[Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

trachtenbergm at gtlaw.com trachtenbergm at gtlaw.com
Tue Jun 9 17:22:00 UTC 2020


I still think what you have is over-engineered and that this is not really such a problem that needs solving.  I also think that restricting the applicant from transferring based on indefinite standards like “legitimate” or “in the ordinary course” can only cause problems as undoubtedly there will be some non-gaming reason that an applicant who received support will want to assign and that the restrictions will cause dispute and confusion especially as new gTLDs are supposedly so innovative and different than anything before.  I think the better and more effective approach here and with most things in the application process is to just remove the incentive for “gaming”.  It should hopefully be apparent to all by now that if f you don’t remove the  incentives for bad or disfavored behavior and just try to prohibit it using indefinite standards that the very smart people in this industry will find a way to get around the prohibition, which is further exacerbated by a practically non-existent ICANN compliance function.

Accordingly, I would propose the following.

To disincentivize “gaming” of the applicant support program by applicants who are applying on behalf of third parties, or with the intent to immediately transfer ownership to third parties, applicants who receive financial support through the ASP Program will not be permitted to assign the relevant Registry Agreement within the first five (5) years of execution of the Registry Agreement unless they repay the repay the full amount of financial support received through the ASP Program plus an additional ten percent (10%).

Best regards,

Marc H. Trachtenberg
Shareholder
Greenberg Traurig, LLP | 77 West Wacker Drive | Suite 3100 | Chicago, IL 60601
Tel 312.456.1020
Mobile 773.677.3305
trac at gtlaw.com<mailto:trac at gtlaw.com> | http://www.gtlaw.com<http://www.gtlaw.com/>

[Greenberg Traurig]

From: Jeff Neuman [mailto:jeff.neuman at comlaude.com]
Sent: Tuesday, June 9, 2020 9:54 AM
To: Trachtenberg, Marc H. (Shld-Chi-IP-Tech) <trachtenbergm at gtlaw.com>; AAikman at lrrc.com; mike at rodenbaugh.com
Cc: gnso-newgtld-wg at icann.org
Subject: RE: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

Thanks Marc.   I have tried to work your language in.

Re:  Highlighted language: How do we word allowing assignments/change of control through the normal course of business (changing corporate entities, death or retirement of owners, etc.).  If we just use the standard, you can assign to parents or subs, then that will allow reverse triangular mergers which gets around the whole no assignment/change of control rules.

“If the Applicant getting Applicant Support prevails in an auction, there should be restrictions placed on the Applicant from assigning the Registry Agreement, and/or from any Change of Control for a period of no less than three (3) years.  This restriction is in place to prevent gaming of the applicant support program whereby an applicant immediately transfers its ownership of a registry to a third party in exchange for any form of financial gain.  However, legitimate assignments (e.g., changing of ownership due to death or retirement, etc., assignments to subsidiaries, etc.) shall be permitted.  All assignments after such time shall be governed under the then-current Registry Agreement standard provisions; provided that any Assignment or Change of Control after the third year, but prior to the seventh (7th) year, shall require the applicant to repay the full amount of financial support received through the ASP Program plus an additional ten percent (10%).


Jeff Neuman
Senior Vice President
Com Laude | Valideus
D: +1.703.635.7514
E: jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>

From: trachtenbergm at gtlaw.com<mailto:trachtenbergm at gtlaw.com> <trachtenbergm at gtlaw.com<mailto:trachtenbergm at gtlaw.com>>
Sent: Tuesday, June 9, 2020 10:18 AM
To: Jeff Neuman <jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>>; AAikman at lrrc.com<mailto:AAikman at lrrc.com>; mike at rodenbaugh.com<mailto:mike at rodenbaugh.com>
Cc: gnso-newgtld-wg at icann.org<mailto:gnso-newgtld-wg at icann.org>
Subject: RE: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

Personally I think that this is a bit of “tilting at windmills” and that if people want to “game” in this way then they will find a way.  Instead of trying to prevent this gaming via indefinite standards that are subject to various reasonable interpretations and will almost certainly result in disputes, I think it would be better to reduce the prohibition on assignments to a shorter period like 2 or 3 years and then just make the applicant pay back the money as a condition of assignment which mitigates any benefit that the applicant and/or assignee would get.  You could even make the condition payment of the benefit received plus x% as a disincentive for such behavior that would not prohibit all assignments.

Marc H. Trachtenberg
Shareholder
Greenberg Traurig, LLP | 77 West Wacker Drive | Suite 3100 | Chicago, IL 60601
Tel 312.456.1020
Mobile 773.677.3305
trac at gtlaw.com<mailto:trac at gtlaw.com> | http://www.gtlaw.com<http://www.gtlaw.com/>

[Greenberg Traurig]

From: Jeff Neuman [mailto:jeff.neuman at comlaude.com]
Sent: Tuesday, June 9, 2020 8:51 AM
To: Trachtenberg, Marc H. (Shld-Chi-IP-Tech) <trachtenbergm at gtlaw.com<mailto:trachtenbergm at gtlaw.com>>; AAikman at lrrc.com<mailto:AAikman at lrrc.com>; mike at rodenbaugh.com<mailto:mike at rodenbaugh.com>
Cc: gnso-newgtld-wg at icann.org<mailto:gnso-newgtld-wg at icann.org>
Subject: RE: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

Thanks Marc for the comments.  This was designed to set forth the principles as opposed to being the contract language, but your points are well made.

The context of this discussion is that some are worried that an applicant who gets applicant support (which may include a bid credit or multiplier in an auction) get the registry and flip it for financial gain to game the system.  That is why the group wanted to prohibit assignment for a period of time.  In the scheme of things, 5 years after a registry signs an agreement is not that long of a period, especially if you assume that most registries will likely not launch until 6 months to a year after they sign.  However, as you note, there are some assignments/change of control that may be necessary and not intended to “game the system” (hence the term legitimate, but understand you concerns about that term).

Do you have some alternative language that would work in this case that achieves what we are trying to achieve?

Thanks.

Jeff Neuman
Senior Vice President
Com Laude | Valideus
D: +1.703.635.7514
E: jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>

From: trachtenbergm at gtlaw.com<mailto:trachtenbergm at gtlaw.com> <trachtenbergm at gtlaw.com<mailto:trachtenbergm at gtlaw.com>>
Sent: Tuesday, June 9, 2020 8:53 AM
To: Jeff Neuman <jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>>; AAikman at lrrc.com<mailto:AAikman at lrrc.com>; mike at rodenbaugh.com<mailto:mike at rodenbaugh.com>
Cc: gnso-newgtld-wg at icann.org<mailto:gnso-newgtld-wg at icann.org>
Subject: RE: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

Sorry to be late to the party on this one.  I echo Mike’s concerns that 5 years is a long time. Additionally, I am concerned with the use of “legitimate”.  I understand the intent and the examples are helpful, but words like “legitimate” are almost certain to be disputed later.  Also, there is no exchange that would involve financial gain (another term open to interpretation) which could be “legitimate”?  And what about situations where the registry will otherwise fail if the RO does not sell?  The RO should instead fail and the TLD should go through the ICANN process – this is a better outcome?  I am also concerned with giving ICANN the ability to “reasonably” withhold its consent to an assignment.  ICANN does not always act reasonably and when ICANN even arguably has discretion to make decisions things don’t always turn out so well…

Marc H. Trachtenberg
Shareholder
Greenberg Traurig, LLP | 77 West Wacker Drive | Suite 3100 | Chicago, IL 60601
Tel 312.456.1020
Mobile 773.677.3305
trac at gtlaw.com<mailto:trac at gtlaw.com> | http://www.gtlaw.com<http://www.gtlaw.com/>

[Greenberg Traurig]

From: Gnso-newgtld-wg [mailto:gnso-newgtld-wg-bounces at icann.org] On Behalf Of Jeff Neuman
Sent: Tuesday, June 9, 2020 7:40 AM
To: Aikman-Scalese, Anne <AAikman at lrrc.com<mailto:AAikman at lrrc.com>>; Mike Rodenbaugh <mike at rodenbaugh.com<mailto:mike at rodenbaugh.com>>
Cc: gnso-newgtld-wg at icann.org<mailto:gnso-newgtld-wg at icann.org>
Subject: Re: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

*EXTERNAL TO GT*
Thanks Anne, you are correct that the However, sentence is not complete.  So, please find the rest of the sentence:

“If the Applicant getting Applicant Support prevails in an auction, there should be restrictions placed on the Applicant from assigning the Registry Agreement, and/or from any Change of Control for a period of no less than five (5) years.  This restriction is in place to prevent gaming of the applicant support program whereby an applicant immediately transfers its ownership of a registry to a third party in exchange for any form of financial gain.  However, legitimate assignments (e.g., changing of ownership due to death or retirement, etc., assignments to subsidiaries, etc.) shall be permitted.  All assignments must have ICANN's consent, which consent may be reasonably withheld. In the event of a change of control after the first five (5) years but during the remaining first term of the registry agreement, the applicant should be required to repay the financial support that they received.”


Jeff Neuman
Senior Vice President
Com Laude | Valideus
D: +1.703.635.7514
E: jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>

From: Aikman-Scalese, Anne <AAikman at lrrc.com<mailto:AAikman at lrrc.com>>
Sent: Monday, June 8, 2020 3:17 PM
To: Mike Rodenbaugh <mike at rodenbaugh.com<mailto:mike at rodenbaugh.com>>; Jeff Neuman <jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>>
Cc: gnso-newgtld-wg at icann.org<mailto:gnso-newgtld-wg at icann.org>
Subject: RE: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

I like the five years.
The sentence that begins with “However” does not appear to be a complete sentence.

Why are we limiting the reimbursement provision to the second half of the contract?
Thanks,
Anne

From: Gnso-newgtld-wg <gnso-newgtld-wg-bounces at icann.org<mailto:gnso-newgtld-wg-bounces at icann.org>> On Behalf Of Mike Rodenbaugh
Sent: Monday, June 8, 2020 12:10 PM
To: Jeff Neuman <jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>>
Cc: gnso-newgtld-wg at icann.org<mailto:gnso-newgtld-wg at icann.org>
Subject: Re: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support

[EXTERNAL]
________________________________
Five years seems like an eternity.  How about two or three, instead?


[Logo]


Mike Rodenbaugh


address:


548 Market Street, Box 55819

San Francisco, CA 94104


email:


mike at rodenbaugh.com<mailto:mike at rodenbaugh.com>


phone:


+1 (415) 738-8087



On Mon, Jun 8, 2020 at 11:43 AM Jeff Neuman <jeff.neuman at comlaude.com<mailto:jeff.neuman at comlaude.com>> wrote:
All,

On the call today, Susan raised a good point about applicants that get Applicant Support trying to “game the system” by immediately flipping their registries to a third party to make a profit.  Although we would hope that those that take the time to go through the Applicant Support Program (ASP) and get approved would alone demonstrate that this is unlikely to happen.  The process to get support is supposed to be vigorous and try to root out potential gaming.  That said, I worked with Susan to draft the following language.  Would this be acceptable as a Recommendation?

“If the Applicant getting Applicant Support prevails in an auction, there should be restrictions placed on the Applicant from assigning the Registry Agreement, and/or from any Change of Control for a period of no less than five (5) years.  This restriction is in place to prevent gaming of the applicant support program whereby an applicant immediately transfers its ownership of a registry to a third party in exchange for any form of financial gain.  However, legitimate assignments (e.g., changing of ownership due to death or retirement, etc., assignments to subsidiaries, etc.).  All assignments must have ICANN's consent, which consent may be reasonably withheld. In the event of a change of control after the first five (5) years but during the remaining first term of the registry agreement, the applicant should be required to repay the financial support that they received.”

Note:  We would add this to Agreements for all that get Applicant Support, not just those that prevail at an auction (with the multiplier or other form of bid credit).

Discuss………..

Jeff Neuman
Senior Vice President

Com Laude | Valideus
1751 Pinnacle Drive
Suite 600, McLean
VA 22102, USA

M: +1.202.549.5079
D: +1.703.635.7514
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