A lawsuit was filed in 2005 over the no bid, VeriSign contract, with ICANN which gave VeriSign a monopoly to administer the .com and .net registries., by the Coalition for ICANN Transparency (“CFIT”).
Today the United States Court of Appeals for the Ninth Circuit, reversed the lower court, and allowed the case to proceed against VeriSign, in the case of: CFIT v. VERISIGN, INC.
The court lays out the case history very well in easy to read form.
“”””CFIT’s complaint endeavored to state claims against VeriSign under Section 1 of the Sherman Act and under California’s counterpart, the Cartwright Act, for conspiracy in restraint of trade in connection with the terms of the .com and .net contracts’ pricing and renewal provisions. In essence, CFIT sought to show that the prices were artificially high and that the renewal provisions wrongfully restrained competition for successor contracts.
“””The complaint also alleged that VeriSign’s conduct in obtaining the anti-competitive provisions constituted monopolization of the .com and .net registration markets.
“””In addition, the complaint sought an injunction against VeriSign’s proposed service for registration of expiring domain names, on the ground it constituted an attempted monopolization of that allegedly separate market.
“”The lower court, dismissed the action with prejudice for failure to state claims under state or federal law in connection with either the .com or the .net contract.
“”It held that CFIT had not sufficiently alleged that either the terms of the contracts or VeriSign’s conduct in obtaining the contracts amounted to antitrust violations. The court also held that CFIT failed sufficiently to allege that a market for expiring domain names existed separate and apart from the market for newly registered domain names.
“”In this appeal, CFIT contends that the district court failed to appreciate the seriousness of the allegations of anti-competitive conduct and that, in rejecting the existence of a separate market for expiring domain names, the district court improperly relied on already outdated authority from earlier in this young century.
“””The appellate court ruled in favor of CFIT, at least with respect to the claims challenging the terms and award of the .com contract and asserting the existence of a separate market for expiring domain names. We therefore reverse.””””
“”CFIT has adequately plead the existence of a conspiracy between VeriSign and ICANN, and that VeriSign had the intent to restrain trade when it entered into the .com contract.”””
The case will now go back to the district court where it should be heard on its merits.
It appears that ICA’s amicus brief was the critical factor in gaining the reversal and remand.
From the opinion:
“Moreover, amicus in this case, the Internet Commerce Association (“ICA”), points out that when Smith and Weber were decided, “the present expired domain name market barely existed,” and that today’s conditions were “unanticipated only a few years ago.”
“Here CFIT’s complaint alleges that every word in the English language is already registered as a domain name, and that desirable domain names can be difficult to come by. On appeal, our understanding of the distinct role and value of expiring domain names has also been significantly aided by the explanation provided by the ICA. As cogently explained by ICA, expiring domain names often carry with them a history of established web traffic and advertising support; when such names do expire, they “still maintain much of [their] prior inbound traffic,” making them more valuable than domain names that have never before been registered. The district court, of course, did not have the benefit of briefing by amicus. With the benefit of this aid to our understanding, we are not prepared to affirm the district court’s ruling that no separate market exists. We therefore reverse and remand for further proceedings.”
Bret A. Fausett, Esq represented the CFIT.
If the VeriSign contract is found to be in violation of the federal and state anti-trust acts and other laws, it could open the contract, to run the .com and .net registries, for open bidding, with all interested parties, resulting in a much lower, registration and renewal cost for all domain holders.
Yes This is A BIG deal.