October 16, 2018

Donuts Inc. loses appeal in .WEB case against ICANN

The decision was ruled out against Donuts Inc. after The United States Court of Appeals agreed that ‘covenant not to sue’ is valid.

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New gTLD giant Donuts Inc. has lost the .WEB case after The United States Court of Appeals ruled the decision in favour of ICANN, stating that the ‘covenant not to sue’ clause is valid.

The lawsuit was filed by the domain name registrar in 2016 after they went through ICANN’s appeal channels to take down Nu Dot Co, that won a rather unusual auction for the .WEB nTLD for USD 135 million.

Donuts say that they were one of the applicants for the .WEB domain name along with the likes of Afilias, Google, Nu Dot Co, Radix and Schlund. They also say that the auction process for this particular domain name was markedly different than the normal processes, which upset them.

According to Donuts, they were unhappy with the fact that a deal had been struck to transfer the ICANN agreement for .WEB to Nu Dot Co after the auction. They also said that had the auction been private, Donuts Inc. would have received a total of USD 22.5 million as a pay-off for losing.

To counter this decision, Donuts said that they sought the help of ICANN’s appeal channels. But when all efforts went in vain, Donuts claimed that they had to sue ICANN in an effort to get a temporary restraining order on the auction, claiming that ICANN had failed to identify who was really in charge of the company (which was later identified as Verisign).

Donuts claims that their restraining offer, that usually takes a long time to enforce action, was refused in record time.

However, the decision to sue ICANN was turned over since because the application for new TLDs included a clause that the applicants would not sue ICANN. But Donuts argued that this agreement not to sue is invalid.

Industry analysts claim that this decision is likely to cause harm to Verisign alone with the delay of activities around the .WEB TLD. It will be interesting to see how Donuts reacts to this loss and strategizes ahead in the domain name market.

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