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InternetNews.com: VeriSign Loses Round Against ICANN

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August 27, 2004
VeriSign Loses Round Against ICANN
By Jim Wagner

VeriSign (Quote, Chart) has come out on the losing end in its breach of contract and antitrust lawsuit against the Internet Corporation for Assigned Names and Numbers (ICANN).

A federal judge in the central district of California ruled VeriSign did not prove its seven-count suit that charged ICANN with violating the Sherman Act and conspiring to stymie its business operations. Judge A. Howard Matz dismissed the claim, which was part of an amended filing by VeriSign.

VeriSign manages the .com generic top-level domain (gTLD), the most popular domain extension on the planet, on behalf of ICANN. Its business decisions, as a publicly-held company on the U.S. stock exchange, affect the Internet operations of registrars and users throughout the world.

ICANN, on the other hand, is ostensibly a technical body charged with ensuring the safety and security of the Internet. The organization is made up of an international body of constituents (or stakeholders) who ensure the Internet's stability.

Matz had already tossed VeriSign's original antitrust claim back in May, telling the manager of the .com and .net registries to amend the document. If the weren't able to prove antitrust claims in court, he added, it didn't make sense to rule on the six breach of contract counts in the suit.

VeriSign lawyers vow the judge's ruling won't stop them from filing the same lawsuit in the California state courts, now that federal relief isn't possible.

"And while the venue will change, our objective to gain clarity regarding ICANN's appropriate role and the process for the introduction of new services does not," said Tom Galvin, VeriSign vice president of government relations, in a statement. "We look forward to making our case in court so VeriSign and many other companies can get the clarity needed to run our businesses effectively."

VeriSign's antitrust claims were based on its belief that ICANN's bottom-up constituency -- where individual business advisory groups (VeriSign's competitors) advised ICANN's board of directors -- were the de facto decision makers in the organization.

Those de facto decision makers put a stop to competitive services that VeriSign felt was necessary in making improvements to the .com registry and its customers, specifically the:

-- much-criticized SiteFinder service, which re-directed misspelled Web site and e-mail addresses to a VeriSign-designed advertisement page; ICANN officials asked VeriSign to suspend the service last year after the unannounced change crashed DNS and e-mail servers around the world. An official report from ICANN in July determined the technology used in SiteFinder should not be used in the public realm again.

-- Wait-List Service (WLS), introduced in January 2002, sparked an outcry by registrars who said the bidding system for expired domains gave VeriSign an unfair advantage over other registrars.
VeriSign has proposed to maintain a central database for individual registrars that were competing for newly-expired domain names on behalf of consumers. Consumers could then go on a first-come, first-served waiting list to get the new domain name. VeriSign would charge $24 for the service, while registrars were left out of the loop.

In March, ICANN approved WLS, pending approval from the U.S. Department of Commerce, though not before VeriSign and a group of registrars filed lawsuits against the organization for delaying the process two years.

The judge didn't see ICANN's decision-making process the same way.

"VeriSign's contentions are deficient," Matz stated in his ruling. "First, there is nothing inherently conspiratorial about a 'bottom-up' policy development process that considers or even solicits input from advisory group. 'Participation' is not enough to give rise to antitrust liability; control is required."

ICANN lawyers applauded the judge's ruling, saying it was an endorsement for the model its organization uses to gain consensus from individuals located around the world.

"The U.S. federal court's decision serves as another important affirmation of ICANN's multi-stakeholder participatory model, and reaffirms the ICANN structure," John Jeffrey, ICANN general counsel, said in a statement. "ICANN is not subject to capture by any commercial or other interest, including VeriSign."
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