.biz injunction halts 53,000 domain names
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
illegal lottery. Speculation has already begun that NeuLevel could face
lawsuits from class-action attorneys representing registrants
and possibly from
the company's own channel.
As anticipated, Judge Anthony Mohr handed down a preliminary
against the company, preventing it from going live with about 53,000
names. Applicants for all the cool-sounding big-money names, like
travel.biz, are affected, as are somewhere between 80 and
500 companies that resell
NeuLevel has also been instructed to put $3m in the court's trust,
cover the possibility that it will have to make 1.5 million refunds of
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.
chief executive Doug Armentrout said in a statement: "While we
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
damages against what they allege is a lottery, illegal in California and
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
Second, an "applications" period opened, where anybody could apply
any name. When an application clashed with an IP claim, the idea was that
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
pool them, then randomly select one applicant to be allowed to
any disputed name.
Applicants were allowed to make multiple applications,
which is one of
the reasons Smiley thinks it constitutes an illegal lottery, as
increase one's chances by paying for more applications. Some registrars
explicitly referred to the process as a "lottery", and applications
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'
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.
for VeriSign and Register.com, 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
wrong, and is not covered by the injunction. He also asked the
to post a $1.6m bond to cover NeuLevel's legal expenses if it wins
trial. Trial is expected in about six months, to give the plaintiff's
time to track down all the 500-odd poeple it names as defendants.
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
The preliminary injunction covers a class of domain referred to in court
"Class 2b". Class 1 names were names where there was a single
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
show.biz. 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
applications per name on average.