American Bar Association
Media Alerts
Media Alerts - Name Space, Inc. v. Internet Corp. for Assigned Names & Numbers - Ninth Circuit
Decrease font size
Increase font size
October 17, 2015
  Name Space, Inc. v. Internet Corp. for Assigned Names & Numbers - Ninth Circuit
Headline:
When bringing Sherman Antitrust claims Twombly's "plausibility" standard for pleading sufficiency calls for alleging enough facts to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.

Areas of Law: Civil Procedure, Antitrust, & Trade Law

Issues Presented:
Whether the plaintiff in an antitrust action sufficiently alleged sufficient facts to make a conspiracy plausible.

Brief Summary:
Plaintiff filed suit against ICANN, a government contracted non-profit to manage the assignment of TLD domain names, alleging a Sherman Act Section 1 claim for conspiracy in restraint of trade and a Sherman Act Section 2 for monopolization. ICANN did not grant the plaintiff the names it requested in 2000. Subsequently, plaintiffs could not afford to file again in 2012 because the application fee had more than tippled.

The panel held that the complaint did not state a claim for conspiracy in restraint of trade or commerce under § 1 of the Sherman Act because it did not sufficiently allege an anticompetitive agreement. Applying the plausibility standard in Bell Atlantic Corp. v. Twombly, under which a complaint must allege facts not merely consistent with, but plausibly suggesting, a conspiracy, the panel held that the complaint's factual allegations relating to ICANN's decision-making were fully consistent with the terms of its agreement with the Department of Commerce granting the plaintiff authority to manage the assignment of TLD domain names. The panel also held that the complaint did not state a claim for monopolization in violation of § 2 of the Sherman Act because ICANN is not a competitor in the market to act as a top level domain registry, the international market for domain names, or the market for blocking or defensive registration services.

Extended Summary:
In order to understand this case some foundational technology information is required. The Internet Corporation for Assigned Names and Numbers (ICANN) creates and assigns Top Level Domains (TLDs), which are the information that appears after the"." in a domain name, such as ".Gov" ".Com" ".edu" etc. The portion before the dot is called the second level domain. A Domain Name System (DNS) links each of these unique names with a corresponding IP address.

Originally the DNS was managed by the National Science Foundation and subsequently, in 1997, by the Department of Commerce (DOC). However, in 1998 the DOC contracted with ICANN a non profit corporation to run the system. Under their agreement ICANN has full control to decide how and what new TLDs will be registered. ICANN is controlled by a board of directors, including many directors who are industry leaders.

name.space is a company that specializes in "expressive" TLDs, such as .art, .food, .magic, .music, .now and .sucks. Their business model is to run these TLDs and sell hosting to their unique names. However none of their TLDs are currently available on the Root. The Root is where ICANN hosts new TLDs.

In 2000, ICANN accepted applications for new TLDs. The application instructions were seven pages, the fee was $50,000, and a single application could seek multiple TLDs. An application was 7 pages and the fee was $50,000.00. During that application period name.space applied for 118 TLDs. ICANN approved only seven new TLDs, none of which was awarded to name.space. The next application period was 2012. This time, the application guidebook was 349 pages, the fee was $185,000, and each application could seek only one TLD. Plaintiffs did not reapply in 2012 because the financial and procedural costs were too high. As in 2000, applications for new TLDs in 2012 came largely from industry insiders. The list of TLDs applied for by others in 2012 included 189 TLDs currently in use by name.space.

name.space filed suit in 2012 alleging violations of the sections 1 and 2 of the Sherman Act, the Lanham Act, the California Cartwright Act, and the California Business and Professions code, relating to the 2012 application round. In addition, name.space alleged common law trademark, unfair competition and tortious interference. In 2013, the district court granted ICANN's motion to dismiss the complaint, holding that the trademark and unfair competition claims failed to present a justiciable case or controversy, and that the other claims failed to state a claim upon which relief could be granted.

Under the Sherman Act section 1, plaintiffs need to prove a "contract, combination or conspiracy among two or more persons or distinct business entities." A complaint asserting this violation must allege facts "plausibly suggesting (not merely consistent) with a conspiracy. This plausibility standard does not impose a "probability requirement," but simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. The complaint alleged that the rules and procedures governing the 2012 Application Round were the result of a conspiracy between ICANN, its board members, and industry insiders. The complaint alleged only circumstantial evidence of an agreement among the alleged co-conspirators: (a) some of ICANN's board members have "known, vested interests in the economic performance of the TLD registries"; (b) ICANN and its board designed the rules for the 2012 Application Round; (c) the 2012 application price was significantly higher than the 2000 price, and the rules more complex; (d) the 2012 Application Round's price and rules conflicted with name.space's business model; (e) the majority of 2012 applicants were industry insiders and large technology companies; and (f) some potential applicants, including name.space, were deterred from applying in 2012 by the price and rules. The panel held that these allegations do not permit the inference of an anticompetitive agreement because they just as easily suggest rational, legal business behavior: "Here, ICANN's decision-making was fully consistent with its agreement with the DOC to operate the DNS and the Root." The complaint's section 1 claim fails because the factual allegations merely permit the inference that a conspiracy is possible rather than plausible.

Under Section 2 of the Sherman Act prohibits monopolization of the relevant market. Because ICANN is not a competitor in any of the three alleged markets, the panel held that it cannot serve as the basis for a § 2 monopoly claim. The panel further held that ICANN's authority was lawfully obtained through a contract with the DOC and that barring predatory behavior, which the complaint did not allege, ICANN is "free to choose the parties with whom [it] will deal, as well as the prices, terms, and conditions of that dealing."

The complaint also asserted Lanham Act, common law trademark, and common law unfair competition claims because ICANN accepted applications for TLDs in use by name.space. The panel held that these claims were not ripe for adjudication, finding that name.space has not alleged that ICANN has delegated or intends to delegate any of the TLDs that name.space uses.

To read full opinion, please visit:

https://www.icann.org/en/system/files/files/namespace-ninth-circuit-affirming-dismissal-31jul15-en.pdf

Panel: Percy Anderson, District Judge Presiding, Stephen Reinhardt, N. Randy Smith, Andrew D. Hurwitz, Circuit Judges.

Date of Issued Opinion: July 31, 2015

Docket Number: No. 13-55553

Decided: Affirmed

Case Alert Author: Robert J. Dagmy
Counsel:
Plaintiff - Appellant - Michael B. Miller (argued), Craig B. Whitney, Adam J. Hunt, Morrison & Foerster LLP, New York, New York.
Defendant - Appellee Jeffrey A. LeVee (argued), Eric P. Enson, Kathleen P. Wallace, Jones Day, Los Angeles, California,
Author of Opinion: Judge Hurwitz

Case Alert Supervisor: Professor Glenn Koppel

    Posted By: Glenn Koppel @ 10/17/2015 05:35 PM     9th Circuit  

FuseTalk Enterprise Edition - © 1999-2018 FuseTalk Inc. All rights reserved.

Discussion Board Usage Agreement

Back to Top