Return to New TLD Agreements Forum - Message Thread - FAQ

Username: mole
Date/Time: Fri, October 12, 2001 at 6:27 PM GMT
Browser: Microsoft Internet Explorer V6.0 using Windows NT 5.0
Subject: uhm, have you been following the news ...???...........


        .biz injunction halts 53,000 domain names

Kevin Murphy, 

NeuLevel has found itself in a tricky situation with its customers and
channel, following yesterday's ruling by a Los Angeles court that the
roll-out of the .biz top-level internet domain could constitute an
illegal lottery. Speculation has already begun that NeuLevel could face
additional lawsuits from class-action attorneys representing registrants
and possibly from the company's own channel.

As anticipated, Judge Anthony Mohr handed down a preliminary injunction
against the company, preventing it from going live with about 53,000
domain names. Applicants for all the cool-sounding big-money names, like and, are affected, as are somewhere between 80 and
500 companies that resell .biz names.

NeuLevel has also been instructed to put $3m in the court's trust, to
cover the possibility that it will have to make 1.5 million refunds of
domain name applications. The preliminary injunction means not that it
has been judged to have acted illegally, but that the civil law suits
against it have a likelihood of success when the case goes to full trial
about six months from now.

NeuLevel chief executive Doug Armentrout said in a statement: "While we
are disappointed with the Court's decision and the impact it will have on
some .biz applicants, we strongly believe that the process we've set
forth and developed in conjunction with the ICANN is the most fair and
equitable way to distribute domain names. We fully intend to pursue this
matter in the courts and will work to resolve these issues as quickly as

At the beginning of August, NeuLevel was sued by class-action attorneys
acting on behalf of potential .biz registrants, with an individual named
David Smiley as the representative plaintiff. A second suit, on behalf of
ePrize LLC, was filed last month. The plaintiffs seek an injunction and
damages against what they allege is a lottery, illegal in California and
most US states. NeuLevel denies any wrongdoing.

The company's roll-out of .biz worked like this. First, there was an
intellectual property claims phase, where trademark holders could stake a
claim to a domain based on their mark, without actually registering it.
Second, an "applications" period opened, where anybody could apply for
any name. When an application clashed with an IP claim, the idea was that
NeuLevel would manually sort out the dispute.

The applications period is what caused the controversy. Unlike other TLD
roll-outs, such as that operated by Afilias with .info, NeuLevel decided
to take all the applications for names from its dozens of registrars,
pool them, then randomly select one applicant to be allowed to register
any disputed name.

Applicants were allowed to make multiple applications, which is one of
the reasons Smiley thinks it constitutes an illegal lottery, as one could
increase one's chances by paying for more applications. Some registrars
even explicitly referred to the process as a "lottery", and applications
as "tickets".

NeuLevel, which is basically a wholesaler, charged its registrar
retailers $2 per application, but the registrars typically resold them
for about $5 each. Many of these registrars also have large reseller
networks comprising hundreds of companies. So NeuLevel finds itself in
the situation where if it is legally obliged to refund its applicants'
$2, its registrars will likely have to refund another $3 on top of that.
It is possible that some registrars could find grounds to sue NeuLevel
for this lost money.

Spokespeople for VeriSign and, the two largest domain name
registrars by market share, declined to comment on the injunction or if
they would take any action as a result. Both companies, along with about
600 other registrars and resellers, are named in the Smiley complaint, as
is the Internet Corporation for Assigned Names and Numbers (ICANN).

Judge Mohr said ICANN, which supports NeuLevel, is not doing anything
wrong, and is not covered by the injunction. He also asked the plaintiffs
to post a $1.6m bond to cover NeuLevel's legal expenses if it wins at
trial. Trial is expected in about six months, to give the plaintiff's
lawyers time to track down all the 500-odd poeple it names as defendants.

NeuLevel's Armentrout said the company will be contacting all its
affected customers shortly. He said: "More than 80 percent of the domain
names applied for during the .biz domain name application process are
unaffected by this decision and will be 'live' by October 23rd."

The preliminary injunction covers a class of domain referred to in court
as "Class 2b". Class 1 names were names where there was a single
application for a single name, and thus the element of chance was not
involved. Class 2a were names were there were multiple applications for a
single name from a single applicant. Names in both of these groups are
allowed to go live as planned.

Class 2b names are names where there are multiple applications submitted
by multiple applicants. For example, 20 people may have submitted 20
applications each for a name like About 53,000 names, a small
but significant ercentage of the total applications, fit into Class 2b.
There were 1.5 million applications for these names, or about 28
applications per name on average.



Message Thread:

Privacy Policy | Terms of Service | Cookies Policy