.Biz Lottery Losers File Class Action Suit

Less than 30 days after opening .biz up for business, a class action
lawsuit has been filed against its registry owners, NeuLevel, the Internet
Corporation for Names and Numbers (ICANN) and a bevy of registrars, for
running an illegal criminal lottery in the state of California.

According to the lawsuit, one of the claimants, David Smiley of Skyscraper
Productions LLC, wanted to file the domain, www.comicbook.biz in the new
domain space, one of seven new domain spaces approved by ICANN last
November
to ease congestion in the popular .com and .net extensions.

But, according to lawyers, Smiley and many other people around the U.S.
didn’t know their chances of actually getting the domain name, a deceptive
practice lawyers say is misleading and illegal.

The lawsuit asks the courts to:

  • File an injunction against all the defendants listed;
  • Restitution for every application fee filed;
  • Pay for court costs and attorney’s fees; and
  • Any other relief the Court feels necessary.

NeuLevel, managers of the .biz domain name registry, set up a lottery
process that started June 27 for people fighting to get the same domain
name in what they considered the most fair and objective
method: randomizing the multiple applications and picking one winner.

The fledgling registry, hoping to make a slew of money in the process, also
stipulated that entrants could file as many applications as they wanted, as
long as they ponied up $2 for each application form.

Enter the registrars, who mounted an impressive bulk email distribution
(some would say spam) campaign to Internet users worldwide. Many
registrars marked up the entry fee to $5 to get in on the application
frenzy
, telling .biz registrants that the more applications they
filed, the better chance they had of winning the domain of choice.

While that is certainly true, since NeuLevel promised a randomized process,
there was bound to be losers. What’s more, none will get a full refund of
the money they invested into their failed domain name bid. NeuLevel has
already said it will not refund its application fee for losing entrants.

Derek Newman, one of a group of lawyers representing .biz registrants, said
they made the filing in Los Angeles because of the higher likelihood of
victory in California, which will establish precedence throughout the U.S.
and possibly worldwide.

“California statutes are the most broadly defined,” Newman said. “In other
words, the relief you can get in California is just as good or better than
the relief you could get in any other state. No other state provides
better relief, which is why California is such a good venue for this lawsuit.”

Newman declined to say when or if the legal team would file in other
states, saying they weren’t ready to discuss their overall strategy. He
did say, however, that lottery charges can be filed in every state and that
unfair competition laws, which also incorporate criminal charges, is
applicable in most states.

From the beginning, NeuLevel and its accredited registrars have emphasized
that there are no guarantees that the registrants will get their domain
name of choice in the event of multiple requests.

That’s unfortunate, because many states (including California, where the
lawsuit was filed) hold that an illegal lottery is any contest, game, or
enterprise of chance that involves a prize. In this case, the prize was
the contested domain name.

“Simply because they tell you it’s a lottery up front doesn’t mean that
what they are doing is lawful,” Newman explained. “When you walk (into the
application process) blindly and it says you have a chance to get the
domain, but you don’t know what those chances are, that’s misleading. They
have a duty to disclose to you what your chances are. Even if the
lottery’s legal, it’s still unfair because of the false, deceptive and
misleading communications surrounding the lottery.

Newman pointed out that these unfair practices also open up the possibility
of investigation by the Federal Trade Commission (FTC), since it deals with
these unfair and deceptive advertising practices against consumers.

Barbara Blackwell, a spokesperson for NeuLevel, said the lawsuit is completely without merit and filed as an attempt to derail the successful introduction of .biz.

“NeuLevel stands completely behind the launch process of .biz, which provides protections for all trademark owners and discourages cybersquatting and speculation,” she said. “We believe that the .biz domain name selection process is the most fair and equitable way to distribute domain names during the launch of the first truly global business-centric space on the Internet.”

The lawsuit has many in the industry wondering how NeuLevel attorneys even
signed off on the lottery process in the first place, knowing the potential
pitfalls of the lottery process.

Larry Erlich, president of DomainRegistry.com, Inc., a registrar based in
Bensalem, PA, said he is now very glad he didn’t start accepting
applications for .biz domain extensions when it opened for business last month.

“We haven’t been accepting applications because we didn’t know how the
whole process works,” Erlich said. “I talked to their lawyers last month
about it and asked for papers explaining the legality of the lottery
process, but they never got back to me about it.

(This lawsuit) has really thrown a monkey wrench into things,” Erlich
continued. “This certainly seems to indicate an illegal lottery. It’s no
different than you taking your TV and selling raffle tickets for it.”

One of the registrars listed in the class action suit was Tucows, Inc. In
addition to pointing out Tucows, the lawsuit points the finger at any
approved registrar accredited and listed on NeuLevel’s Web site.

Joanna Beckett, Tucows spokesperson, spoke about what was on the minds of
many of the other registrars listed.

“This lawsuit isn’t an issue for us, this is an issue for NeuLevel to deal
with,” she said.

ICANN, however, may face increased scrutiny from the courts over its
decision to accept NeuLevel’s bid to manage the .biz domain. In addition
to the $50,000 fee every applicant made to the governing body of the U.S.
domain root, ICANN directors were to determine how the potential registries
would carry out the registration process. It’s unlikely the entire board
of directors, and staffers to boot, could overlook the potential landmine
NeuLevel’s registration process entailed.

ICANN officials were unavailable for comment on the lawsuit or its
selection process.

Newman said he hasn’t heard from any of the parties listed in the suit and
never contacted them before filing, saying actions of this type can never
be settled amicably. He said the defendants now have time to review the
documents during this discovery period, which could take up to a year.

“The issues here are not terribly complicated, so I hope that it takes a
lot less than a year,” Newman said.

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