VeriSign loses another 'domain slamming' suit

VeriSign, a leading domain name registrar, has lost a fourth lawsuit over its aggressive customer acquisition campaign. The campaign involved the mailing of a controversial "domain name expiration notice" to competitors' customers, encouraging them to switch to VeriSign.

The plaintiff, Go Daddy Software Inc, filed its 'domain slamming' lawsuit in an Arizona federal court, alleging consumer fraud, deceptive advertising and misappropriation of trade secrets. The court ordered VeriSign to discontinue the marketing campaign, enjoining VeriSign from sending the notices to, specifically, Go Daddy's customers and, more broadly, any other competitors' customers.

The Go Daddy suit comes on the heels of previous actions filed by BulkRegister, the California Consumer Action Network and a class action on behalf of all consumers making similar claims against VeriSign. BulkRegister won a preliminary injunction in a Maryland federal court (see VeriSign enjoined from 'domain slamming'). Christine Jones, Go Daddy's general counsel, is reported as saying that VeriSign interpreted the preliminary injunction to apply narrowly to only BulkRegister's customers.

Three years ago, VeriSign held 100% of the '.com', '.net' and '.org' (CNO) market, but this was down to 38% in April 2002 according to SnapNames.com, which tracks the industry. In the meantime, Go Daddy has risen from 47th place to sixth place in the past 18 months, largely due to its heavy discounting. BulkRegister, which places fifth in the CNO rankings, claims it was shocked to learn that VeriSign was continuing to mail the notices.

VeriSign's aggressive marketing tactics are not without risk. Despite its brand name advantage (possibly jeopardized by this negative publicity), VeriSign appears to be pursuing a high-risk strategy to avoid a flat-out price war with its lower-priced competitors.

Douglas Wood and Linda Goldstein, Hall Dickler Kent Goldstein & Wood LLP, New York

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