[gnso-rpm-wg] TMCH followup

Sun Mar 12 18:15:40 UTC 2017

Oops, I noticed a typo:

Where I wrote in section 7: "Note, many applications are for multiple
years! It's clear that the validation/review costs are being generated
year after year. "

I obviously intended to write "It's clear that the validation/review
costs are NOT being generated year after year. "

Sincerely,

George Kirikos
416-588-0269
http://www.leap.com/

On Sun, Mar 12, 2017 at 2:05 PM, George Kirikos <icann at leap.com> wrote:
> Hi folks,
>
> After yesterday's call, I did some additional research on some of the
> issues that were raised. Here's what I found (long message ahead, but
> it'll be worth it):
>
> 1. Several times it's been argued that if there was competition for
> Deloitte, or if Deloitte was replaced entirely with a less expensive
> provider, that might entail compensation to Deloitte for intellectual
> property, etc. It turns out that argument is not correct.
>
> When ICANN entered into agreements with IBM and Deloitte, Fadi Chehade
> blogged about it, see:
>
> https://www.icann.org/news/blog/concluding-the-series-of-trademark-clearinghouse-meetings
>
> That page was hard to find (and I don't think was part of our working
> groups's institutional memory) given that it has moved from where it
> used to be; see contemporaneous reporting at:
>
> http://domainincite.com/11309-deloitte-confirmed-as-first-trademark-clearinghouse-provider
> http://www.ebrandservices.com/icann-signs-tmca-with-deloitte-as.html
>
> and I don't believe appears in our PDP wiki. In particular, the
> announcement clearly states that "ICANN retains all intellectual
> property rights in the Trademark Clearinghouse data. (Note this is as
> between ICANN and Deloitte….)."
>
> This fact handles that argument.
>
> 2. In the same ICANN link as above, it was specifically stated that
> "Deloitte’s validation services are to be non-exclusive. ICANN may add
> additional validators after a threshold of minimum stability is met."
>
> I think it's clear, after 3+ years, that there's stability. Additional
> validators should be added, to drive down costs and fees, if the TMCH
> is retained (it might turn out that the TMCH is eliminated, due to our
> work; that's an open question).
>
> 3. In the same ICANN link as above, most crucially, it stated "ICANN
> may audit Deloitte’s performance (and revenues/costs) to confirm that
> the costs and fees for validation services are reasonable."
>
> Obviously, this should be done, if it hasn't been done already, and
> with immediacy, to inform our work and recommendations. This is a
> multi-million dollar per year contract, with apparently limited or no
> oversight, and my calculations (see below) suggest it can be
> replicated for multi-hundreds of thousands of dollars, at most.
>
> 4. Yesterday, it was brought up whether "costs" of the TMCH were even
> a complaint. The actual independent TMCH review should have been
> brought up, see:
>
> https://newgtlds.icann.org/en/reviews/tmch/revised-services-review-22feb17-en.pdf
>
> where the survey responses were clear, see page 64 (bottom):
>
> "Fees and costs: Most registries and trademark owners felt that fees
> and the costs associated with working with the TMCH are too high."
>
> This is what the community has told us. We should not ignore it. Why
> are we  paying for surveys, and not utilizing the results in followup
> work? I'm not an advocate for trademark holders, however I am an
> advocate for economic efficiency and eliminating waste and excess
> fees. This is low hanging fruit.
>
> 5. This is a question for the registry operators -- on page 45, it
> mentions that there's a one-time for of $5,000 per TLD to access the
> TMCH. Is that fee being paid to Deloitte, or is it being paid to IBM,
> or … ? (affects the calculations of what is "reasonable") With 1000+
> new gTLDs, clearly this is another  multi-million dollar cost, for a
> function which is mostly automated --- huge potential for cost
> savings.
>
> It's unclear if the actual cost is $5,000, by the way. I believe
> somewhere else I might have seen a figure of $7,000 per TLD, although
> perhaps that's an outdated fee. If someone has the definitive number,
> please post.
>
> 6. Unrelated to costs (but central to our work), on page 9 of the
> independent TMCH review, the top ten most frequently downloaded
> trademark strings are published, along with the trademark holders:
>
> 1. smart  15,198    Smart Communications, Daimler AG
> 2. forex  14,823    Forex Bank AB
> 3. hotel  14,690    Hotel Top Level Domain GMBH
> 4. one    14,205    American Acedemy of Opthamology
> 5. love   13,912    Cartier International AG, The Conde Nast Publications
> 6. cloud  13,821    individual
> 7. nyc    13,622    City of New York, NYC & Company
> 8. london 13,343    London & Partners
> 9. abc    13,331    LV Insurance Management Limited
> 10. luxury 13,125   ILUX Holdings
>
>
> While the EFF highlighted the example of "THE" in their excellent
> submission, I think the above data makes it clear that there are a lot
> of commonly used phrases that are generating notices, and/or being
> used in sunrise periods. In particular, none of the top 10 above are
> famous or fanciful marks like Verizon, Exxon, Google or Lego, or marks
> that are routinely subject of cybersquatting complaints. Rather, they
> are commonly used terms that should be open to many potential
> registrants. If there is a "deterrent" effect on registrants, it's
> clear that commonly used terms are ones that actual registrants are
> interested in, and not terms like "facebook" or "google" or "Verizon",
> given the stats above.
>
> Since the independent review has already crunched the numbers, and
> there were apparently no issues of confidentiality, our working group
> should be given access to the much larger set of top queries, perhaps
> the top 100 or even the top 500 or 1000, and not just the top 10. If
> we are to properly and deliberately weigh and consider the costs and
> benefits of the TMCH, measuring the "chilling effect" on commonly used
> terms, it makes sense to see which terms are generating the most
> claims notices. ICANN didn't have this data before the new gTLD
> program was launched. We do have it now, and this should affect our
> policymaking. Scaremongering about "what might happen" should be set
> aside, since we have facts as to what *did* happen, through
> experience.
>
> We can then also compare those top queries against sunrise
> registrations, and against the relevant marks themselves to check for
> 'gaming' behaviour, and thus measure the deleterious effects on other
> prospective registrants.
>
> Let's take a look at one of the above. The most obvious and striking
> example  seems to be #3, "hotel"
>
> Using TMView (searching by Applicant Name), I see multiple
> registrations, some figurative and some word marks for that applicant,
> for hotel/hotels (singular/plural). (although, conceivably they could
> be using a registration in a country not part of TMView, so the below
> analysis could be open to challenge. But, stay with me...). Some of
> those marks include either the word "dot" or a "." in the marks. The
> TMCH criteria clearly state that:
>
> http://www.trademark-clearinghouse.com/content/registered-trademarks
>
> they won't accept marks that include a dot. Thus, the only remaining
> possibility from TMView is EM 007502891, which is a figurative mark:
>
> https://www.tmdn.org/tmview/get-detail?st13=EM500000007502891
>
> Using the automated translation, into English, it's for:
>
> "Class 35: On line advertising on a computer network; Class 38:
> Provision of information relating to telecommunications., Class 45:
> Registration of domain names (legal services)."
>
> You'll notice the original proprietor details, Dirk Krischenowski, no
> stranger to the ICANN community.
>
> https://icannwiki.org/Dirk_Krischenowski
> http://domainincite.com/18613-berlin-ceo-prime-suspect-in-icann-data-breach
>
> Who, ironically, is a critic of the TMCH!
>
> https://www.thedomains.com/2014/03/31/berlin-dirk-krischenowski-blasts-icann-over-tmhc-which-has-largely-failed/
>
> Using DomainTools paid version (NB: my paid subscription is running
> out soon, and I likely won't renew given egregious price increases --
> perhaps ICANN or this working group should compensate those putting in
> the work for for their future research costs), I can see:
>
> a) hotel.black, registered currently by "Hotdom GMBH" listed for sale
> on Sedo for  2990 Euros:
>
> https://sedo.com/search/details/?language=us&domain=hotel.black
>
> Doesn't look like a "defensive" registration to prevent cybersquatting to me.
>
> HotDomain GMBH also owns hotelregistry.org, although the historical
> WHOIS for that shows "Hotel Top-Level-Domain GMBH" too, on the same
> street in Berlin.
>
> The page at:
>
> http://dotzon.com/dotzon/team/
>
> shows both "Katrin Ohlmer" (currently listed for HotDom GMBH) and
> (here's a shocker) Dirk Krischenowski!
>
> The oldest archived WHOIS record for hotel.black is from 2014-08-15 (2
> days after the creation date), and it's in the name of (wait for it….)
> Dirk Krischenowski (shocker, I know!).
>
> This was clearly registered in the Sunrise period, which began July 22, 2014:
>
> http://www.circleid.com/posts/20140625_afilias_announces_start_of_black_sunrise_period/
>
>
> b) hotel.domains: Current registrant -- here's a shocker, it's (drum
> roll) Dirk Krischenowski !! And if you visit that website:
>
> https://hotel.domains/
>
> you'll see a list of domains for sale:
>
> hotel.cologne EUR 15,000
> hotel.partners $3,000
> hotel.black $4,000 (remember, current registrant in WHOIS is slightly
> different, from above)
>
> and dozens more (singular and plural). I've posted screenshots
> (multiple, in order to make sure all the domains were visible) at:
>
> http://www.loffs.com/images/hoteldomains/
>
> (ICANN staff might want to put them on our Wiki, so they're part of
> the record of this group)
>
> I leave it as an exercise to the reader to check how many of them were
> obtained via sunrise (grunt work at DomainTools), although the answer
> is likely very obvious to everyone, without even having to check.
>
> I argue, and stand with the EFF on this, that this is not consistent
> with the intended purpose of the TMCH, and demonstrates how it's wide
> open for abuse and gaming. The entire TMCH database, if it is to be
> retained, should be public and transparent, and dubious records should
> be able to be challenged easily.
>
> 7. I promised above to explore what the TMCH should cost. Here are
> some rough back of the envelope calculations and ideas.
>
> (a) if the audit of Deloitte's TMCH (which ICANN is allowed to do) was
> to be done properly, besides simply looking at accounting records,
> costs and revenues (which can be manipulated), one should look at how
> much time it takes to review each application. A proper audit would
> look at the date of submissions, and the date of approvasl, so that
> Deloitte can't "fudge" the numbers, and then also look at the volume
> of applications. This would then allow one to accurately gauge the
> time a human being spent to review each application (e.g. if 100
> applications were reviewed in one day, by one human, one can then do
> the math and see how many minutes each one took, etc.) With a proper
> audit, this can't be gamed, since one can look for peak dates of
> applications, e.g. 1000 applications one day, all approved within 3
> days later, to measure the peak rate of approvals.
>
> (b) Considering the nature of the application itself (there's a
> Youtube video at https://www.youtube.com/watch?v=aL0n_pNTVgE showing
> the process, and what's collected -- it's really not that much). I
> estimate that a reviewer would spend on average 5 minutes per
> application. That'd be 12 applications per hour, or 84 applications
> per 7 hour work day, or 420 per week, or 20,160 per 48 week year. For
> one person. We see from Deloitte's report, they've had approximately
> 28,549 applications. My rough calculations suggest that one or two
> people could easily handle the job. In fact, Deloitte's own website,
> where they list their team:
>
> http://trademark-clearinghouse.com/content/clearinghouse-team
>
> shows a very lean team, with only 3 validation experts, so that's the
> correct order of magnitude.
>
> Let's be generous, and pay these people $50/hour. If they can manage
> even just 5 applications per hour, then the actual verification costs
> are $10 each. And, to be clear, this is relatively "easy" grunt work
> that could done at lower cost with skilled workers from India, Russia,
> or other less expensive countries, instead of in Belgium.
>
> Of course, Deloitte's team includes a bunch of well compensated
> managers and overhead of that nature. In an efficient operation, those
> are eliminated. But, let's say the costs are tripled (that would
> include "real" costs like computers and justifiable overhead --- 6 or
> 7 figure salaries for managers doing very little don't count). That
> still makes it $30/each.
>
> If you look at the rest of their "team", they list 5 people handling
> invoicing??!?? That's shocking, and it's unclear why they have more
> people handling invoicing than are handling actual validation (the
> true "work" ICANN is looking for). Perhaps these are people doing
> invoicing for many other companies, and not just dedicated to the
> TMCH. Anyhow, I'll add 5% for invoicing/billing (really a part of
> overhead), given cloud invoicing tools these days. That'd take us to
> $31.50 (with generous assumptions to date).
>
> Note, many applications are for multiple years! It's clear that the
> validation/review costs are being generated year after year. Those
> essentially happen once at the beginning. So, this would reduce actual
> costs even more, to perhaps $10 to $15/year.
>
> Why are trademark owners paying $95 to $150 per years? Because they're
> dealing with a monopoly without oversight, and the monopolist is
> maximizing profits as any business would do in those circumstances.
>
> This cries out for competition, if the TMCH is even retained (unclear
> at this point, an open question). As I said above, I'm not an advocate
> for trademark holders, but it seems like they (and perhaps the
> registry operators too, if their fees are going to Deloitte) are
> getting a raw deal.
>
> We saw with competitive tenders that Neustar lost their numbers contract:
>
> https://www.bloomberg.com/news/articles/2015-03-26/neustar-loses-and-ericsson-wins-on-numbers-contract-vote-at-fcc
>
> For domain names, with new entrants, the cost of domain name
> registrations went from $35/yr at Network Solutions (monopoly) to
> under $10/yr these days for a .com at GoDaddy, etc.
>
> Afilias stuck with PIR for the .org backend after a tender process,
> but certainly at a much better cost:
>
> http://domainnamewire.com/2016/11/14/org-sticks-afilias-backend/
>
> These are basic things that any business would do to save money, so
> it's unclear to me why some people within the ICANN community and/or
> this working group believe that $95 or $150 is a reasonable price for
> the TMCH, without even exploring alternative providers through a rebid
> process, or allowing multiple providers.
>
> Sincerely,
>
> George Kirikos
> 416-588-0269
> http://www.leap.com/