Applicant Guidebook interpretations vary among top-level domain applicants
When ICANN opened the 2012 round of new generic top-level domain (gTLD) applications, it encouraged parties facing the same desired string to negotiate their own resolutions. If applicants could not agree, ICANN offered an “auction of last resort” to determine the winner. That pragmatic approach led to many private settlements, including negotiated auctions where losing applicants split proceeds with the winner. Those arrangements proved lucrative for some applicants and effectively reduced the number of contested strings ICANN had to resolve directly.
In light of the 2012 experience, ICANN adopted stricter language in the Applicant Guidebook for subsequent rounds to discourage opportunistic filings made simply to extract payment from a rival applicant. The guidebook’s intent is clear: discourage applicants who enter the process solely to claim a payout if outbid. To achieve that, the guidebook bars certain private resolutions of contention sets that were common in the earlier round.
However, the guidebook’s text is not entirely straightforward. On the one hand, it emphasizes that ICANN-run auctions are the official mechanism to settle contention sets when multiple applicants seek the same string. At the same time, the guidebook also contains provisions that appear to permit a degree of communication among applicants prior to a specific cutoff. This dual framing has led to uncertainty about what types of pre-reveal communications and agreements are allowed or prohibited.
Communications are prohibited from Reveal Day until the earlier of (1) the date a prevailing applicant signs a Registry Agreement for a specific contending gTLD string, or (2) the applicant withdraws the relevant application. The prohibition on “communicating directly or indirectly” includes public disclosures as well as private communications……The New gTLD Program does not prohibit applicants from communicating directly or indirectly any information related to applications or application strategies:
– For strings that are not in contention.
– Occurring outside of the defined periods where communication is prohibited
Read together, those passages create an apparent window of permissibility. Communication is explicitly forbidden during the period beginning on Reveal Day and continuing until a winner signs the Registry Agreement or an application is withdrawn. Yet before Reveal Day, the language suggests applicants may communicate and potentially negotiate. This raises a straightforward question: if two or more parties are independently aware that competitors have applied for the same string before Reveal Day—through public disclosure or other means—are they free to reach a private settlement prior to the formal Reveal Day cutoff?
The ambiguity is compounded by ICANN’s description of when a contention set is formally recognized. Some phrasing suggests that contention sets are not officially established until ICANN publicly reveals applications. If that is strictly the case, then pre-reveal negotiations could be interpreted as taking place outside the prohibited period and therefore permissible. Yet the guidebook also warns against any attempts to circumvent the formal process, and it includes stringent penalties for violations of the communications policy.
Applicants and counsel are understandably cautious. The potential consequences for breaching the prohibition on communicating during the covered period can be severe, raising the stakes for anyone considering pre-reveal negotiations. This risk has left many applicants unsure about whether they can ethically and legally negotiate an agreement before Reveal Day—or whether doing so could expose them to sanctions or the invalidation of their application.
Discussion among practitioners has highlighted the practical concerns. Some attorney commentaries and industry posts have called attention to the topic and asked ICANN to clarify the rules. These discussions underscore that the guidebook’s language, while well-intentioned, leaves room for multiple interpretations that could affect applicants’ behavior and the overall fairness of the application process.
If ICANN’s primary objective was to reduce filings made solely to obtain settlement payments, the revised rules may accomplish that. But the current lack of clarity about pre-Reveal Day communications leaves applicants and stakeholders seeking further guidance. Clear, authoritative direction from ICANN would help avoid inconsistent practices and ensure that applicants understand what forms of negotiation, if any, are permissible before applications are publicly revealed.
I contacted ICANN for clarification on this issue and will provide an update when a response is received. In the meantime, applicants should consult their legal advisers and exercise caution before entering into any negotiations that might be interpreted as falling within the guidebook’s prohibited communications period.