Porn Ruling Could Spell Trouble for ICANN

A case pitting adult entertainment companies against the gatekeepers of Internet domain names cleared a key hurdle when a federal judge in Los Angeles largely allowed antitrust claims over the controversial .xxx domain to go forward.

U.S. District Judge Philip Gutierrez last month partly granted motions to dismiss filed by the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit organization in charge of the domain name system, and ICM Registry, LLC, the registry running the .xxx domain. But the judge allowed the plaintiffs to pursue their core claims that ICANN and ICM were running what amounts to a shakedown of the adult industry, forcing website operators to defensively seek .xxx addresses to protect their brands. (Read Gutierrez's 17-page at http://pdfserver.amlaw.com/tal/icann.pdf.)

The Big Porn v. Big Web showdown began last November, when Mitchell Silberberg & Knupp filed suit on behalf of adult film company Digital Playground, Inc. and Manwin Licensing International S.a.r.l., the company that manages online content for Playboy and owns and licenses adult websites like the wildly popular YouPorn.com. The companies alleged in their complaint that ICANN and ICM violated federal antitrust law during the establishment of the .xxx domain, which was intended to be used exclusively for adult content. ICM had been lobbying for the .xxx top-level domain for more than a decade before ICANN finally approved it and contracted with ICM to operate it last year, according to the complaint. (See the complaint at http://pdfserver.amlaw.com/tal/ICANNComplaint.pdf.)

Plaintiffs: No Competition

The plaintiffs claim that ICANN and ICM conspired to establish the .xxx domain, knowing that adult websites would have no choice but to pay outsized fees for .xxx addresses and giving ICM a monopoly on adult domains. They argue that there was no competition for the registry contract to operate the .xxx domain, and that the renewal provisions in the contract between ICANN and ICM meant there would be virtually no competition in the future. The companies are seeking to enjoin the domain, void the agreements between ICANN and ICM, and impose price constraints and service requirements on ICM.

ICANN's lawyers at Jones Day moved to dismiss in January, arguing that since ICANN is a non-profit that doesn't make or sell anything, it was immune from antitrust claims. (See the motion at http://pdfserver.amlaw.com/tal/ICANNmtd.pdf. For some past high-level musings on ICANN's antitrust liability status, see, “ICANN's Escape from Antitrust Liability,” Justin T. Lepp, 89 Wash. U. L. Rev. 931 (2012) (http://bit.ly/MCpL4T) and “ICANN and Antitrust,” A. Michael Froomkin and Mark A. Lemley, University of Illinois Law Review, Vol. 2003, No. 1.) Gutierrez didn't buy the organization's argument. “ICANN granted ICM the sole authority to operate [.xxx]. In return, ICM agreed to pay ICANN money,” the judge wrote. “This is 'quintessential' commercial activity and it falls within the broad scope of the Sherman Act.”

ICANN and ICM, which is represented by Wilmer Cutler Pickering Hale and Dorr, also failed to persuade Guttierez that the plaintiffs hadn't identified a relevant market for defensive .xxx registrations. Instead, the judge essentially signed off on the plaintiffs' argument that the only way to block a name in the .xxx domain is to register a name in the .xxx domain. Gutierrez did, however, dismiss claims regarding the market for “affirmative registrations” ' any registrations for new websites intended primarily for adult content. The judge pointed out that Manwin's own YouPorn.com site is the most popular free adult video website on the Internet, indicating that a .com domain is an “adequate economic substitute” to a .xxx site.

Jones Day's Jeffrey LeVee says that he was grateful that the judge had sided with ICANN on the affirmative market question. LeVee doubts the plaintiffs can ultimately prove that a defensive registration market exists, and he notes that the issue of whether ICANN engages in commercial activity is something that can be appealed if the case makes it that far.

“ICANN argued, and we still believe, that while the process of selling domain name subscription is a commercial activity, what ICANN does is at its core non-commercial,” LeVee says. He doesn't think the decision will make a big impact on the 1,000-plus top-level domains ICANN is currently considering for approval. “The domain name world is about to become much more competitive than it is today,” he says.

Mitchell Silberberg's Kevin Gaut had a markedly different take on the decision and its implications for ICANN: “I think that the approval of additional [top-level domains] has made the antitrust potential [against ICANN] heightened.” Gaut says the plaintiffs were pleased with the ruling on defensive registrations and are considering their options about amending their complaint to attempt to establish a relevant market on the claims relating to affirmative registrations. As to ICANN's antitrust immunity defense, he says it “had absolutely no merit. There's no question that ICANN is engaged in commerce.”

A case pitting adult entertainment companies against the gatekeepers of Internet domain names cleared a key hurdle when a federal judge in Los Angeles largely allowed antitrust claims over the controversial .xxx domain to go forward.

U.S. District Judge Philip Gutierrez last month partly granted motions to dismiss filed by the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit organization in charge of the domain name system, and ICM Registry, LLC, the registry running the .xxx domain. But the judge allowed the plaintiffs to pursue their core claims that ICANN and ICM were running what amounts to a shakedown of the adult industry, forcing website operators to defensively seek .xxx addresses to protect their brands. (Read Gutierrez's 17-page at http://pdfserver.amlaw.com/tal/icann.pdf.)

The Big Porn v. Big Web showdown began last November, when Mitchell Silberberg & Knupp filed suit on behalf of adult film company Digital Playground, Inc. and Manwin Licensing International S.a.r.l., the company that manages online content for Playboy and owns and licenses adult websites like the wildly popular YouPorn.com. The companies alleged in their complaint that ICANN and ICM violated federal antitrust law during the establishment of the .xxx domain, which was intended to be used exclusively for adult content. ICM had been lobbying for the .xxx top-level domain for more than a decade before ICANN finally approved it and contracted with ICM to operate it last year, according to the complaint. (See the complaint at http://pdfserver.amlaw.com/tal/ICANNComplaint.pdf.)

Plaintiffs: No Competition

The plaintiffs claim that ICANN and ICM conspired to establish the .xxx domain, knowing that adult websites would have no choice but to pay outsized fees for .xxx addresses and giving ICM a monopoly on adult domains. They argue that there was no competition for the registry contract to operate the .xxx domain, and that the renewal provisions in the contract between ICANN and ICM meant there would be virtually no competition in the future. The companies are seeking to enjoin the domain, void the agreements between ICANN and ICM, and impose price constraints and service requirements on ICM.

ICANN's lawyers at Jones Day moved to dismiss in January, arguing that since ICANN is a non-profit that doesn't make or sell anything, it was immune from antitrust claims. (See the motion at http://pdfserver.amlaw.com/tal/ICANNmtd.pdf. For some past high-level musings on ICANN's antitrust liability status, see, “ICANN's Escape from Antitrust Liability,” Justin T. Lepp, 89 Wash. U. L. Rev. 931 (2012) (http://bit.ly/MCpL4T) and “ICANN and Antitrust,” A. Michael Froomkin and Mark A. Lemley, University of Illinois Law Review, Vol. 2003, No. 1.) Gutierrez didn't buy the organization's argument. “ICANN granted ICM the sole authority to operate [.xxx]. In return, ICM agreed to pay ICANN money,” the judge wrote. “This is 'quintessential' commercial activity and it falls within the broad scope of the Sherman Act.”

ICANN and ICM, which is represented by Wilmer Cutler Pickering Hale and Dorr, also failed to persuade Guttierez that the plaintiffs hadn't identified a relevant market for defensive .xxx registrations. Instead, the judge essentially signed off on the plaintiffs' argument that the only way to block a name in the .xxx domain is to register a name in the .xxx domain. Gutierrez did, however, dismiss claims regarding the market for “affirmative registrations” ' any registrations for new websites intended primarily for adult content. The judge pointed out that Manwin's own YouPorn.com site is the most popular free adult video website on the Internet, indicating that a .com domain is an “adequate economic substitute” to a .xxx site.

Jones Day's Jeffrey LeVee says that he was grateful that the judge had sided with ICANN on the affirmative market question. LeVee doubts the plaintiffs can ultimately prove that a defensive registration market exists, and he notes that the issue of whether ICANN engages in commercial activity is something that can be appealed if the case makes it that far.

“ICANN argued, and we still believe, that while the process of selling domain name subscription is a commercial activity, what ICANN does is at its core non-commercial,” LeVee says. He doesn't think the decision will make a big impact on the 1,000-plus top-level domains ICANN is currently considering for approval. “The domain name world is about to become much more competitive than it is today,” he says.

Mitchell Silberberg's Kevin Gaut had a markedly different take on the decision and its implications for ICANN: “I think that the approval of additional [top-level domains] has made the antitrust potential [against ICANN] heightened.” Gaut says the plaintiffs were pleased with the ruling on defensive registrations and are considering their options about amending their complaint to attempt to establish a relevant market on the claims relating to affirmative registrations. As to ICANN's antitrust immunity defense, he says it “had absolutely no merit. There's no question that ICANN is engaged in commerce.”