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Donuts demands $22.5 million for .Web domain name

Company amends lawsuit against ICANN and demands “its share” of the proceeds.

New top level domain company Donuts is continuing its battle with ICANN over .web, filing an amended complaint (pdf) in federal district court in California.

Donuts is complaining that the auction for .web, which closed for $135 million, should not have gone forward because there was a change of control at applicant Nu Dot Co.

The company suspected that another company was bankrolling Nu Dot Co’s application.

It was right. At some point, Verisign struck an agreement with Nu Dot Co, which won the auction. Nu Dot Co plans to assign rights in .web to Verisign at some point in the future, pending ICANN’s approval.

Donuts is miffed on a couple of counts.

First, Nu Dot Co/Verisign decided to force the auction to an ICANN auction of last resort. This means that the proceeds go to an ICANN account that will be spent on an as-yet-undetermined use. Donuts’ updated lawsuit demands $22.5 million plus interest in damages, which is how much it would have received had the auction been private and still closed for $135 million. It says ICANN ignored the changes at Nu Dot Co because ICANN wanted its piece of the action.

Second, it’s upset that Verisign is getting .web. It alleges that Verisign did a back door deal with Nu Dot Co because it was worried about U.S. anticompetitive action or increased scrutiny of the Verisign Cooperative Agreement with the Department of Commerce.

Whether or not Donuts has points in its case, I seriously doubt two things:

1. I doubt ICANN didn’t take action over Nu Dot Co’s application because it wanted the money. It doesn’t want the money or the scrutiny. The community is currently deciding how to spend the money.

2. I doubt Verisign has been involved with Nu Dot Co’s bid from the get-go to avoid U.S. oversight. I suspect it came up with the idea to get involved later on, perhaps based on how the new TLD program was progressing. The fact that Neestar is the backend registry for .web, which Verisign will have to pay to switch, is exhibit A to prove this.

Of course, discovery might prove me wrong.

Kevin Murphy made another interesting point about this kerfuffle: What Verisign did doesn’t seem too different from what Donuts did with Rightside for its “Covered TLD LLC” strings. It had a deal to transfer certain domains to Rightside.

Top level domain names are designed to be bought and sold, and ICANN has made provisions for this. Donuts recently offered to buy Rightside’s portfolio, after all.

Presumably, ICANN’s process for evaluating transfers of ownership of strings is robust. If not, then the community messed up when it approved the Applicant Guidebook.

Verisign and Nu Dot Co are not named in the suit.

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