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privity of contract

  • To: <irt-final-report@xxxxxxxxx>
  • Subject: privity of contract
  • From: "Ray Fassett" <ray@xxxxxxxxx>
  • Date: Thu, 4 Jun 2009 23:29:30 -0400

I would like to thank the IRT members for its concerted effort to provide
for the ICANN Board its recommendations to the high arching issue of rights
protection in the launch of new gTLD's.  I'd also like to recognize that the
Board gave the IRT an accelerated timeline to develop its recommendations.
In this light, I think we have to also recognize some degree of haste in the
final IRT recommendations.  Here is one example: 


"The IRT agrees with WIPO's position.that trademark owners should have.the
ability to trigger a proceeding against the Registry Operator." (Final
Report, page 39 of 69)


The above is a shift of position from the prior IRT draft report which read:


".post delegation dispute is a contract dispute between ICANN and the
contracted registry." (Summary of IRT Suggested Revisions to WIPO Proposed


Thus, between the short time of the draft report to the final report, a
dramatic shift occurred amongst the group, primarily comprised of lawyers,
that in the world of contract law is known as "benefit without obligation".
Or simply rights to enforcement to an entity that is not a contract
signatory.  To further exemplify the haste of this shift in position, it is
not even clear what third parties i.e. "who" would qualify for such standing
of enforcement rights.  The fundamental concept of quid pro quo is at hand
here as I suspect was understood by the group at the time the draft version
was published.  Something changed and given the gravity of it, the reasons
for this change are not articulated.  The result is a final recommendation
that is dangerously excessively one sided.  In other words, not legally


Allow me to examine what its purpose seems to be for.  This can be found in
section 2.1 Applicable Disputes (Page 41 of 69) copied verbatim below:


2.1 Applicable Disputes


2.1.1 A Registry Operator, as defined in the applicable Registry Agreement
with ICANN, shall be required to submit to a mandatory administrative
proceeding where a third-party (complainant) has filed a complaint with
ICANN asserting that: The Registry Operator's manner of operation or use of a TLD is
inconsistent with the representations made in the TLD application as
approved by ICANN and incorporated into the applicable Registry Agreement
and such operation or use of the TLD is likely to cause confusion with the
complainant's mark; or The Registry Operator is in breach of the specific rights protection
mechanisms enumerated in such Registry

Operator's Agreement and such breach is likely to cause confusion with
complainant's mark; or The Registry Operator manner of operation or use of the TLD exhibits
a bad faith intent to profit from the systemic registration of domain name
registrations therein, which are identical or confusingly similar to the
complainant's mark, meeting any of the following conditions: (a) taking
unfair advantage of the distinctive character or the reputation of the
complainant's mark, or (b) unjustifiably impairing the distinctive character
or the reputation of the complainant's mark, or (c) creating an
impermissible likelihood of confusion with the complainant's mark.


Again, because it is fundamentally important, it is not clear from section
2.1 "who" has standing for an Applicable Dispute (it appears any third party
in the world, beyond even a rights holder as broad a term as this is, would
gain such standing).  


Examining, the purpose of seeking enforcement can only be
interpreted to pertain to "community" gTLD operators since "open" gTLD
operators will naturally not be making "representations" of its "manner of
operation or use" in its gTLD application.  I can only assume (because
reasons are not stated) this must be about a presumptive fear that future
"community" gTLD operators will 1) vastly stray from its "manner of
operation or use", 2) such straying will be of direct and material harm to
trademark holders and 3) ICANN as a contracted party will not enforce
compliance upon the community gTLD operator.  There is a ton of leap going
on here towards justifying a recommendation that would award to a non
signatory entity a benefit without any obligation.


Examining, the purpose of seeking enforcement can only be
interpreted as a lack of confidence that ICANN as a contracted party will
enforce compliance.  Again, this is a presumptive fear.  Sound legal
approach does not solve such fears by enabling enforcement rights in a
contract to third parties.  To do so creates uncertainty and undue risk that
drives to the reason privity exists in contract law that provides a contract
cannot confer rights or impose obligations arising under it on any person or
agent except the parties to it.  I can only assume (because reasons are not
stated) the issue has to do with a lack of confidence that ICANN will
enforce compliance, while at the same time actions by the organization in
the last six months have been taken to staff up compliance personnel along
with new, publicly stated efforts and commitments to make contract
compliance a high priority as an organization.  To simply dismiss these
actions is not reasonable.


Examining is clear path benefit without obligation. The presumptive
fear is "bad faith intent" by the Registry Operator from the activity of
enabling a "systemic registration of domain name registrations".  This is
best known as contributory infringement.  The logic seems to be that unnamed
trademark holders should be provided the benefit of third party rights to
enforcement in contract without any obligation based solely on a fear of
contributory infringement by a Registry Operator.  I am not aware of a
single TLD registry operator that has been found as a contributory
infringer, in any jurisdiction or by any authority, to justify a
recommendation of such clear path benefit without obligation.


Counter Proposals: To address from what I can best interpret as its purpose, I think
we all can agree that existing sTLD operators perform in a "manner of
operation or use" consistent to what the respective sTLD operator originally
"represented" in its application to ICANN.  The common contract provision
that all sTLD operators share is called the Charter.  The Charter is what
embodies in the contract the sTLD operator's "representations" - known as
eligibility requirements - to secure a domain name registration in the gTLD.
It seems to be working in practice for not only the contracted parties but
for third parties without contract privity.  It appears logical to first
investigate incorporating the Charter into future community gTLD contracts
before hastily jumping to enforcement rights to entities that are non
signatories. This recommendation makes a claim of "The Registry Operator is in
breach."  Breach of contract by one signatory is remedied by another.  This
is the way it works.I have no other counter proposal to offer. Registry Operators are in the core business of, whether for-profit
or non-profit, enabling processes for the specific purpose of "a systemic
registration of domain names" where subsequent use of the domain name
registration is implied.  Contributory infringement can only be determined
by a legal court of competent jurisdiction, not through awarding in contract
clear path benefit without any obligation.


With all the above said, it is clear that the final IRT report shifted
positions from its draft report that stated "a post delegation dispute is a
contract dispute between ICANN and the contracted registry" to "trademark
owners should have.the ability to trigger a proceeding against the Registry


It is this cataclysmic shift that led to the final IRT recommendation to
award non signatories enforcement rights in contract.  Otherwise, there is
no other basis.  In recommending such an award, no obligation for such
benefit is explained i.e. quid pro quo is glaringly absent to support such a
shift in position.  It is likely this exact point was mitigated back and
forth by IRT group members from the draft report to the final report.  It is
reasonable to suspect those with the overriding presumptive fears won out in
haste of a hard deadline.  If the group took another poll today, maybe
consensus shifts back to the position as stated but a few weeks prior in the
draft report.  The level of consensus for the shift in position in the final
report is certainly unclear.  This is significant because the group was
comprised, and motivated, for a common interest.


The only justification that I can interpret from the final report for the
shift is a latching on to a WIPO report (that apparently also suggests such
a solution).  But when I dig to try to understand the need, particularly
Section 2.1, it does not appear to hold muster to a reasonable person on the
one hand and in the legal sense is excessively one sided on the other.  This
is what I have attempted to articulate, while not trying to be overly
critical and also appreciating the amount of effort by the IRT members to
produce its report to the Board in an ambitious time frame.


Where opinion is expressed herein please accept in my personal capacity and,
where more substantive, on behalf of Employ Media LLC, a contracted party
with ICANN for the .jobs sTLD.  None of the views expressed should be
interpreted as on behalf of ICANN's Registry Constituency of which Employ
Media is an active member of.


Thank you for your consideration.


Ray Fassett


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