After Spending $9 Million Trying To Get The .XXX Extension, ICM Goes On The Offense

The President of the ICM Registry, Stuart Lawley posted an open letter on Circle ID, clearly going on the offense in its bid to get the contract from ICANN to run the proposed .XXX registry.

The open letter is addressed to “ICANN and the Internet Community”, and is republished below:

ICM first applied to run the registry for the .XXX extension in 2000, reapplied in 2004 and is currently awaiting ICANN’s final decision after a recent three member “Independent Review Process” Panel found that ICANN wrongfully denied the application.

I met with Mr. Lawley in his offices last week and he talked about the $9 Million + dollars his company has spent in pursuit of the .XXX extension.

Over $5 Million was spent in the Independent Review Process (IRP) which took over 2 years from the start to the ruling.

According to ICANN 2010 budget they record an “unexpected excess legal charge” of over $1.5 M.  Lawley believes that most or all of this amount was spent on ICANN’s attorneys fees for the IRP.  Actually Lawley believes that ICANN total legal bill for the IRP exceeded $2.2 Million.

However in addition to legal fees, each side had to pay $241,000 in cost which went to pay the three member panel.  ICANN was ordered by that same panel to reimburse ICM for the $241K they paid in.

So all totaled up, ICANN may have spent close to $3 Million just for the IRP process and lost.

Now with the Brussels meeting coming up in about 2 months the issue seems to be heading for a final show down.

If ICANN approves the extension and gives the contract to ICM, they will need just 200,000 registration at the proposed $50 registration fee, to recoup their costs.

However if ICANN denies the application or further delays a decision, Lawley told me that ICM will file suit for damages, including all of its costs, legal fees and lost revenue going back to 2007 when ICANN rejected the application.

No matter how you feel about the .XXX extension, you have to be some what concerned about the costs ICANN will incur in the defense of such a case and the possible judgment which could run into the 8 and possibly even 9 figures, as domain holders fund ICANN.

The question also should be asked if so much time, costs and expenses have been incurred by ICANN on one proposed extension how are they ever going to add hundreds, possibly thousands of new extensions?

“”ICM Registry will shortly issue an in-depth response to ICANN’s paper outlining “possible process options” for addressing the declaration of the Independent Review Panel regarding .xxx, which is now open for public comment.

This letter provides a shorter and more personal perspective on this paper and the six-year process that has led ICM Registry, and ICANN, to this point.

We are, frankly, disappointed and dismayed that ICANN staff would seriously contemplate simply disregarding the findings of the independent panel of eminent jurists in the Independent Review. But that is exactly what two of the three options put forward by staff would do.

The Independent Review Process offered ICANN and ICM a mechanism to finally resolve the status of ICM’s application. Let’s be clear here: this was no five-minute hearing. The IRP process went on for nearly two years and both sides were given ample opportunity to present their arguments in depth; which they both did, including at an in-person hearing with witnesses and in hundreds of pages of written briefs.

It cost both ICM Registry and ICANN several million dollars each, and the process was fair, thoughtful, and rigorous. As a result, we acknowledged well before the panel issued its declaration, that we would respect the Panel’s declarations even if the decision went against us.

And the Panel’s findings are clear. Not only did it find in our favour on all the important issues in the case, but it also clearly rejected the arguments put forward by ICANN’s management, often in strong terms.

The Panel did find that its declaration was not binding on the ICANN Board but we expected that ICANN would respect the views of the Panel and honour, in ICANN’s own words, its “ultimate” accountability mechanism. It is profoundly disappointing then that the options paper, which was produced by the same team whose arguments were dismissed by the IRP, effectively ignores every other aspect of the panel’s declaration.

The fact is, as independent experts have now confirmed, that the ICANN Board’s decision to reject dot-xxx in 2007 was the product of bad advice. And the Board continued to rely on that bad advice all the way through the IRP process where it was eventually disregarded by some very serious legal minds. So the current Board should be very cautious about following the advice it has now received in the form of three options that disregard the Panel’s conclusions (even the option to accept the Panel’s findings contains subsequent steps that ignore those same findings).

Neither the ICANN Board nor the ICANN community is well served by this approach. What’s more, it is costing ICANN, ICM and the Internet community millions of dollars to continue down this path.

Our biggest concern, however, remains not the cost, nor the self-serving refusal to accept failed legal arguments. What really concerns ICM Registry is that if ICANN is willing to disregard its own processes and obligations, it risks undermining the organization and model itself.

ICM Registry has always been a big defender of ICANN’s private sector led, bottom-up and multi-stakeholder decision-making process, even though that has meant a slow, expensive and frustrating journey for us in our effort to improve one small part of the Internet. But it is something we have always believed in as it allows everyone affected by the Internet to have a say in the Internet’s evolution.

In Nairobi and in the on-topic public comments on the staff’s options paper, serious members of the ICANN community—including those who opposed creation of dot-xxx in the first instance—have urged ICANN to respect its own accountability mechanisms. We sincerely hope that the ICANN Board is listening.

This is a critical test of ICANN’s maturity as an organization, especially considering that it has recently been freed from direct oversight by the US government. We take no pleasure at all in finding ourselves in the position of having to insist that ICANN demonstrate the maturity it needs to maintain the confidence of the global Internet community, and to do so in a clear and unambiguous decision.

ICANN should simply do the right thing and approve the creation of a dot-xxx top-level domain without delay and without seeking to cover mistakes of the past with a curtain of additional processes.

Sincerely
ICM Registry”””

Comments

  1. says

    These ICM folks are crazy. 200K registrations for an industry that doesn’t want it and add regulation and excess oversight to a typical tld? Doomed from the start. Will be a disaster. Porn guys are some of the cheapest operators online and will not spend the extra to give them a site that will be on lockdown for any wall/virus/security/nanny program out there. Look for Cable companies and ISP to block those to not only protect themselves from lawsuits but to keep the profits for themselves. Why make visiting porn sites any more awkward and sleazy than it already is? Adding the .xxx to it makes it so.

  2. MHB says

    Sin

    ICM didn’t go into this deal thinking that is was going to cost them millions to just get the extension.

    Just like the new gTLD process they paid the application fee which I think was less than $100K as opposed to the $185K this time, and started down the road.

    However the road with ICANN was full of speed bumps, potholes and sinkholes much of ICM’s money got poured down those.

    Once your in the process and feel like you complied with all of the rules and are entitled to get what you applied for what do you do?

    Just walk away? Losing millions

    Or do you fight & spend more millions?

  3. says

    Actually, I would walk away, and spend those millions getting some nice domains and get it back on the road. The time is money, if we can contruct the time and learn our lessons then we can still make that money back.

    Wasting your time, along with money is definately not a good thing. This case will be court for a while, and believe me, It wont end, but resources will end to get the money back.

    What is the point of getting .xxx??????? in the first place???? That seems like Destructive move anyway. Come on this is fail, and people who had insight, that is wrong insight. Trust me, I have a feeling that this will not end good, if you spend more millions to defend yourself.

    They should have long quit it when they got rejected the first time. ITS stupid wastings millions to get worthless extensions approved.

    Its like, my way or highway?

    First I play the poker, and it cost me 1000 dollars to get las vegas to play in casino with insight that i will win money. But if I dont win, should I take the casino in the court, that pay for my trip costs?

    Its very risky, what I think is right (although I am not rich guy at all,) I think they should use the money wisely and stop wasting money.

    May God Bless Them!!!

  4. says

    Sin,
    Thanks you for your comments concerned about the costs we have incurred on this. MHB is correct, at the outset of this round (we had already spent c. $1M in the 200o round), our cost budget , on top of the $45,000 application fee was around another $1M. Post approval in June 2005 however, the process became damaged and thereafter we were determined to ensure that ICANN followed its documented processes and were equally determined that we would not be deterred by endless process asphyxiation .With well over 100,000 pre-reservations, despite the drawn out process we are confident we will exceed the 200,000 registrations MHB mentions. Its not comparable to playing poker, its a questions of International and local law together with ICANN being responsible to its own community in terms of Transparency and Accountability, which they are very keen to trumpet. Now is the time the world will see whether they really deliver on it. As former ICANN Board member commented “Time to walk the Talk”

  5. MHB says

    Chip

    Don’t forget that the .biz registry has something like 5M domains registered so I think hitting 200K will happen almost on the rollout.

    Now as far as no one wanting or needing you can look at it the other way which is tell me you wouldn’t pay $50 for porn.xxx or sex.xxx or hundreds maybe thousands more.

  6. Vanessa, L. Logatti says

    Mr. Lawley,

    I am very glad to hear of your great Success!… Very Nice!!! My congratulations to you, all your hard work and your perseverance.
    Cheers!
    Ness.

  7. says

    Prediction: ICANN uses the .XXX as an excuse to call Time.OUT on new TLDs.

    It will take a couple of years for the .CO and .COM dust to clear.

    There are also major RE-BIDS needed for .ORG .NET and .COM

    The PBS-like ICANN Board could pull in the fences and leave .XXX in limbo.

    By 2012 it will be an election issue. ICANN likes headlines and the spot.light.

    .XXX has been “almost approved” since 1995.

  8. MHB says

    Big Lie

    ICANN has nothing to do with .co extension.

    .Co is a country code, or ccTLD.

    ICANN does not govern those.

    .XXX would be a TLD like .Com, .Net, .Org

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