ICANN and ICM Sued for Anti-Competitive Practices Relating to the Newly-Created .XXX Top Level Domain
The recent establishment of .XXX, a new Top-Level Domain Name (“TLD”) intended for adult-oriented content, has been met with some trepidation and sparked controversy from those within and outside of the adult-oriented industries. Although much has been made of the threat of .XXX cybersquatting relating to mainstream companies, institutions and brands, ironically, the first formal legal challenge to the .XXX TLD, comes from those within the adult industry.
Last week, the owners of two popular adult-oriented websites, YouPorn.com and Digital Playground, filed a federal antitrust lawsuit against the operators of the .XXX TLD, and the administrator of the Domain Name System (“DNS”), alleging antitrust violations related to the creation and maintenance of the controversial TLD. Plaintiffs complaint named the Internet Corporation for Assigned Names and Number ("ICANN") and its exclusive registry operator for the .XXX TLD, ICM Registry, LLC ("ICM") as defendants in the suit. ICANN is a non-profit corporation responsible for the domain names on the internet. It is responsible for administering the internet domain name system by controlling the creation of all TLDs and accrediting registrars for domain names. ICM is a for-profit registry operator providing services to domain registrants for fees.
The suit filed in the Central District of California, alleges monopolistic conduct, price gouging, and anti-competitive and unfair practices. Specifically, the plaintiffs allege that defendant ICM manipulated and intimidated ICANN into entering into an agreement which resulted in a monopoly by: naming ICM as the sole registrar for the .XXX TLD; agreeing to a prohibition on the creation of any competing TLDs for the adult industries; and, granting ICM control of pricing without any oversight by ICANN. As a result, the plaintiffs argue that ICM now maintains a monopoly over the sole adult-oriented TLD.
The plaintiffs complaint also alleges that ICM has already engaged in monopolistic and anticompetitive acts by charging prices considerably higher than those charged in competitive markets for similar TLD services. In some instances, plaintiffs allege that ICM is charging ten times more for their .XXX registration services than comparable registration services relating to other TLDs.
Interestingly, the plaintiffs accuse ICM of using its power to create an artificial market for .XXX registrants inside and outside of the adult-oriented industries. For those outside the adult industries, the .XXX TLD has caused great concerns relating to cybersquatting threats, concerns which plaintiffs allege have resulted in defensive registrations by those concerned about having their trademarks, brands and companies associated with the .XXX TLD. The plaintiffs allege that these "deadweight" registrations exceed any economic benefit for the .XXX TLD because defensive registrations will disproportionately dominate affirmative registrations. For instance, the complaint maintains that parties within and without the adult industry will file defensive registrations to avoid loss in reputations, loss of good will, confusion and dilution with being associated with .XXX TLD.
This suit was filed near the expiration of the “land rush” period on November 25, 2011, a period during which only those within the adult industry are permitted to register domain names under the .XXX TLD. As of December 6, 2011, registration under the .XXX TLD is open to the public, a period when many fear that cybersquatters will begin registering mainstream marks and brands under the .XXX TLD. Only time will tell whether legal challenges to the .XXX TLD have a meaningful impact on ICANN’s administrative practices and ICM’s registration services.
Owen J. McKeon is a Director in the Gibbons Intellectual Property Department. Lisa H. Wang, an Associate in the Gibbons Intellectual Property Department, co-authored this post.
