ICANN files response in Donuts lawsuit

ICANN reiterates that Donuts agreed not to sue.

ICANN has filed its response in Donuts’ appeal of a lawsuit to the U.S. Court of Appeals, 9th District.

The lawsuit stems from the $135 million auction for .web. Donuts was one of seven applicants for the domain name. One applicant, Nu Dot Co, decided that it did not want to hold a private auction for the domain name, thus forcing ICANN to hold an “auction of last resort” for .web.

This was a big financial blow for Donuts. In a private auction, the losers split the proceeds. If a private auction concluded for $135 million, Donuts would have received over $20 million.

Donuts said that Nu Dot Co had a change of control that required updating its application. It turns out that Verisign struck a deal with Nu Dot Co to fund its auction in return for Nu Dot Co assigning rights to .web after it won and entered into a contract with ICANN.

Nu Dot Co denied any change of control. ICANN investigated and came to the same conclusion. It seems that the deal was similar to some others in which Nu Dot Co and Verisign agreed to a transfer deal that would take place after a contract was signed with ICANN.

After going through ICANN’s normal accountability mechanisms, Donuts sued. A district court rejected the claims because Donuts agreed not to sue ICANN when it applied for top level domain names. Donuts appealed.

In ICANN’s response, entered into the docket yesterday, the non-profit states:

Throughout the process, ICANN followed the letter and spirit of the agreed-upon procedures. [Donuts company] Ruby Glen, on the other hand, has taken several steps aimed at highjacking the process for its own financial gain, not the least being this lawsuit, which violates the parties’ agreement to resolve disagreements through alternative dispute resolution mechanisms, not litigation.

The answering brief says that Donuts brought up several new arguments in its appeal but argues that none of them apply to the case.

Even if ICANN prevails, the appeal will take a long time to resolve. The 9th circuit’s median time from filing a notice of appeal to disposition is 13.3 months.

Meanwhile, the Antitrust Division of the U.S. Department of Justice is still investigating Verisign’s plans to run .web.