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Advisory Concerning Smiley Litigation

12 October 2001

Marina del Rey, California, USA (12 October 2001) Yesterday, in a preliminary ruling, a state-court judge in Los Angeles County, California determined that one aspect of the initial name allocation system implemented by NeuLevel, Inc., was in violation of the State of California's lottery law. NeuLevel is the Virginia-based registry operator for the new "dot biz" top level domain (TLD) that was recently authorized by the Internet Corporation for Assigned Names and Numbers (ICANN).

ICANN notes that the judge did not find the contract that ICANN entered into with NeuLevel was unlawful. The judge, however, did determine that NeuLevel's decision to charge a $2.00 fee for processing certain ".biz" applications might be in violation of California's lottery law. Although this preliminary ruling takes a different approach than earlier California decisions upholding processing fees, there is no question that all organizations must conduct their businesses according to the applicable laws of the jurisdictions where they operate.

As a global public interest organization, ICANN is particularly concerned that the judge's ruling applied California law to domain-name applications having no relation to California – that is, to applications submitted to registrars not doing business in California by persons living outside of California (including persons residing outside of the United States) under domain-name agreements governed by laws of another jurisdiction.

ICANN believes the judge's ruling in this regard is contrary to well-established legal principles and violates the rights of non-Californians and non-US. citizens. ICANN also believes that the ruling, if upheld on appeal, would be harmful to the evolution of the global Internet.

The launch of the ".biz" TLD is one of several TLD roll-outs that are occurring in connection with ICANN's "proof of concept" phase to add new TLDs to the Internet, as required by its Memorandum of Understanding with the US Department of Commerce. ICANN is assessing the effect of the court's ruling in connection with its ongoing evaluation of the process of the initial roll-out of new TLDs.