Freenom goes to arbitration against ICANN suspension

Freenom, a provider of registry services, recently came under the scrutiny of the Internet Corporation for Assigned Names and Numbers (ICANN). The company's registrar arm, OpenTLD BV, was contacted by the ICANN compliance team after losing two Uniform Domain Name Dispute Resolution Policy (UDRP) cases brought by rival registrars. As a result of this, ICANN suspended OpenTLD's registrar accreditation for cybersquatting the brands of several of its competitors. In response to this, OpenTLD has started arbitration proceedings seeking to overturn ICANN's "disproportionate" decision to suspend its accreditation.

ICANN notified OpenTLD of the suspension of its registrar accreditation on June 23 2015, stating that:

"OpenTLD has engaged in a pattern and practice of trafficking in or use of domain names identical or confusingly similar to a trademark or service mark of a third party in which the registered name holder has no rights or legitimate interest."

As a result of this finding, OpenTLD would be prevented from using its registrar accreditation to create new domain name registrations or to transfer domain names to its management for 90 days starting on July 8 2015. As part of the suspension notice, ICANN also specified nine steps that OpenTLD would need to take by September 15 2015, in order to cure the breaches to its Registrar Accreditation Agreement (RAA). ICANN concluded that failure to cure these breaches by this date "may result in RAA termination and an extension to OpenTLD's suspension pending final termination."

Sections 5.5 and 5.7 of the RAA details the provisions under which ICANN may terminate or suspend a registrar's accreditation. Section 5.5.2.4 of the RAA states that one of the grounds for termination of an accreditation is if a registrar is:

"found by ICANN, based on its review of the findings of arbitral tribunals, to have been engaged, either directly or through its affiliate, in a pattern and practice of trafficking in or use of domain names identical or confusingly similar to a trademark or service mark of a third party in which the registered name holder has no rights or legitimate interest, which trademarks have been registered and are being used in bad faith."

Section 5.7.1 of the RAA states that, if a registrar is determined to have engaged in such practices, ICANN may choose to suspend a registrar's "ability to create or sponsor new registered names or initiate inbound transfers of registered names for any or all gTLDs", pursuant to Section 5.7.2 which provides that:

"Any suspension under Subsections 5.7.1 will be effective upon fifteen (15) days written notice to registrar, with registrar being given an opportunity during that time to initiate arbitration under Subsection 5.8 to determine the appropriateness of suspension under this agreement."

As such, under the terms of the RAA, it seems that ICANN's suspension of OpenTLD's registrar accreditation was entirely justified due to the adverse UDRP decisions and the clear evidence that OpenTLD had indeed been engaging in the "use of domain names identical or confusingly similar to a trademark or service mark of a third party in which the registered name holder has no rights or legitimate interest, which trademarks have been registered and are being used in bad faith".

Furthermore, ICANN's suspension of OpenTLD's registrar accreditation took place only after an initial outreach to OpenTLD by ICANN's compliance team on June 2 2014, which informed the registrar that ICANN was investigating it for breaches of the RAA and asking for further information on the background to these breaches. However, it appears that ICANN never received any response to this outreach and thus took the step of suspending OpenTLD's registrar accreditation.

As mentioned above, in its suspension notice, ICANN detailed nine steps that OpenTLD would need to take by September 15 2015 to remedy these breaches. It appears that rather than trying to take steps to address these issues, OpenTLD instead opted to start arbitration proceedings against ICANN's suspension of its registrar accreditation as per Section 5.8 of the RAA. Under Section 5.8, at the same time as starting the arbitration process, a registrar can also request that the arbitration panel lifts the suspension of its accreditation until a final arbitration decision is handed down. Section 5.8 states that if a registrar can demonstrate "that continued operations would not be harmful to consumers or the public interest", then the arbitration panel can order a stay of the suspension.

In its request for arbitration seeking the stay of the suspension of its registrar accreditation, OpenTLD asserts that ICANN had failed to demonstrate that OpenTLD's continuing operations would not be in the public interest. Furthermore, OpenTLD claims that ICANN's decision to suspend the registrar accreditation was a "draconian measure" in response to what it describes as "two isolated instances among more than 25 million active domains managed by OpenTLD". As such, OpenTLD claims that the suspension of its registrar accreditation would be damaging to its reputation and drive its customers to use competing registrar services. In addition to this, OpenTLD also claimed that it was given no prior notice of the suspension.

ICANN submitted a robust response to OpenTLD's arbitration filing by countering all of the claims and stating that, at this stage in the proceedings, the arbitration panel is convened only to determine whether or not the registrars "continued operations would not be harmful to consumers or the public interest" and, if this is the case, to order a stay of the suspension.

As such, in ICANN's view, the bulk of OpenTLD's claims are not for consideration at this juncture. However, the response from ICANN addressed all of OpenTLD's claims and it made for interesting reading. Addressing OpenTLD's claims that the UDRP decisions were two unrelated incidents, ICANN revealed that complaints were made to its compliance team by other registrars whose brands had been infringed by OpenTLD. It transpired that both GoDaddy and Tucows had sent OpenTLD cease and desist letters in relation to domain name registrations that infringed their IP rights. As such, the two UDRP decisions do not appear to be as isolated as OpenTLD claims, but would appear to be part of a wider practice of bad-faith domain name registrations.

ICANN also attacked OpenTLD's claims that it had taken steps to cure the breaches of its RAA. ICANN pointed out that OpenTLD had failed to address any of the nine remedial steps set out in the June 23 2015 suspension notice. As a result of this, ICANN states that OpenTLD has provided no evidence that its continued operations would be in the public interest and as such urged the panel not to stay the suspension of OpenTLD's registrar accreditation.

The ICANN compliance team appear to be acting well within the bounds of the RAA and it is somewhat surprising that OpenTLD has taken such an aggressive stance against ICANN's actions in this case, especially considering the clear evidence that it is in breach of the terms of the RAA and appears to have failed to have addressed the nine remedial actions as set out by ICANN.

David Taylor and Daniel Madden, Hogan Lovells LLP, Paris