ICANN Violated Bylaws in .WEB Domain Dispute, Panel Rules

The Internet Corporation for Assigned Names and Numbers (ICANN), the organization responsible for coordinating the internet’s naming system, has been found to have violated its own bylaws in a long-standing dispute over the coveted .WEB top-level domain (TLD). An Independent Review Panel (IRP) has ruled that ICANN failed to make a necessary decision regarding Verisign’s deal to acquire .WEB, a move that has significant implications for the future of the internet’s domain landscape.

The IRP’s decision emphasizes that ICANN must adhere to its commitment to making objective and fair decisions based on documented policies. The .WEB saga underscores a pattern of ICANN avoiding crucial decisions, often to the detriment of contracted parties and the wider internet community. This ruling now compels ICANN to take decisive action.

The Genesis of the .WEB Dispute

The heart of the issue lies in the auction for the rights to operate the .WEB TLD. Several companies vied for control, including Nu Dot Co (NDC), a venture established by the founders of .CO Internet. As the application process drew to a close, Verisign (NASDAQ: VRSN), the leading domain name registry, entered the fray. Verisign orchestrated a deal with Nu Dot Co, wherein NDC would bid in the auction with the understanding that Verisign would subsequently acquire the .WEB TLD from them.

Nu Dot Co emerged as the victor, securing the .WEB rights for $135 million. This amount matched the second-highest bid, which was submitted by Afilias, another applicant in the running. The outcome sparked considerable discontent among the other applicants. Not only had their competitor, Verisign, effectively won the auction, but Nu Dot Co had opted for an ICANN-managed auction of last resort, rather than a private auction that could have yielded substantial financial gains for the losing applicants, potentially in the tens of millions of dollars each.

Donuts, another contender for the .WEB domain, initially filed a lawsuit challenging the auction’s outcome, but the case was ultimately dismissed by the judge. With Donuts’ legal avenues exhausted, Afilias stepped forward, initiating a cooperative engagement process with ICANN. When this process proved unfruitful, Afilias escalated the matter to the Independent Review Process, seeking a formal ruling on the situation.

The IRP’s Verdict: ICANN’s Failure to Act

ICANN recently published the IRP’s decision, which unequivocally stated that ICANN had violated its own governing documents:

ICANN has violated its Amended and Restated Articles of Incorporation of Internet Corporation for Assigned Names and Numbers, as approved by the ICANN Board on 9 August 2016, and filed on 3 October 2016 (Articles), and its Bylaws for Internet Corporation for Assigned Names and Numbers, as amended on 18 June 2018 (Bylaws)…

…by failing to make a critical decision regarding the propriety of the agreement between Nu Dot Co and Verisign. The IRP panel elaborated on this point:

It may be fair to say, as averred in the [ICANN’s] Response, that “ICANN has been caught in the middle of this dispute between powerful and well-funded businesses”. However, in the Panel’s view, it is not open to [ICANN] to add, as it does in the same sentence of its Response, “[and ICANN] has not taken sides”, as if [ICANN] had no responsibility in bringing about a resolution of the dispute by itself taking a position as to the propriety of NDC’s arrangements with Verisign.

In the opinion of the Panel, there is an inherent contradiction between proceeding with the delegation of .WEB to NDC, as [ICANN] was prepared to do in June 2018, and recognizing that issues raised in connection with NDC’s arrangements with Verisign are serious, deserving of [ICANN] consideration, and remain to be addressed by [ICANN] and its Board, as was determined by the Board in November 2016. A necessary implication of [ICANN’s] decision to proceed with the delegation of .WEB to NDC in June 2018 was some implicit finding that NDC was not in breach of the New gTLD Program Rules and, by way of consequence, the implicit rejection of the [Afilias’] allegations of non-compliance with the Guidebook and Auction Rules. This is difficult to reconcile with the submission that “ICANN has taken no position on whether NDC violated the Guidebook”.

In essence, the IRP determined that ICANN should have thoroughly assessed whether the agreement between Nu Dot Co and Verisign adhered to the established New gTLD Program Rules. Instead, ICANN appeared to have deferred the decision, hoping that the competing bidders would either abandon their claims or that an external entity would resolve the matter on their behalf. This passive approach was deemed a violation of ICANN’s responsibilities.

While the IRP acknowledged that it lacked the authority to award the .WEB domain to Afilias, the runner-up in the auction, it unequivocally mandated that ICANN fulfill its duty and make a definitive decision on the matter. Furthermore, the IRP directed ICANN to cover a significant portion of Afilias’ expenses and fees incurred during the Independent Review Process, adding further weight to the ruling.

ICANN’s Response: A Continued Hesitation?

ICANN’s initial response suggests a continued reluctance to take a firm stance. In an official statement posted on its website, ICANN stated:

The ICANN Board will consider the Final Declaration as soon as feasible, within the timeframe prescribed in the Bylaws, and remains hopeful that the relevant .WEB applicants will continue to seek alternatives to resolve the dispute between them raised during the IRP. (emphasis added)

This statement indicates that ICANN may still be hoping for a resolution between the involved parties, rather than making a decisive determination itself.

Verisign, on the other hand, released a statement urging ICANN’s board to proceed with contracting the .WEB domain, reflecting their desire to finalize the acquisition.

Implications and the Road Ahead

The IRP’s ruling carries significant implications for ICANN’s credibility and its role in governing the internet’s domain name system. It underscores the importance of accountability and the need for ICANN to act decisively, even in complex and contentious situations. The ruling sends a clear message that ICANN must adhere to its own bylaws and make objective decisions based on established policies.

The future of the .WEB domain remains uncertain. ICANN is now under pressure to conduct a thorough review of the Verisign-Nu Dot Co agreement and determine whether it complies with the New gTLD Program Rules. Depending on ICANN’s decision, the .WEB domain could ultimately be awarded to Verisign, remain with Nu Dot Co, or potentially be re-auctioned. The resolution of this dispute will likely set a precedent for future domain name disputes and influence ICANN’s decision-making processes.

The internet community will be closely watching ICANN’s next steps as the organization navigates this challenging situation. The outcome will have a lasting impact on the domain name landscape and the future of internet governance.

The Broader Context of gTLD Expansion

The .WEB domain dispute also highlights the broader context of the expansion of generic top-level domains (gTLDs). The introduction of hundreds of new gTLDs, such as .app, .shop, and .online, was intended to increase competition and innovation in the domain name market. However, the process has also been fraught with challenges, including complex application procedures, high costs, and disputes over trademark rights. The .WEB case underscores the need for ICANN to carefully manage the gTLD program and ensure that it operates fairly and transparently.

As the internet continues to evolve, the role of domain names in shaping online identity and navigation will only become more critical. ICANN’s ability to effectively govern the domain name system is essential for maintaining the stability and accessibility of the internet. The .WEB dispute serves as a reminder of the importance of ICANN’s mission and the need for the organization to uphold its commitments to the internet community.