Independent Review Panel says appeal was frivolous and orders it to pay ICANN’s legal costs.
An Independent Review Panel (IRP) has denied Afilias’ latest attempt to wrest control of .web away from Verisign (NASDAQ: VRSN) and has ordered the company to pay $237,000 to ICANN.
[A note for clarity: Afilias sold all of its top level domains to Donuts last year but retained ownership of its application for .web and then renamed itself AltaNovo Domains Limited. In this article, I will refer to the company as Afilias, as most of the relevant actions took place while it used that name. To be clear, this is not referring to Donuts, which now owns the domains that Afilias applied for and was granted.]
Afilias was the runner-up in the ICANN auction for .web. Nu Dot Co outbid it at $135 million, but it later became public that .com registry Verisign bankrolled Nu Dot Co’s bid. Verisign agreed to finance the auction under an agreement that Nu Dot Co would assign .web to Verisign after it won.
The competing applicants or Nu Dot Co cried foul. Donuts sued, but the court tossed the case because of a covenant not to sue. Then, Afilias picked up the mantle by filing for Independent Review at ICANN. It asked that Nu Dot Co’s bid be negated and Afilias be awarded the top level domain.
The IRP ruled that ICANN failed to determine whether Nu Do Co’s bid was acceptable under the rules and ordered ICANN’s board to make that decision. It stopped short of ordering ICANN to award the domain to Afilias and said this was not within the panel’s remit.
Afilias then filed an appeal under Rule 33 of the arbitration rules, designed to handle errors in the decision and address any claims that the panel failed to address. Afilias argued that the IRP failed to address some of its claims.
The IRP had ruled against Afilias in the appeal. It had harsh words for Afilias:
The Panel has dismissed the Application in its entirety. In the opinion of the Panel, under the guise of seeking an additional decision, the Application is seeking reconsideration of core elements of the Final Decision. Likewise, under the guise of seeking interpretation, the Application is requesting additional declarations and advisory opinions on a number of questions, some of which had not been discussed in the proceedings leading to the Final Decision.
In such circumstances, the Panel cannot escape the conclusion that the Application is “frivolous” in the sense of it “having no sound basis (as in fact or law)”. This finding suffices to entitle the Respondent to the cost shifting decision it is seeking and obviates the necessity of determining whether the Application is also “abusive”.
Accordingly, it ordered Afilias to pay ICANN’s legal fees of $237,000. It did not shift the burden for the cost of the panelists, which was $140,000.
Verisign has blasted Afilias for its actions and says that Afilias violated a pre-auction quiet period by trying to encourage Nu Dot Co to enter into a private auction in which the losers would split the winning bid.
In a blog post today, Verisign said it expects more delays:
If Afilias’ motivation has been to avoid ICANN’s scrutiny of its own pre-auction misconduct, especially after exiting the registry business when it appears that its only significant asset is the .web application itself, then what we should expect to see next is for Afilias/AltaNovo to manufacture another delaying attack on the Final Decision. Perhaps this is why its litigation counsel has already written ICANN threatening to continue litigation “in all available fora whether within or outside of the United States of America.…”
It’s unclear to me, at this point, what Afilias has to gain by dragging this out further. You could previously argue that Afilias wanted to keep Verisign from introducing .web because it would be competitive to its own top level domains. But now that it doesn’t own any, it doesn’t benefit from a delay unless there’s some sort of earnout in its deal with Donuts or if it genuinely still thinks owning .web would be a profitable venture and that it can convince a court that it should get .web. I don’t see Verisign offering a settlement to Afilias to get it to go away.
So we’ll keep an eye on two things. First, will Afilias sue over the matter?
Second, what will ICANN’s board decide about Verisign’s deal with Nu Dot Co? ICANN will probably greenlight the arrangement for two reasons. Denying the claim would open up a can of worms with other bidding arrangements between parties. And ICANN certainly doesn’t want Verisign to sue it.