Company believes covenant not to sue is invalid.
New top level domain name company Donuts, through its company Ruby Glen, LLC, filed its opening brief (pdf) last week in an appeal over the .web domain name.
Donuts was one of the applicants for the .web domain name. Nu Dot Co won the auction for $135 million after Verisign struck a deal with it to transfer the ICANN agreement for .web to it after the auction.
The runner up in the auction was Afilias, not Donuts, but Donuts was upset that Nu Dot Co wouldn’t participate in a private auction for the domain name. Instead, Nu Dot Co pushed it to an ICANN “auction of last resort”. Had the auction been private, Donuts would have received about a $22.5 million payoff for losing.
Donuts went through ICANN’s normal appeals channels. When that failed, it sued ICANN in District court. The judge tossed out the suit because the application for new TLDs included a clause that the applicants would not sue ICANN. Donuts argues that this agreement not to sue (called an exculpatory clause) is invalid, as it writes in its opening brief:
The district court’s ruling was in error because: (1) the Exculpatory Clauses, when strictly construed, do not apply to the claims asserted in the FAC; (2) the parties’ agreement involves a matter of public interest, which renders the Exculpatory Clauses void under California common law; (3) the Exculpatory Clauses are void on their face pursuant to California Code of Civil Procedure section 1668 (“Section 1668”) because they release ICANN from intentional misconduct, gross negligence, and intentional or willful violations of the law; (4) Ruby Glen’s second (tortious breach) and fourth (unfair business practices) causes of action specifically allege intentional misconduct, rendering the Exculpatory Clauses void as applied to each claim; (5) the enforcement of the Exculpatory Clauses to the first cause of action (breach of contract) would render the parties’ agreement illusory; and (6) Ruby Glen should have been afforded at least one opportunity by the district court to amend its pleading.
Donuts’ appeal seems to be largely about trying to get a pay off for losing the auction. It didn’t challenge a previous deal similar to what Verisign did with Nu Dot Co when an Automattic-affiliated company struck a deal for .blog. That auction was private and Donuts received a share of the proceeds. Additionally, Donuts had a somewhat similar deal with Rightside (a competitor that it later acquired) to transfer domains after the auctions.
While money is a big reason for challenging the auction, it has the side benefit of delaying the rollout of .web, a competitor to Donuts’ 240 top level domain names.
If read this right, it doesn’t care what Verisign did to win .web. All it wants is to get a piece of that 135 million. Isn’t it? In that case, assuming that that the DOJ’s CIS is cleared, how this appeal delay .web launch?
I just looked at that brief again. It actually is contending verisign’s deal with NDC rather than auction benefits share. What do you think?
Andrew Allemann says
Yeah, because they want the domain to have to be re-auctioned. If Verisign is out of the mix then Nu Dot Co would probably agree to a private auction. They can’t sue ICANN for a split of the proceeds.
Verisign out of the mix ??!! :). No way.. They will fight this tooth and nail. .web is the biggest threat to .com/.net. Going by the history, this case will go nowhere. It looks like, ICANN made all the legal clauses needed in the agreement that are going to protect them in such petitions. Moreover, records indicate “motion to reconsider” will be denied more than 65% of the times.
.web will crush a lot of new extensions.
Yep, and it won’t take much to crush a donut.
Any timeline set for next step?
Can someone explain this to me like i am a 7 years old?
Because I dont get it.
This another company backed Auction has happened before as with .blog
Donuts was happy with that, along with others similar deal.
Then there is this “received a share of the proceeds.” What is that?
So they are basically saying paid me and i will shut up?
Because I am reading like there is a bunch of losers who are not happy because they lost and decide go to court. This is worst then trolls.
Donuts chucked a tanty and ran to mommy crying saying it’s ‘not fair’.
Andrew Allemann says
The court granted ICANN an extension for filing the reply. Now due at the end of October.
Well its End of October now.
Andrew Allemann says
I checked Friday morning and there was nothing yet. Will check again Monday.