Domain registrars sue ICANN, VeriSign

One day after being sued by VeriSign over delays in approving a new service for backordering Internet domain names, the organization that controls the Internet’s DNS is now being sued by a group of eight domain name registrars seeking to stop the new services’ implementation, this time with VeriSign being named as a codefendant.

The lawsuit, which was filed Friday in the U.S. District Court for the Central District of California in Los Angeles, seeks to halt the implementation of a VeriSign-backed waiting list for expired domain names called Wait List Service (WLS).

The suit accuses VeriSign and ICANN, the nonprofit corporation responsible for allocating IP address space and managing top-level domains, of “planning to implement a scheme to dupe consumers into buying domain names the consumers will never be able to register, and an unlawful and fraudulent protection racket,” according to court filings.

The battle is over how to re-register the 10,000 to 25,000 top level domains that become available each day after their owners fail to pay renewal fees, said Bill Mushkin, the CEO of Name.com, one of the registrars behind the lawsuit.

Under the current system, popular domain names are often back-ordered and then auctioned to the highest bidder when they become available again. While customers may pay a higher fee for a back-ordered domain – on average they cost between $30 and $60, Mushkin said – they only pay for the domains when they actually obtain them.

Under the WLS system, back-ordered domains would be awarded on a first-come, first-serve basis, but customers would pay an annual fee to back-order the domain, regardless of whether it becomes available for purchase during the year, Mushkin said.

Mushkin and the other plaintiffs in Friday’s lawsuit argue that this system could help Verisign create new “insurance” services that would be used by companies looking to ensure that their own domain names never become available to the general public. “The WLS thereby allows VeriSign and ICANN to generate fees by playing their unknowing customers against each other for merely maintaining the status quo,” the court filings say.

The WLS implementation will also reduce the amount of money smaller registrars make from back-ordered domains, Mushkin said. “From a smaller registrar’s perspective, the amount of money from these can be the difference between profitability and a loss,” he said. “A lot of the smaller registrars are going to go out of business if WLS gets implemented.”

While VeriSign declined to comment directly on the lawsuit, citing company policy against discussing ongoing litigation, VeriSign’s vice president of government relations, Tom Galvin, did defend the WLS system, saying it would help remove the uncertainty involved in back-ordering domain names. “It enables a person who wants a domain name that’s currently registered to know in certainty that if a domain name ever expires, they will get it,” he said.

Galvin expressed hope that WLS could soon be implemented. “We’ve been working on this service for over two years and we hope, either in Rome or sometime shortly after that, to reach a solution,” said Galvin, referring to ICANN’s week-long meetings being held in Rome next week.

On Thursday, however, VeriSign sued ICANN, accusing the organization of over-stepping its authority and stifling the implementation of services like WLS. “Working the ICANN process is like being nibbled to death by a duck.” Galvin said Thursday. “It makes no sense and, in the end, you’re dead in the water.”

The eight companies named as plaintiffs in the suit are: ABR Products, Name.com LLC, Lee Chambers Company LLC, Fiducia LLC, Spot Domain LLC, !$6.25 Domains Network, Ausregistry Group Pty. Ltd., and !$!Bid It Win It.