ICANN's Opposition to Plaintiffs' Motion for Preliminary Injunction Smiley v. ICANN (14 September 2001)

Jeffrey A. LeVee (State Bar No. 125863)
Gregory D. Schetina (State Bar No. 113568)
JONES, DAY, REAVIS & POGUE
555 West Fifth Street, Suite 4600
Los Angeles, CA 90013-1025
Telephone: (213) 489-3939
Facsimile: (213) 243-2539

Attorneys for Defendant
INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTRODUCTION

Defendant Internet Corporation for Assigned Names and Numbers ("ICANN") is widely recognized as the global consensus entity charged with coordinating the management of certain technical aspects of the Internet. ICANN is a private-sector, non-profit, public-benefit corporation dedicated to performing this coordination according to global consensus and for the public good.

Some of ICANN's most important functions relate to the "Domain Name System" ("DNS"), which allows Internet computers to identify each other by easy-to-remember names ending with a now-familiar suffix - known as a "top-level domain" or "TLD" - such as ".com" or ".org". ICANN, which was created in 1998, presently is in the process of overseeing the deployment of seven new TLDs, including the first new "generic" TLDs to be introduced to the Internet in thirteen years. For at least several years, many in the Internet community have supported the introduction of new TLDs such as ".biz" to support the continued growth and evolution of the Internet. ICANN, in keeping with its mission of bottom-up policy development, has employed open and transparent processes to ensure that new domain names would be introduced in a manner consistent with the community consensus, while still preserving the stability of the Internet, ICANN's most important function.

The painstaking efforts of ICANN and its worldwide constituency will culminate initially in the ability of Internet users everywhere to access hundreds of thousands, if not millions, of websites operating under new names such as ".biz," ".info" and ".name". Through this action and, more specifically, the instant motion for preliminary injunction, two potential website operators seek to prevent any person or entity from operating with a ".biz" name for the foreseeable future. Plaintiffs claim that, because ".biz" domain name applications are processed in random order and are subject to a nominal processing fee, the registration of ".biz" names is a "lottery scheme" that violates California's gaming laws. According to plaintiffs, speculation about potential harms to them during the pendency of this litigation - which they could avoid if they wish - requires the entire ".biz" segment of the global Internet to be shut down immediately, thereby radically altering the careful roll-out that ICANN has been overseeing, and potentially throwing the long-planned expansion of the DNS into jeopardy. Such an injunction is warranted, plaintiffs claim, because they might be awarded ".biz" domain names over the next two weeks and then lose those names if the Court ultimately determines that the ".biz" roll-out violated California law.

In its memorandum filed today, defendant NeuLevel, Inc. explains that the ".biz" start-up plan does not meet the elements of an illegal lottery under California law and does not resemble the type of exploitative gambling operation that state and federal statutes are designed to prevent. ICANN submits this brief to emphasize that the certain harm to the entire Internet community from a preliminary injunction against ".biz" registration and operation would far outweigh any interim harm plaintiffs might incur if the Court denies their motion.

STATEMENT OF FACTS

The relevant facts are set forth fully in the attached declaration of Louis Touton, ICANN's vice-president, secretary and general counsel, and are summarized here.

The Internet's universality derives in large part from the Domain Name System ("DNS"), a hierarchical network of computers that translates user-friendly domain names (such as "www.LASuperiorCourt.org") into the lengthy "Internet Protocol" ("IP") numbers (such as 209.80.48.82) that computers employ to route traffic and establish connections among themselves. (Touton Dec. ¶¶ 3-7.) This lawsuit involves the creation of a new set of domain names in the DNS, to support the Internet's growth by allowing additional domain names to be registered and associated with IP numbers. Although some people view themselves as "owning" a domain name, in fact, registration of a name simply means that the DNS will translate that name into the IP number by which the registrant's computer can be identified. (Id. ¶ 7.)

Plaintiffs are, in essence, seeking to shut down the carefully planned roll-out of a new set of domain names in the DNS. The technical term for a domain-name ending such as ".com", ".org," or ".biz" is a global or generic "top-level domain" (gTLD). (Id. ¶ 10.) From the original deployment of the DNS in the mid-1980s, there were only seven gTLDs, and only three of these were generally available to public registrations. (Id.) As the Internet evolved from primarily a U.S.-based academic and research network to a ubiquitous global medium for commerce and information exchange, there arose strong motivation to augment and diversify the DNS through the introduction of new gTLDs. (Id. ¶ 11.)

Before domain names within a new gTLD can be registered in the DNS, the gTLD must be added to the "authoritative root-zone file" in a master computer that is distributed to thirteen "root server" computers at the top of the DNS hierarchy located throughout the world. (See id. ¶¶ 7, 19.) The authoritative root-zone file - and therefore much of the DNS - historically has been controlled by U.S. government agencies or through agreements with them. (Id. ¶ 8.) In January 1998, almost four years ago, the U.S. Department of Commerce ("DOC") recognized the Internet community's growing interest in new gTLDs, and the need for creating a new mechanism for coordinating the increasingly complex, and increasingly international, administrative and policy issues raised by the use and expansion of the DNS . (See DOC "Green Paper," dated Jan. 30, 1998, on DOC website at http://www.ntia.doc.gov/ntiahome/domainname/dnsdrft.htm.)

After receiving considerable further public comment, the DOC issued a "White Paper" stating that "the U.S. Government [wa]s prepared to recognize, by entering into agreement with, and to seek international support for, a new, not-for-profit corporation formed by private sector Internet stakeholders to administer policy for the Internet name and address system." (DOC "White Paper," dated June 4, 1998, on DOC website at http://www.ntia.doc.gov/ntiahome/domainname/6_5_98dns.htm.)

In response to the government's proposal, a broad coalition of the Internet's business, technical, academic and user communities formed ICANN in October 1998. (Touton Dec. ¶ 9.) ICANN is recognized by the U.S. and other governments, as well as the broader Internet community, as the global consensus entity that is the appropriate body to coordinate various technical and related policy aspects of the DNS, including the addition of new gTLDs to the authoritative root-zone file. (Id.)
Over the past three years, the Internet community has been working through ICANN toward a measured and responsible introduction of new gTLDs to support the public's need for additional, easy-to-remember domain names. The first phase involved many months of study and deliberation by a special working group and then multiple rounds of reports, recommendations, and public comments (which numbered over 1000) before final action by the ICANN Board. (Id. ¶ 13.) This process revealed a clear consensus that a small number of TLDs should be introduced initially as a "proof of concept" before any widespread expansion of the DNS. (Id. ¶¶ 14, 23.)

ICANN then selected a small set of new TLDs and the "registry operators" that will manage them. (Id. ¶ 15.) This phase involved ICANN's formal call for proposals, the review of 44 applications by a team of experts, robust dialogue through ICANN's public forums (including over 5000 written comments submitted by the public and an all-day open meeting in California), and consideration by the ICANN Board in a several-hour open session on November 16, 2000. (Id. ¶¶ 16-17.)¹ Ultimately, ICANN elected to pursue seven proposals, including the proposal by JVTeam, LLC (now known as NeuLevel, Inc.) to become the registry operator for a ".biz" generic top-level domain. (Id. ¶ 18.)

With continued broad-based consultation, ICANN negotiated detailed agreements for operation of the new TLD registries in a manner consistent with the consensus goals of the Internet community. (Id.) Agreements for three TLD registries (".biz", ".info", and ".name") have now been finalized, the DOC has authorized the addition of those TLDs to the authoritative root-zone file, and the operators are in various stages of preparing to register new domain names. (Id. ¶¶ 18-19.) The ".biz" domain names are scheduled to become operational in early October 2001. (Id. ¶ 31.)

Throughout the long and careful process described above, much attention was given to the issue of how registry operators would process the "first wave" of registrations for domain names within the new TLDs. (Id. ¶¶ 21-23.) In particular, concerns arose from the fact that the introduction of any new TLD is likely to lead to an initial surge in registrations as people seek to register the most desirable domain names. (Id. ¶ 22.) Because gTLDs were last introduced during the Internet's infancy in the 1980s, prior to the "commercialization" of the Internet, the traditional use of a strict "first-come/first-served" regime provides little guidance on how to avoid or at least minimize the problems of a "land rush." (Id. ¶¶ 22, 24.) In fact, the Internet community generally views a "first-come/first-served" regime for new gTLDs as impractical (due to the high risk - validated by recent experiences - that computer systems would be overloaded by a deluge of registration requests) and potentially unfair (due to the expectation that some applicants would gain an advantage in a registration "race" by using more sophisticated technology). (Id. ¶ 26.)

During the process of evaluating how to introduce the new TLDs, it became apparent that the Internet community strongly supports the testing of random selection - as opposed to "first-come/first-served" - registration processes during the "proof of concept" phase. (Id.) As a result, the ".biz", ".info", and ".name" registry operators all initially proposed - and their registry agreements all require - some method of random processing of domain name registrations received during an extended application period. (Id. ¶ 25.) These methods allow orderly processing and are designed to avoid providing an inappropriate advantage to any registrant. (Id. ¶ 26.)

In mid-May 2001, ICANN and NeuLevel announced the exact process for ".biz" registrations, and these announcements were widely reported by the press. (Id. ¶ 31.) NeuLevel began accepting applications for ".biz" names in July 2001, and the initial application period will end on September 17, 2001. (Id.) Consistent with the May 2001 announcement, NeuLevel has accepted applications from all applicants who choose to submit them, without attempting the technically impractical task of preventing multiple applications from the same applicant and with each application subject to a $2.00 processing fee. (Id.)² The first group of .biz domain names are scheduled to be registered and operational by early-October 2001.

ICANN and the rest of the Internet community have made immeasurable efforts over the past several years to achieve the responsible introduction of new gTLDs. (Id. ¶ 33.) The operation of ".biz" domain names will represent a momentous step forward in the long process of providing the Internet community with the benefits of competition through a variety of domain name options and services. (Id.) Interruption of the process at this juncture would cause Internet users to be unable to communicate with each other, obtain and disseminate information, and participate in the electronic marketplace via ".biz" domain names, thereby stopping the introduction of this source of enhanced consumer choice and new competition. (Id.) In addition, the resulting concern and confusion, and the potential impact on other new TLD rollouts, likely would injure ICANN's attempt to insure that the roll-out of the new TLDs does not adversely affect the stability of the Internet, which obviously is critical to Internet users everywhere. (Id. ¶ 34.)

ARGUMENT

I. THE MOTION FOR PRELIMINARY INJUNCTION SHOULD BE DENIED BECAUSE PLAINTIFFS FAIL TO MAKE THE REQUISITE SHOWING UNDER CALIFORNIA LAW.

Plaintiffs are seeking to prevent defendants from: (1) accepting and processing domain name applications in exchange for a processing fee; (2) registering domain names based on random-order processing of such applications; (3) spending or transferring any processing fees received; and (4) "not prohibiting" third parties from accepting and processing domain name applications in exchange for a processing fee. (Plaintiffs' Motion at 2.) The first three requests do not apply to ICANN, which does not accept or process domain name applications, register domain names, or receive any part of a processing or registration fee. Furthermore, the first three requests fail to meet the familiar standards for preliminary prohibitory injunctions. The fourth request is completely inappropriate for the reasons set forth below.

The two factors that guide the trial court's exercise of its discretion in deciding a motion for preliminary injunction are: (1) the plaintiff's likelihood of success on the merits, and (2) a balancing of the likely harm from granting the injunction against the likely harm from denying it. See, e.g., Abrams v. Saint John's Hosp. & Health Ctr., 25 Cal. App. 4th 628, 635-36 (1994). By considering these two factors together, the court minimizes the potential for harm through an erroneous interim decision.

Plaintiffs will not succeed on the merits of their claim, for the reasons set forth in defendant NeuLevel's memorandum. In addition, the balance of harms, which is the focus of this memorandum, tips decidedly against the issuance of a preliminary injunction. The balancing of harms "involves consideration of such things as the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo." Abrams, 25 Cal. App. 4th at 636. These considerations each show that the likely harm from the injunction requested by plaintiffs would far exceed the likely harm if no injunction were issued.

A. The Likely Harm In The Absence Of An Injunction Is Minimal.

Plaintiffs claim that if no injunction is issued, "innocent consumers" will continue to pay defendants processing fees in connection with domain name registration requests. (Plaintiffs' Mem. at 10-11.) This point is now largely moot because, consistent with NeuLevel's ".biz" start-up plan, requests to register domain names will not be accepted for processing after September 17, 2001 until the onset of post-landrush first-come/first-served registration. In any event, the potential harm from continued acceptance of domain name applications during the pendency of litigation would be relatively small, even assuming that the Court were to find an illegal lottery. Notwithstanding plaintiffs' rhetoric about "innocent consumers," the ".biz" domain names are restricted to use only for commercial or business purposes. And plaintiffs concede that the potential harm from an illegal lottery is limited to the possibility that some players will "pay valuable consideration for [little or] nothing in return." (Id. at 11.) If necessary, any such harm could be remedied easily and completely at the end of litigation.

Plaintiffs also claim that if domain name applications are processed now, they will suffer a variety of harms attributable to their own operation of websites under ".biz" domain names. (See id. at 11-12.) Specifically, plaintiffs worry that any domain names registered to them might be reassigned to someone else if the Court were to find an illegal lottery, in which case their pendente lite efforts to develop websites under particular names would be wasted. A preliminary injunction against the registration of ".biz" domain names, however, is completely unnecessary to prevent this "harm" because plaintiffs can simply wait until after the litigation to make use of the ".biz" domain names that they have sought to register, thereby achieving precisely the same effect. Interim harms that are within plaintiffs' control should receive no weight in the Court's preliminary injunction analysis. See Wiggins v. Secretary of the Army, 751 F. Supp. 1238, 1241 (W.D. Tex. 1990), aff'd, 946 F.2d 892 (5th Cir. 1991) (even assuming a likelihood of success on merits, motion for preliminary injunction would be denied because alleged interim harm "is within the Plaintiff's control and the exercise of that control should not prejudice the Defendant").

Finally, plaintiffs claim that the registration of domain names to certain applicants will irreparably harm all others "because they will forever lose the opportunity to fairly secure one of the valuable <.biz> domain names." (Plaintiffs' Mem. at 13.) This argument directly contradicts plaintiffs' above-mentioned assumption that domain names would be reassigned if the Court were to find an illegal lottery. More importantly, plaintiffs' "lost opportunity" argument lacks merit because, contrary to their apparent belief, neither they nor anyone else has a legal right to an "opportunity" to register a particular ".biz" domain name. Instead, the "opportunity" to register ".biz" domain names derives solely from the Internet community consensus supporting the introduction of the ".biz" TLD and the registration of ".biz" domain names according to NeuLevel's start-up plan, as a "proof of concept" to determine whether this mechanism represents a technically sound and fair way to introduce TLDs in the future. Plaintiffs will suffer no cognizable harm from the loss of an "opportunity" that never existed outside of the registration process being attacked by them in this lawsuit.

B. The Likely Harm From An Injunction Is Overwhelming.

By contrast, the injunction plaintiffs seek would be severely detrimental to the Internet community. Through ICANN, the community has been working for years toward the introduction of new TLDs and has been expecting for many months that ".biz" names will become operational in early October. Although a business cannot know with certainty whether it will succeed in registering a specific domain name, thousands of enterprises undoubtedly have made substantial preparations for the launching of ".biz" websites as soon as the names become operational. Likewise, thousands if not millions of Internet users around the world undoubtedly are prepared to begin communicating, obtaining information, and engaging in transactions within the ".biz" domain. From the Internet community's perspective, therefore, the impending operation of ".biz" websites in early October represents the status quo, and plaintiffs' last-minute attempt to block that event would, if successful, severely disrupt the settled and well-justified expectations of countless businesses and Internet users throughout the world.³

Plaintiffs reveal much when they glibly assert that a preliminary injunction can do no harm because the ".biz" domain names "are not perishable goods that will spoil if not quickly distributed." (Plaintiffs' Mem. at 14.) This treatment of domain names as an exploitable commodity, which underlies every aspect of the plaintiffs' lawsuit, is antithetical to the core ideals of the Internet community as embodied in ICANN. The irreparable harm from an injunction involves not domain name value, but rather the hundreds or thousands of ".biz" transactions that would be lost each second and could never be replaced.

Just as importantly, an injunction against ".biz" would have a severe impact on the much broader process of which ".biz" is only one part. The ".biz" TLD and a small number of other new TLDs are being introduced as a "proof of concept" - proof that the Internet can effectively support the essentially simultaneous introduction of multiple new TLDs. The introduction of large TLDs such as ".biz" poses very significant challenges to registry stability and fair allocation. The various elements of the ".biz" introduction are intended to test possible means of meeting these challenges, so that the long-term need for expansion of the number of TLDs on the Internet can be addressed. The results of these efforts will allow the Internet community to consider, through the open processes of ICANN, the mechanisms for a broader introduction aimed at promoting competition and expanding the scope of available services within the DNS. An injunction would impede the Internet's overall development by delaying this process, deflating the momentum that has taken years to build, and creating substantial uncertainty, perhaps the greatest harm of all. The result would harm the continued development of the Internet as the truly remarkable medium it offers for global commerce, communication, cultural interchange, and free expression.

Plaintiffs seek to avoid acknowledgment of these potentially devastating consequences by claiming that an injunction would merely preclude an unlawful registration process while leaving "many lawful alternative means" through which registration could proceed apace. (Plaintiffs' Mem. at 14.) This argument lacks merit for several reasons. It incorrectly assumes that NeuLevel's current process is unlawful and improperly suggests that defendants should avoid harmful delays by effectively implementing the final relief sought in this case - a different registration process. In any event, as discussed above and in the accompanying declaration of Louis Touton (¶¶ 26-30), the methods proposed by plaintiffs generally are considered ill-suited to the "proof of concept" process, and the Internet community broadly supports the testing of random selection methods for reasons of both feasibility and fairness. Even if it were appropriate to use a different registration system, implementation would take several months and thus would not prevent the irreparable harms that would flow from implementation of the requested injunction.

II. THE FORM OF RELIEF REQUESTED BY PLAINTIFFS IS IMPROPER.

The specific order sought by plaintiffs would enjoin defendants from:

1. Offering the chance to register a domain name in exchange for consideration;

2. Distributing, assigning, causing registration of, and/or transferring a domain name pursuant to a lottery system (i.e., a system comprised of prize, consideration, and chance);

3. Spending, distributing, encumbering, assigning, and/or transferring money that Defendants have received from consumers/business as consideration for the chance to register a domain name; and

4. Not prohibiting domain name registrars and other third parties, which Defendants have accredited or empowered to offer domain names, from offering the chance to register a domain name in exchange for consideration.

(Plaintiffs' Motion at 2.)

As a threshold matter, the requested order is worded improperly because it assumes that the current ".biz" registration process violates California's lottery statute. In fact, the current process does not offer applicants the chance to register a domain name in exchange for consideration, and ".biz" domain names are not being assigned or registered pursuant to a system comprised of prize, consideration, and chance. Thus, even if the court were to issue injunctive relief, the requested relief as worded by plaintiffs would need to be revised substantially.

In addition, ICANN cannot properly be subject to the first three items of requested relief. ICANN does not participate in the technical process for registering domain names in TLDs that have been entered into the authoritative root-zone file. Thus, ICANN does not "offer" the opportunity to register domain names; nor does it "distribut[e]," "assign[]," "caus[e] registration of," or "transfer[]" domain names. ICANN also does not receive - directly or indirectly - application fees, registration fees, or any other payments from domain name registrants. A party cannot be enjoined from "[s]pending, distributing, encumbering, assigning, and/or transferring money" that it does not have.

The last item of requested relief, at least as presently worded, makes no sense, as it would enjoin defendants from "not prohibiting" third parties from taking certain actions. This bizarre wording appears to be an attempt to transform a mandatory injunction into a prohibitory one. An injunction is prohibitory if it requires a party to refrain from a particular act and mandatory if it compels performance of an affirmative act. Davenport v. Blue Cross of California, 52 Cal. App 4th 435, 446 (1977). In this connection, plaintiffs' linguistic gymnastics are unavailing because "[t]he substance of the injunction, not the form, determines whether it is mandatory or prohibitory." Id. at 447. In Davenport, for example, the court of appeal held that an injunction was mandatory when it prohibited defendant from "refusing to authorize" certain medical treatment. Id. at 443, 447. Just as an injunction against "refusing to authorize" clearly mandates affirmative acts of authorization, so too would an injunction against "not prohibiting" clearly mandate affirmative acts of prohibition.

"A preliminary mandatory injunction is rarely granted," as it is "not permitted except in extreme cases where the right thereto is clearly established and it appears that irreparable injury will flow from its refusal." Id. at 446 (citation and internal quotation marks omitted). Plaintiffs fail – and, indeed, do not even attempt – to meet this standard. Plaintiffs cannot even satisfy the requirements for a preliminary prohibitory injunction, and their inability to meet more rigorous requirements is amply demonstrated by their extreme (albeit unsuccessful) efforts to avoid phrasing the requested injunction in mandatory terms.

In addition, the last item of requested relief cannot be granted because it fails to specify the acts through which ICANN might "prohibit" domain name registrars and other third parties from accepting and processing domain name applications in exchange for a processing fee. An injunction must be "specific in terms" and "describe in reasonable detail . . . the act or acts" to which it applies. Union Pacific R.R. Co. v. Mower, 219 F.3d 1069, 1077 (9th Cir. 2000) (quoting Fed. R. Civ. P. 65(d)); accord Wilson v. Superior Court, 194 Cal. App. 3d 1259, 1273 n.3 (1987).

The relationship between ICANN and NeuLevel is governed by a contract, the Registry Agreement, which sets forth NeuLevel's obligations to ICANN. That contract, which specifically contemplates NeuLevel's acceptance and processing of domain name applications in exchange for a processing fee, does not give ICANN any legal basis to prohibit the acceptance of fees. Similarly, the relationships between ICANN and accredited registrars are governed by contracts, called Registrar Accreditation Agreements, which embody the obligations of registrars to ICANN that ICANN could enforce. Although the Registrar Accreditation Agreements do provide that registrars will observe certain practices in dealing with customers (for example, ensuring that customers give accurate information and notifying customers of the registrar's privacy policies), they specifically disclaim any intent to "prescribe[] or limit[] the amount Registrar may charge Registered Name Holders for registration of Registered Names." (Touton Dec. ¶¶ 15, 20.) Finally, with respect to ICANN's ability to prohibit "third parties," there is utterly no suggestion of how that might be accomplished. Accordingly, the injunction requested by plaintiffs is improper because it lacks the requisite specificity and would require ICANN to achieve a result that lies beyond its control and that has no basis in the various agreements that define the only obligations that ICANN has the ability to enforce.

CONCLUSION

The likely harms to ICANN and the entire Internet community weigh heavily against the imposition of the requested injunction, particularly when weighed against the truly minimal harms asserted by the plaintiffs. ICANN urges the Court to deny the motion for preliminary injunction.

Notes:

1. The ICANN Board is comprised of nineteen persons from 11 different countries. Their names and backgrounds may be found at http://www.icann.org/general/abouticann.htm.

2. ICANN receives no part of the $2.00 application fee or any other fee charged by NeuLevel in the domain name application and registration process. (Id. ¶ 32.)

3. Plaintiffs' delay in seeking relief has substantially increased the likely harm that would result from the issuance of a preliminary injunction. Plaintiffs filed their complaint on July 23, 2001 and undoubtedly were aware of the relevant facts even earlier. Despite their knowledge of the registration process and the scheduled October roll-out, plaintiffs inexplicably delayed the service of the complaint and then the filing the instant motion, which they filed on August 21, 2001. By intentionally waiting until the eleventh hour to seek an injunction, plaintiffs created their own "emergency." The Internet community's expectations and preparations with respect to ".biz" domain names have developed significantly during the period of plaintiffs' delay, and consequently the likely harms from the requested injunction are now at their peak.