outrageous about asking high prices for domain names?” [5]. As Mr. Levine noted:

Unfortunately, the Panel in Autobuses de Oriente was also persuaded by false facts masquerading as elements (namely prices) and by incoherent reasoning of similarity of logos… It should not be a Panel’s role to determine that a price is too high. (emphasis added).

Ado.com, an intrinsically valuable three-letter dictionary-word domain name, was ordered transferred largely based upon the highly speculative and factually unsupported finding that a “high asking price” indicated bad faith. This decision potentially destabilizes the important secondary market in domain names by holding that the mere offering of a domain for sale at a market price set by the seller can be used as justification to seize the domain name under the UDRP. The role of the UDRP is to provide a remedy for clear-cut cases of cybersquatting and not to wade into domain name pricing in the absence of clear evidence of bad faith registration and use. Making an inferential leap that an asking price for a dictionary word-domain name is “so high” that it necessarily means that a particular trademark owner was targeted, does not constitute a “clear cut case” of cybersquatting that the Policy is intended to address. Rather, it is at most, an unclear and speculative case where a panel ought to dismiss a complaint in the absence of clear evidence of targeting.

ICA and our domain investor members are concerned about the impact of the ado.com decision on domain name investments. Lawful domain name investors rightfully fear that complainants, abetted by some panelists, will increasingly use the UDRP as an alternative to negotiating in good faith for the acquisition of a valuable intangible asset. Morgan Linton, [6] a successful entrepreneur who is also a domain investor, raises just these concerns in a recent article. [7] He points out that businesses can invest in other assets secure in their ownership rights, but a business that invests in domain assets could face substantial losses due to the risk of loss from unjust UDRP decisions.

Now let’s turn to domains names. If you put $100,000 into a domain name that we’d all agree is worth $500,000, and that past sales data shows could even sell for more… you could lose that domain in a UDRP and be left with nothing a month after you buy it. That’s a real risk… I think we should be honest about the risks and the realities of the flaws that exist UDRPs and the real threat it poses to domain names as an asset class…

So here’s the question—can we create an environment where investors can put $100,000 or more into a single domain name and know that asset will be protected like it is with stocks, bonds, mutual funds and real estate? What can we do as an industry to improve the process and take the risk out of owning six and seven figure domain names?

The ado.com panel’s decision to use the offer price as a primary reason for terminating ownership rights jeopardizes the foundation of the global market in generic and non-infringing domain names, whose lawful participants range from individuals to Fortune 1000 companies. [8] Where a domain has inherent value due to its innate characteristics, and there is insufficient evidence that the domain name was registered to target a complainant’s trademark, as in ado.com, a complainant will not have met its burden, and the panel should be obliged to dismiss the complaint. Otherwise, such new and radical reinterpretations of the UDRP pose a risk to investment domains by turning the policy into a tool for reallocation of lawfully acquired intangible assets—as opposed to holding true to the UDRP’s purpose of remedying clear-cut cases of cybersquatting.

When examining how it came to be that the panel in ado.com stretched to justify a transfer based on mere (and incorrect) speculation despite the apparent lack of evidence, one cannot help but look at the panel’s record in other cases. Two of the ado.com panelists have a history of advancing radical interpretations of the Policy. This may be because both are in their own ways authors of the UDRP, and may, unfortunately, see themselves not merely as the usual panelists charged with strictly applying the Policy, but as adept policy makers who are able to improve upon the Policy by shaping the way which it is interpreted through their role as panelists. One of the ado.com panelists is the lead authors of one of the founding documents of the UDRP, as he was the lead author of WIPO’s draft version of the UDRP. When sitting as a panelist in the Camilla.com UDRP dispute, [9] he found “bad faith” registration even though the domain name was registered before the Complainant had trademark rights—a chronological impossibility. He further imposed a responsibility on domain owners to search the globe for newly formed trademark rights so as to avoid any inadvertent infringing use, an impossible standard that is found nowhere in the Policy and which has been rejected by other panelists. The ICA issued a Statement [10] decrying the new and unprecedented standards invented by the Panel in the Camilla.com dispute. The domain owner was forced to sue to protect its rights from this misconceived decision, which was subsequently vacated by the Federal Court.

One of the other ado.com panelists previously ordered the transfer of the big5.com domain name despite the domain name being registered before the complainant had trademark rights, therefore making it (like in Camilla.com) an impossibility that it was registered in bad faith. The panelist’s theory that “later use can convert a good faith registration into a bad faith registration” is now a widely derided and universally discredited [11] misinterpretation of the Policy, known as the “retroactive bad faith” or “RBF” doctrine. In his role as a lead editor of the WIPO’s Consensus View, he included ‘Retroactive Bad Faith” in Version 2.0, [12] despite it being merely a radical and minority-held position, thereby indirectly encouraging complainants to bring meritless cases [13] which relied upon this now discredited doctrine.

This panelist also signed his name to the flawed decision in CEAT.com, [14] where his decision has been criticized for “twisting the language of the Policy” [15] to justify a finding that a public offer to sell a short, inherently valuable four-letter domain was evidence of bad faith targeting of an Indian tire company. He was also on the panel that issued the flawed decision in Hayward.com, where a city domain purchased for $20,000 by an investor in city-domains [16] was ordered transferred based on some de minimis ad links and, as with the ado.com decision because the panel thought the asking price was too high.

Finally, the Panel finds it informative—though not decisive—that, according to documents in the record, Respondent purchased the domain name hayward.com for USD$20,000 and was attempting to sell it for at least USD$100,000. These figures would seem to indicate that Respondent saw some value in this domain name for reasons other than its existence as the name of the city of Hayward, California—with a population of only about 150,000 people. [17]

The “scary” [18] decision in Hayward.com caused great concern among the domain investment community. A complainant’s counsel asked in regard to the decision, “Do Panelists even know how to value domain names?” [19]

What all of these aforementioned decisions have in common with the ado.com case (aside from the panelists), is that each one ordered the transfer of a valuable domain name despite a lack of clear-cut evidence of bad faith registration and use. This suggests that the panelists expanded their proper mandate by illegitimately failing to confine their transfer orders to clear-cut cases, and thereby purported to expand the scope of the Policy and attempted to introduce their own novel theories. In Camilla.com and Big5.com, the respective domain names were transferred despite no evidence of bad faith registration. In Ceat.com, Hayward.com, and Ado.com, the respective domain names were transferred despite no evidence beyond mere highly subjective inference by the panel, that there was bad faith registration and use. Moreover, the latter cases departed from the well-established case law that a registrant has the right to sell a domain name for whatever price he deems appropriate regardless of the value that a complainant or an appraiser may ascribe to the domain name. The two leading cases for this principle happen to be cases decided by one of the three panelists on the ado.com case, which makes this panel’s decision all the more unfathomable and concerning, since one of the panelists departed from his own original view which was consistent with the consensus amongst panelists. [20] The owners of the Camilla.com, Hayward.com and ado.com domains were forced to file in Federal Court to protect their rights and to seek the just outcomes they were denied by overreaching panelists in the UDRP proceedings.

The UDRP is at its finest when panelists generally respect established consensus interpretations and generally follow precedent from past decisions, as thereby parties are afforded uniform, consistent, and predictable results. When panelists stray from established approaches to cases, they are in effect attempting to unilaterally entrench their own particular subjective interpretations of the Policy outside of the well-established and proper ICANN policy development process. Whatever shortcomings that a panelist may feel the UDRP has, or whatever improvements or new policies the panelist feels should be made, panelists must studiously support the UDRP’s success by having it remain a stable and trustworthy regime for the adjudication of disputes, rather than a sand box for experimentation and unilateral changes. Changes to the UDRP, if any, should only occur within the well-established parameters of the ICANN policy development process which painstakingly takes into account all stakeholder perspectives in order to maintain a fair and reputable dispute resolution system.

[1] Autobuses de Oriente ADO, S.A. de C.V. v. Private Registration / Francois Carrillo

[2]See for example; The Final Report of the WIPO Internet Domain Name Process of April 30, 1999 at 315; see also ICANN Second Staff Report on Implementation Documents for the UDRP, dated, October 24, 1999, at 315; also see WIPO, “The Uniform Domain Name Dispute Resolution Policy and WIPO, August 2011, “prepared by the WIPO Arbitration and Mediation Center in August 2011 to provide an overview of the Uniform Domain Name Dispute Resolution Policy and WIPO’s role in relation thereto, for the purpose of informing discussion at the September 2011 INTA Conference on Trademarks and the Internet”, at Page 2; See also, World Trademark Review, February 7, 2017, “The UDRP: a dispute resolution policy to stand the test of time?”.

[3] Other three-letter, dictionary-word dot-com domains names have sold for $500,000 and higher, including act.com for $500,000, hot.com for $850,000, fix.com for $850,000, and sky.com, guy.com, zip.com and fly.com all for $1 million or more. See https://namebio.com/?s==EjN1czMzYTM

[4] See: https://domaininvesting.com/dax-com-sold-via-sedo-500000/

[5] See: Levine, Gerald, “What’s So Outrageous Asking High Prices for Domain Names”, CircleID, February 12, 2018.

[6] Morgan Linton’s LinkedIn profile: https://www.linkedin.com/in/morganlinton/

[7] See: https://morganlinton.com/are-six-figure-domain-names-a-risky-investment/

[8] See for example; https://domaininvesting.com/namescon-keynote-godaddys-paul-nicks/.

[9] See: http://www.wipo.int/amc/en/domains/decisions/text/2015/d2015-1593.html

[10] See: Domain Name Wire “ICA issues statement on horrible Camilla.com UDRP decision (https://domainnamewire.com/2015/12/11/ica-camilla-com/)

[11] See: CircleID “The Rise and Fall of the UDRP Theory of ‘Retroactive Bad Faith’

[12] See: WIPO Overview of WIPO Panel Views on Selected UDRP Questions, Second Edition (“WIPO Overview 2.0”) (http://www.wipo.int/amc/en/domains/search/overview2.0/#31)

[13] See: CircleID “Why the Record Number of Reverse Domain Name Hijacking UDRP Filings in 2016?

[14] http://www.wipo.int/amc/en/domains/search/text.jsp?case=D2011-1981

[15] See: DomainInvesting.com “Paul Keating: What Does ceat.com UDRP Teach Us?” (https://domaininvesting.com/paul-keating-what-does-ceat-com-udrp-teach-us/)

[16] See: DomainNameWire, “SantaRosa.com Sells for $75k, Sedo Sells .de Domain for $118k” (https://domainnamewire.com/2008/09/16/santarosacom-sells-for-75k-sedo-sells-de-domain-for-118000-eur/)

[17] http://www.wipo.int/amc/en/domains/decisions/html/2009/d2009-1493.html

[18] See: TheDomains: “WIPO Takes Away a Geo Domain; Hayward.com Putting It On Our Worst of 2010 List”, (https://www.thedomains.com/2010/02/09/wipo-takes-away-a-geo-domain-hayward-com-putting-it-on-our-worst-of-2010-list/)

[19] http://www.trademarktitan.com/2010/02/recent-udrp-decision-shakes-domainer-community-hayward-industries-inc-v-webquest-com-inc/

[20] See Etam, plc v. Alberta Hot Rods, WIPO Case No. D2000-1654; a registrant is entitled to offer its business asset for sale at market price and this is not bad faith; and also see Personally Cool Inc. v. Name Administration Inc., NAF Claim Number: FA1212001474325; a domain name registrant has the right to sell a domain name for whatever price he deems appropriate regardless of the value that Complainant or an appraiser may ascribe to the domain name.

By Internet Commerce Association, Non-Profit Trade Organization Representing Domain Name Owners

Founded in 2006, the Internet Commerce Association (ICA) is a non-profit trade organization representing domain name investors, website developers and related companies.

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