ICANN | Questions to and Answers from Applicant for .kids and .xxx

Questions to and Answers from Applicant for .kids and .xxx

ICANN Questions:

ICANN is in the process of reviewing ICM Registry's TLD Application. As outlined in the October 23, 2000 TLD Application Review Update which appears at http://www.icann.org/tlds/tld-review-update-23oct00.htm, ICANN may "gather the additional information [it] require[s] by posing specific questions to applicants in e-mail and requesting a written response."

Keeping in mind the goal to evaluate applications to operate or sponsor new TLDs in as open and transparent a manner as possible, both the questions posed by ICANN and the Applicant's responses will be publicly disclosed on the ICANN website.

Accordingly, ICANN requests your reponses to the following questions:

1. State in detail your position as it relates to possible legal claims by certain applicants and/or non-applicant third parties based on alleged trademark, patent or other violations of purported rights in the TLDs identified in your application

2. If you receive a new TLD, state whether you will indemnify ICANN for claims arising from legal challenges regarding your right to operate the new TLD. If you will indemnify ICANN, identify and describe in detail the resources you propose to utilize for the indemnification.

ICM Registry Responses :

In brief answer, (1) it is ICM Registry's position that there are no legal claims against the .XXX TLD based on alleged trademark, patent or other purported rights, further (2) ICM Registry is prepared to indemnify ICANN from legal challenges regarding ICM Registry's right to operate the .XXX TLD.

ICM Registry's arguments are described in detail as follows:

ICM Registry takes the rights of intellectual property owners very seriously. This commitment is evidenced by the DNSO's Intellectual Property Constituency's report ( IPC ) dated Nov. 1, 2000 which ranks ICM Registry as one of the 4 most favorable proposals addressing the concerns of the broader intellectual property community.

ICM Registry and our legal advisers have been closely following intellectual property claims associated with domain names. We concur completely with the position ICANN stated in the letters executed by Mr. Touton. We acknowledge that top-level domain names, and specifically the TLDs proposed by ICM Registry does not qualify for trademark protection and that the implementation of the proposed TLDs will not infringe on any third party's intellectual property rights.

Our position is supported by the following legal arguments:

UNDER EXISTING CASE LAW, A TLD CANNOT SERVE AS A TRADEMARK

No court in the United States has found any trademark significance in a top-level domain name. Image Online Design, Inc. V. Core Association, 2000 U.S. Dist. LEXIS 10259, No. CV 99-11347 RJK (C.D. Cal. 2000). Indeed, rather than look at a gTLD to determine trademark rights, the Ninth Circuit and others ignore the TLD as though it were invisible next to the second level domain name in an infringement action. Id. Courts analyzing the trademark significance of second level domain names disregard the top-level domain name because the TLD is generic. See e.g., Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1055 (9th Cir. 1999) (approving of the district court's comparison between a domain-name combination, moviebuff.com and a trademark, MovieBuff); Interstellar Starship Serv. Ltd. v. EPIX, Inc., 184 F.3d 1107, 1110 (9th Cir. 1999) ("epix.com" is, "for all intents and purposes, identical in terms of sight, sound, and meaning" to "EPIX."); Public Serv. Co. v. Nexus Energy Software, Inc., 36 F. Supp. 2d 436 (D. Mass. 1999) (finding "energyplace.com" and "Energy Place" to be virtually identical); Minnesota Mining & Mfg. Co. v. Taylor, 21 F. Supp. 2d 1003, 1005 (D. Minn. 1998) (deciding that "post-it.com" and "Post-It" were the same); Planned Parenthood Federation of America, Inc. v. Bucci, 1997 U.S. Dist. LEXIS 3338, No. 97-0629, at 8 (S.D.N.Y. Mar. 24, 1997) (concluding that "plannedparenthood.com" and "Planned Parenthood" were essentially identical).

Our legal consultants have also advised us that, though it is not binding law, the United States Patent and Trademark Office (the "PTO") declines to interpret a TLD as indicating source. In its Examination Guide No. 2-99, the PTO specifically states that:

"When a trademark [or] service mark ... is composed, in whole or in part, of a domain name, neither the beginning of the URL (http://www.) nor the TLD have any source indicating significance. Instead, those designations are merely devices that every Internet site provider must use as part of its address. Today, advertisements for all types of products and services routinely include a URL for the web site of the advertiser. Just as the average person with no special knowledge recognizes "800" or "1-800" followed by seven digits or letters as one of the prefixes used for every toll-free phone number, the average person familiar with the Internet recognizes the format for a domain name and understands that "http," "www," and a TLD are a part of every URL." United States Department of Commerce, Patent and Trademark Office, Examination Guide No. 2-99, Marks Composed, in Whole or in Part, of Domain Names (Sept 29, 1999).

The mark .XXX is universally recognized as a classification for sexually explicit content. This prevents it from ever functioning as a source identifier for a particular good or service.

THERE IS NO PRECEDENT FOR PATENT PROTECTION FOR A TOP-LEVEL DOMAIN NAME

National patent laws exist to protect novel ideas. As Mr. Touton articulated in ICANN's letter to Anthony Harrison of e2p Limited, new generic top-level domain names have been widely discussed for over a decade and in some cases even implemented. ICM Registry's proposed .XXX has been the subject of United States congressional testimony, and law review articles. Accordingly, the XXX domain name idea is not novel, and therefore is not entitled to protection under any national patent laws.

ICM Registry is confident that no applicant or non-applicant third party could successfully prevail on any cause of action based upon trademark, patent or other alleged violation of rights against it. ICM Registry would deem any such action "frivolous" and in addition to vigorously defending this action would seek immediate sanctions under the applicable national laws.

ICM Registry proposes the following resources be used to support indemnification of ICANN from legal challenges regarding ICM Registry's right to operate the .XXX TLD:

CHESTERMERE INVESTMENTS LIMITED WILL CONTRIBUTE ADDITIONAL FINANCIAL RESOURCES TO SUPPORT ICM REGISTRY TO DEFEND AGAINST LEGAL CLAIMS

As referenced in our original application, ICM Registry is wholly owned by Chestermere Investments Limited, a private investment holding company with marketable securities and real estate assets in excess of CDN $50 M and net shareholder equity in excess of CDN $30 M. Chestermere proposes to set aside a minimum of $250,000 US towards a legal defense fund. Chestermere will work with ICANN to ensure that both itself and ICANN will have adequate financial reserves to address potential legal claims.

In addition to having access to more than adequate financial resources ICM Registry will secure industry leading legal expertise.

ICM REGISTRY PROPOSES TO CONTRIBUTE $4.00 PER DOMAIN NAME FOR LEGAL FEES AND TO SUPPORT COSTS ASSOCIATED WITH ITS POLICY ADVISORY BOARD ("PAB")

ICM Registry has proposed to contribute $4.00 US per .XXX domain registration exclusively to supplement legal fees and to support costs associated with its policy advisory board. ICM Registry anticipates the following legal and policy contributions over the term of the company's accreditation:

New .XXX Domain Name Registrations ^[1]
Time Period	10% Confidence Level	50% Confidence Level	90% Confidence Level
Year 1 (2001)	255,000	170,000	110,000
Year 2 (2002)	525,000	315,000	240,000
Year 3 (2003)	630,000	420,000	264,000
Year 4 (2004)	717,000	512,000	264,000

New .XXX Domain Name Registrations ^[2]
Time Period	10% Confidence Level	50% Confidence Level	90% Confidence Level
Year 1 (2001)	$1,020,000	$680,000	$440,000
Year 2 (2002)	$2,100,000	$1,260,000	$960,000
Year 3 (2003)	$2,520,000	$1,680,000	$1,056,000
Year 4 (2004)	$2,868,000	$2,048,000	$1,056,000

ICM Registry is confident that the legal and policy fee contributions proposed above will be more than adequate to support those costs associated with defending both itself and ICANN from legal actions. Additional detailed information with respect to ICM Registry's pro-forma financial projection assumptions can be provided upon request.

ICM REGISTRY PROPOSES TO ADOPT COMPREHENSIVE INSURANCE COVERAGE

ICM Registry has contracted Stuart Fudge of Morris & Mackenzie to provide insurance brokerage, risk management and benefit consulting services. Morris & Mackenzie, the largest privately-owned Canadian insurance broker in Canada, has committed to assist ICM Registry in servicing ICM Registry's indemnification requirements.

Upon accreditation by ICANN, ICM Registry shall, throughout the term of its accreditation, obtain and maintain at its own cost and expense from a Best's rated A, class 10 or better insurance company licensed to do business in the state of Delaware. This will cover liability insurance, including, specifically general comprehensive liability, property, professional liability and directors' and officers' liability in amounts satisfactory to ICANN. ICM Registry name ICANN as an additional insured party under its policies of general and professional liability insurance for as long as ICM Registry utilizes any rights licensed from ICANN. ICM Registry will provide to ICANN, from time to time, upon request from ICANN, certificates of insurance that keep ICANN abreast of the parameters of what is covered.

ICM Registry also commits to acquire liability insurance for errors and omissions and patent, trademark and copyright infringement liability insurance on behalf of ICM Registry, with ICANN named as a beneficiary. This insurance will provide coverage in excess of US$1M.

This additional insurance protection will secure the company is protected against harmful legal judgments and unanticipated events.

ICM REGISTRY PROPOSED INDEMNITY CLAUSE

ICM Registry is prepared to agree to an indemnification provision similar to the following clause:

"ICM Registry shall defend, indemnify, and hold harmless ICANN and its officers, directors, managers, employees, agents, contractors, affiliates and attorneys ("ICANN Related Parties") from and against any and all claims of ICM Registry or any third party, including, but not limited to all loss, liability, claims, demands, damages, cost or expense, causes of action, suits, proceedings, judgments, awards, executions and liens, including reasonable attorneys' fees and costs (including claims without legal merit or brought in bad faith), arising from acts or omissions relating to an allegation of (i) ICANN's delegation of duties to ICM Registry to operate a top-level domain name registry; (ii) an infringement or other violation of rights with respect to a top-level domain name operated by ICM Registry; (iii) an infringement or other violation of rights with respect to a second level domain name caused to be registered under a top-level domain name operated by ICM Registry's registry; (iv) any action of ICM Registry or its agents. Notwithstanding the foregoing, in the event such claim against ICANN is related to any third party registry/registries, ICM Registry shall indemnity ICM Registry only to the extent ICM Registry's registry is charged, and therefore will be liable for indemnity pro rata with respect to any other registry/registries. If ICANN is threatened by claims or suit of a third party, ICANN may seek written assurances from ICM Registry concerning ICM Registry's obligation to indemnify ICANN. Failure to provide such written assurances is a material breach. Failure of ICM Registry to fully indemnify ICANN in a timely manner will result in termination of ICM Registry's rights to operate the TLD registry, and such termination shall in no way prejudice ICANN's right to seek the indemnity by way of litigation or otherwise."

To conclude, ICM Registry upon accreditation is prepared to defend and indemnify ICANN as stated above from all legal challenges. ICM Registry is confident that with both the financial resources and a comprehensive strategy proposed we will be able to successfully fulfill this commitment.

Thank you for the opportunity to elaborate on our proposal. Should you have any further queries or concerns, we would, of course, be pleased to respond.

[1] ICM Registry's Operator Proposal, Section D13.2.5

[2] Gross new contributions were calculated per new .XXX second level domain name per year in US dollars. Additional contributions to legal fees and the PAB will be generated from multiple year registrations.

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