Copy of comments on the August 24, 1998 draft of New Entity

[haywood.torrence@bellatlantic.COM]

Attached is a copy of the comments that Bell Atlantic previously provided to
Joe Sims on 4 September.

Woody Torrence

4 September 1998


Joe Sims, Esquire
Jones, Day, Reavis & Pogue
Metropolitan Square
1450 G Street, NW
Washington, DC 20005-2088

Dear Joe:

As you know Bell Atlantic, for some time, has taken an active role in
the efforts to create a new, private sector-based structure for
establishing Internet domain name policy.  Our concern with and
interest in these efforts grows most immediately out of our
experiences under the current domain name assignment system, a system
designed largely without input from the commercial sector and with a
less than full appreciation for the intersection of Internet domain
names and trademarks.  That system, of course, was designed and
implemented, the commerce was a negligible – effectively a
non-existent – part of the life of the Internet.  Today, however,
commerce is integral to the life of the Internet.  Accordingly, we
believe it imperative that decisions with regard to domain name policy
strongly reflect an appreciation for the need to protect against
trademark infringement.  And to that end, we believe that the
commercial sector must have a strong and effective voice in any new
administrative structures for the Internet.

Bell Atlantic has reviewed IANA's most recent proposed set of
incorporation documents.  We commend IANA for stepping up to the
difficult role of trying to synthesize a concrete and credible
proposal out of the myriad ideas that have developed in conferences,
fora and Internet discussion groups over the last two months.  The
process that IANA has initiated, while not perfect, represents the
best opportunity for achieving the goals set out in the United States
Government's White Paper, and we offer our support for that process.
Bell Atlantic will work together with IANA and all other interested
parties to achieve a viable, workable result.

To that end, we would like to share with you our ideas on the latest
draft of Articles and bylaws for a new Internet administrative
authority.  While we also join in supporting many of the comments of
others -- especially with respect to the need for heightened attention
to intellectual property implications of domain name administration --
our comments here highlight certain additional specific points in the
documents that occasion significant concern  for Bell Atlantic.

Fundamental Concerns

Our concerns derive, in large measure, from the difficulties we have
experienced and continue to experience with regard to trademark
infringement in the context of second level domain name assignments.
We recognize that this is an issue as to which there is no simple
solution; it brings into play many different, and potentially
competing, equities.  On the other hand, there has been set into
motion (or are imminently contemplated) a number of processes which
could help to resolve this issue – among them, the WIPO process and
the contemplated Leahy Study.  We are concerned that powers accorded
an initial Board of Directors under the current draft of the documents
could pre-empt the results of these processes through the immediate
introduction of new generic top level domains (or gTLDs).

Accordingly, we strongly believe that the Articles of Incorporation
should prohibit the Board of Directors from introducing new gTLDs
pending resolution of the key trademark issues that are the subject of
these studies.  We recognize that proscribing the powers of a Board of
Directors on such a specific point is unusual – although certainly
not without precedent.  On the other hand, what is also clearly true
is that the organization being created here is not an ordinary
nonprofit corporation.  Rather, is really the creation of a governance
structure operating under the form of a corporation.  And as it is the
creation of a governance structure, orderly processes for resolution
of difficult issues are not pre-empted or mooted that are already (or
will shortly be) underway need to be respected and preserved by the
new entity at a structural level, so far as is possible.  Thus, we
believe this proscription should be explicit in the Articles
themselves.

Bell Atlantic is also concerned about the absence in the current
documents of any express limitation on the initial board of directors'
power to reshape the basic governance design.  The Articles of
Incorporation appear to take a fairly standard approach: use the
Articles the essential corporate structure required to get the
corporation up and running; establish in the bylaws the basic outline
for administration; and preserve for the future directors great
flexibility to refine and hone that basic outline -- or, if warranted,
to alter it substantially – without having to alter the Articles.
This is an imminently understandable approach, and justifiable one, as
a general matter for corporation creation.  It is also attractive
perhaps in view of the tight timetables laid out in the White Paper
for getting the corporation up and running; making final, definitive
determinations, ab initio, of all the arrangements probably could not
wisely be done for an organization such as this in such a short frame.

We are concerned, however, that the current approach provides too much
leeway for the initial board to redraft the bylaws on a variety of
sensitive issues prior to the seating of board members nominated by
one or more supporting organizations (SOs).  Again, in this instance,
the emphasis should be on this entity as a governance structure rather
than on this entity as corporate entity. In order to create the trust
necessary for a credible governance structure, we believe the Articles
themselves, rather than the default provisions of the California
Nonprofit Corporation Code, should establish the bases for their
amendment.  Further, we suggest that the Articles not be subject to
amendment unless they have the support of a majority of each SO's
directors.  And finally, we suggest that the Articles include a
provision precluding emendation of the bylaws until such time as each
of the SOs has seated its members on the Board. This provision,
coupled with other suggestions made below, would preclude a "rump"
group of initial directors from substantially altering the shape of
the organization outlined here until all directors are seated.

Finally, we would add a word on a non-structural – but nonetheless
key – issue.  We applaud the IANA's recognition that commercial
stakeholders, including trademark holders, have a valid interest in
how the new Internet administrative authority will be structured and
how it will function.  If this interest is to find adequate and
effective expression in the new administrative structure, it must find
representation not merely in directors nominated by the specific
supporting organization for domain naming activities, but also, and in
significant measure, among the "At Large" directors that are proposed
to comprise fully half of the corporation's Board of Directors.

Specific Comments (by Document and by Section)

Article V, Section 1, says that "the Board may act by a majority vote
of Directors present at the meeting . . .," subject to quorum
requirements.  We believe that, given the potentially conflicting
interests on this Board, an absolute majority of all directors holding
office ought to be required for adoption of any resolution.  As a
general proposition, this probably should be effective for most
non-controversial decisions.  However, for any important substantive
decisions that impact or effect the rights, obligations and/or
interests of any significant sector of the Internet community, we
believe that a four-fifths majority of the directors is appropriate,
in addition to the requirement that such a decision have an absolute
majority of all directors holding office.

Article VI, Section 1 calls for the vesting, at least for some period
of time, of all the Initial Board's authority in the nine "At Large"
directors. Clearly, this provision is necessary, as a practical
matter, in order to get the corporation established.  The make up of
that group of "At Large" directors, therefore, is crucial to the
success or failure of this endeavor.  We cannot stress strongly enough
our belief that the commercial sector must be adequately and credibly
included within that cadre.  This is especially true in view of the
dilution of the relative strength of the SO directors in the current
draft (with the increase in the "At Large" contingent from six persons
to nine persons).  Otherwise, this proposal will not work fairly or
effectively.

Article VI, Section 4, Paragraph B allows the Board to adjust the
representation formula for the SOs, subject to the proviso that it
cannot do so until the all the SOs have elected members to the Board
"or April 1, 1999, whichever is sooner" (emphasis added).  Although we
appreciate the intent of this provision, it is also important to
recognize that the Domain Name Supporting Organization (DNSO), unlike
the other two supporting organizations, does not have a clearly
defined – and relatively limited numbers – of potential members.
Moreover, many of the groups that may comprise this SO may have
divergent positions on issues that could make creation of the
structure of this organization problematical.  Hence, April 1, 1999 is
probably too optimistic a date to permit such a fundamental adjustment
in the representational structure of the Board. Our earlier suggestion
– to wit, that the bylaws not be alterable until all directors from
supporting organizations specified in the initial bylaws are seated
– would obviate this problem, and we reiterate our support for this
idea.  But in any event the date chosen is much too soon and should,
in no event, be prior to October 1, 1999.

Article VI, Section 9, Paragraph D raises a similar concern to that
just discussed.  It calls for the division of the SOs' directors into
classes – except that it specifies the term of all directors as
being "considered to have begun on October 1, 1998 regardless of when
those original Directors actually take office."  As a practical
matter, it is a almost a certainty that no DNSO director will take
office prior to sometime into the next year; the whole DNSO entity
needs to be created from the ether, and the structures and policies
for electing its officers will have to be created.  By the time the
DNSO is in a position to nominate its directors for the board, one of
them, in all likelihood, will be elected to a term that is about to,
or may already have, expired.  Thus, we suggest changing this
provision.

Article VI, Section 10 allows for aural resignations at Board
meetings.  That is not a problem, but we believe this section probably
should also require, in the case of such an aural resignation, a
prompt written follow up to corporate Secretary within some reasonable
period of time.

Article VI, Section 12 contains provisions for filling vacancies.
Under its provisions, the Board can fill any vacancy.  Perhaps the
bylaws implicitly assume – but in any event should expressly
provide – that in the event of a vacancy of a director of a SO, the
director elected by the Board, if any, is required to resign as soon
as the relevant SO nominates its own replacement director.  Also, we
are not clear about the purpose or the effect of the provision of this
section that states "the replacement need not hold the office, if any,
of the removed Director."

Article VI, Section 22, we believe, ought to have the qualifier
"reasonable" attached to it; the same is true of Article VIII, Section
7.

Article VI, Section 23 says, in essence, that "silence amounts to
consent."  Is not it fairer, or at least less presumptive, to have
silence imply abstention?

Article VII, Section 1 establishes the authority of the Board to
create new SOs by two-thirds vote.  While we agree that there ought to
be some provision for the introduction of new SOs, we think admission
of a new SO ought to require, at minimum, the affirmative vote of a
majority of the directors from each cohort of directors elected by
SOs.  After all, it is the interests of the SOs on the Board that will
be subject to dilution by the introduction of additional SOs.  More
generally, we have serious concerns about the ability of other SOs to,
in effect, "pocket veto" recommendations of the DNSO.

Article IX provides for both a Chairman of the Board and a President.
We would suggest as an alternative considering the title of "Chief
Executive Officer" rather than "President" for the functional head of
the corporation and having him or her also serve as the chair of the
Board.

Finally, the extent of the discretion established in Article XIV is a
huge problem.  It is, of course, already addressed in our comments at
the outset of this document.  We reiterate once again our view that
the Articles of Incorporation need to substantially proscribe the
ability of the initial board to alter the bylaws until all SOs have
their directors seated on the board.

Please feel free to contact me (202-336-7870;
haywood.torrence@bellatlantic.com) or Sarah Deutsch (703-974-8450) if
you want to discuss these issues in greater detail.

Sincerely,



Haywood Torrence, Jr.
cc:  	Ira Magaziner
	Joe Sims, Esquire

	Page 5
	September 4, 1998

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