NeuLevel Settles Internet Domain Class-Action Suit

One company that aimed to offer an alternative domain naming services has
settled a class-action suit for roughly $1.2 million. NeuLevel Inc. is said
to have operated an “illegal lottery” in distributing .biz domain
addresses.

The settlement, approved on Dec. 13 and recently made public, involves
NeuLevel Inc., based in Sterling, Va., and says the company effectively
operated a scheme, whereby the highest bidders received the most desirable
addresses, ending in .biz.

“The court says this company broke the law. I don’t think the law makes a
lot of sense in this case, but that’s the court’s decision,” says Esther
Dyson, chairman of EDventure Holdings, and former chairman of ICANN, The
Internet Corporation for Assigned Names and Numbers, from 1998-2000. She
says ICANN’s privatization has “too much oversight, rather than too little.”

Dyson says the Internet naming business process is “now a competitive
market, that’s been privatized. It was a good idea to privatize, but that
doesn’t mean everything is ideal.” She went onto say that ICANN’s
privatization process is “facing teething problems.”

Dyson says the issue in this case is the “illegal lottery,” adding “the
lawsuit is under U.S. law and the case has to do with a company breaking a
U.S. law.”

NeuLevel has been beset by litigation, and last fall a California judge
blocked the company from handing out an estimated 58,000 disputed domain
addresses. As a result, NeuLevel paid $1.7 million in refunds to applicants
trying to secure the disputed domain addresses.

But the class-action settlement aims to cover the close to 25,000 applicants
of domain addresses, who have still yet to get refunds.

In addition to providing refunds to domain address applicants, NeuLevel also
agreed to pay $1.175 million to cover plaintiffs’ attorney fees.

NeuLevel has registered 750,000 names in the .biz domain, a fraction of the
more than 21 million .com domain addresses.

While ICANN is not an enforcement agency, Dyson says that ICANN sets policy,
she adds any disputes are to be resolved through the WIPO, or World
Intellectual Property Organization.

But in the case of NeuLevel’s illegal lottery, a class-action case was
brought by David Smith, a Phoenix disc jockey, and several other unhappy
applicants, who did not realize they were entering a lottery. While
regulatory oversight of the domain address market remains an issue, this
case is expected to set a precedent in setting a standard for private
companies operating domain address lotteries.

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