[Gnso-newgtld-wg] proposed Language for those Getting Applicant Support
Alexander Schubert
alexander at schubert.berlin
Wed Jun 10 12:10:25 UTC 2020
Obviously the entire “flipping” issue (and hence measures against it) depends very much on the way we grant applicant support – and to whom.
I lost track; but do we enforce a connection between applicant entity and string? E.g.: an applicant from a country applying for their own language community? Or would we also support an applicant who just happens to be incorporated in a country that we deem worthy of support, but they could apply for commercial strings like .app or .shop?
If the latter; then I tend to not support Marc’s otherwise very intelligent solution – that the applicant has to repay the support if they sell the registry. Because if you manage to win a string that has a huge secondary market value – and you have flipped it to a third party: paying back applicant support is your least concern as you are flush with cash.
If we haven’t established the limitations (policies) around application support eligibility – then in my mind this entire discussion is essentially fruitless. Currently “2.5.4 Applicant Support” states:
“ICANN may put in place a fee reduction scheme for gTLD applicants from economies classified by the UN as least developed.”.
Oh well. So I find a couple of straw men in an underdeveloped country, rent an office, staff it with 2 (for almost zero cost as everything is inexpensive in that country, especially outside big cities), that “company” then outsources the application process to a U.S. “consultancy” (all quotation marks to highlight that they are only “so called”) – and that’s all you need to get applicant support and an auction multiplier? The consultancy might be the real beneficiary – but nobody knows: officially they are just the consultancy. Conveniently in these countries often ownership can be easily shielded from being identified (try to identify the owner of a company in a tax haven: good luck).
Instead of trying to fix this via policing efforts that investigate after the fact; why not creating eligibility criteria that will eliminate potential fraud right away? So my question is: would we want to grant applicant support for high value generic strings that have no association to the applicant’s community (example of association would be: geo, language, culture, etc)? In other words: shouldn’t we restrict applicant support to strings that are tied to the respective community? A tribe applying for their language. A city community applying for their city in their country?
In 2012 a lot of applicants artificially established their headquarters in countries which they have zero affiliation with. We don’t even have to fantasize of applicants sitting in the U.S. – but acting as company incorporated in tax havens: that happened already in 2012. With lots of strings.
Who would support to formulate the eligibility criteria in a way that there isn’t any incentive to abuse the applicant support program?
THANKS,
Alexander
From: Gnso-newgtld-wg [mailto:gnso-newgtld-wg-bounces at icann.org] On Behalf Of Aikman-Scalese, Anne
Sent: Dienstag, 9. Juni 2020 21:22
To: Jeff Neuman <jeff.neuman at comlaude.com>; trachtenbergm at gtlaw.com; mike at rodenbaugh.com
Cc: gnso-newgtld-wg at icann.org
Subject: Re: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support
Is that 3 years from winning the auction or three years from contract signing?
From: Jeff Neuman < <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com>
Sent: Tuesday, June 9, 2020 7:54 AM
To: <mailto:trachtenbergm at gtlaw.com> trachtenbergm at gtlaw.com; Aikman-Scalese, Anne < <mailto:AAikman at lrrc.com> AAikman at lrrc.com>; <mailto:mike at rodenbaugh.com> mike at rodenbaugh.com
Cc: <mailto:gnso-newgtld-wg at icann.org> gnso-newgtld-wg at icann.org
Subject: RE: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support
[EXTERNAL]
_____
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: <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com
From: <mailto:trachtenbergm at gtlaw.com> trachtenbergm at gtlaw.com < <mailto:trachtenbergm at gtlaw.com> trachtenbergm at gtlaw.com>
Sent: Tuesday, June 9, 2020 10:18 AM
To: Jeff Neuman < <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com>; <mailto:AAikman at lrrc.com> AAikman at lrrc.com; <mailto:mike at rodenbaugh.com> mike at rodenbaugh.com
Cc: <mailto:gnso-newgtld-wg at icann.org> 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
<mailto:trac at gtlaw.com> trac at gtlaw.com | <http://www.gtlaw.com/> www.gtlaw.com
From: Jeff Neuman [ <mailto:jeff.neuman at comlaude.com> mailto:jeff.neuman at comlaude.com]
Sent: Tuesday, June 9, 2020 8:51 AM
To: Trachtenberg, Marc H. (Shld-Chi-IP-Tech) < <mailto:trachtenbergm at gtlaw.com> trachtenbergm at gtlaw.com>; <mailto:AAikman at lrrc.com> AAikman at lrrc.com; <mailto:mike at rodenbaugh.com> mike at rodenbaugh.com
Cc: <mailto:gnso-newgtld-wg at icann.org> 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: <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com
From: <mailto:trachtenbergm at gtlaw.com> trachtenbergm at gtlaw.com < <mailto:trachtenbergm at gtlaw.com> trachtenbergm at gtlaw.com>
Sent: Tuesday, June 9, 2020 8:53 AM
To: Jeff Neuman < <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com>; <mailto:AAikman at lrrc.com> AAikman at lrrc.com; <mailto:mike at rodenbaugh.com> mike at rodenbaugh.com
Cc: <mailto:gnso-newgtld-wg at icann.org> 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
<mailto:trac at gtlaw.com> trac at gtlaw.com | <http://www.gtlaw.com/> www.gtlaw.com
From: Gnso-newgtld-wg [ <mailto:gnso-newgtld-wg-bounces at icann.org> 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 < <mailto:AAikman at lrrc.com> AAikman at lrrc.com>; Mike Rodenbaugh < <mailto:mike at rodenbaugh.com> mike at rodenbaugh.com>
Cc: <mailto:gnso-newgtld-wg at icann.org> 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: <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com
From: Aikman-Scalese, Anne < <mailto:AAikman at lrrc.com> AAikman at lrrc.com>
Sent: Monday, June 8, 2020 3:17 PM
To: Mike Rodenbaugh < <mailto:mike at rodenbaugh.com> mike at rodenbaugh.com>; Jeff Neuman < <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com>
Cc: <mailto:gnso-newgtld-wg at icann.org> 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 < <mailto:gnso-newgtld-wg-bounces at icann.org> gnso-newgtld-wg-bounces at icann.org> On Behalf Of Mike Rodenbaugh
Sent: Monday, June 8, 2020 12:10 PM
To: Jeff Neuman < <mailto:jeff.neuman at comlaude.com> jeff.neuman at comlaude.com>
Cc: <mailto:gnso-newgtld-wg at icann.org> gnso-newgtld-wg at icann.org
Subject: Re: [Gnso-newgtld-wg] proposed Language for those Getting Applicant Support
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