WASHINGTON, June 20 (Reuters) - A federal court in Phoenix ordered domain-name giant VeriSign Inc. VRSN.O late Wednesday to discontinue a marketing campaign that has spurred complaints of deceptive advertising from rivals.
Domain-name seller Go Daddy Software Inc. sued market leader VeriSign earlier this month in U.S. District Court in the District of Arizona, seeking to force VeriSign to stop sending out "domain name expiration notices" that sought to trick rivals' customers into unwittingly transferring their accounts.
Go Daddy charged that the notices amounted to false and deceptive advertising, interference with customer relationships, misappropriation of trade secrets and consumer fraud.
VeriSign agreed to halt the campaign in a court order signed on Wednesday, but a Go Daddy spokeswoman said the suit would continue as Go Daddy seeks to recover damages.
A VeriSign spokesman said he could not comment until he had seen the order.
The letters sent out by VeriSign warn recipients that they could lose their domains if they do not send $29 to VeriSign. Customers who return the forms inadvertently switch their accounts to VeriSign, whose annual fee is much more than Go Daddy and many other registrars typically charge.
Baltimore-based BulkRegister won an injunction against VeriSign in May, and the campaign has also drawn complaints from a California law firm and the nonprofit California Consumer Action Network.
BulkRegister's injunction required VeriSign to stop sending the notices to its customers, but the Go Daddy suit forced VeriSign to discontinue the campaign completely.
VeriSign enjoyed a monopoly in the domain-name business through much of the 1990s, but the Mountain View, California company has been losing market share in recent years to sellers like Go Daddy which charge as little as $8.95 per year for the rights to a domain name like www.example.com.
"Either they're desperate to slow down the horrible attrition of domain name registrants to lesser-priced registrars, or they had a marketing person who made a bad decision," said Go Daddy general counsel Christine Jones.
VeriSign told Go Daddy it had stopped the campaign in May, Jones said, but the smaller registrar's customers continued to receive the notices well into June.
Jones said she hoped the ruling would serve as a warning to other domain-name registrars like Register.com RCOM.O that have been sending out similar notices.
"If this order doesn't send a message to those guys that they've got to clean up their solicitations, I'd be very surprised," Jones said.
A Register.com spokeswoman said she was not familiar with the letter in question because the company typically sends out several different marketing letters.
VeriSign also faces a handful of lawsuits seeking class-action status that accuse the company of inflating its stock price and misleading investors about organic growth.
VeriSign's stock fell 33 cents to $8.68 in early-afternoon Nasdaq trading.