VeriSign and Icann are bring sued by a group of eight domain name registrars seeking to stop the back-ordering services of internet domain names.
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The lawsuit seeks to halt the implementation of a VeriSign-backed waiting list for expired domain names called Wait List Service (WLS).
The suit accuses VeriSign and Icann, the non-profit corporation responsible for allocating internet protocol address space and managing top-level domains, of "planning to implement a scheme to dupe consumers into buying domain names the consumers will never be able to register, and an unlawful and fraudulent protection racket".
The battle is over how to re-register the 10,000 to 25,000 top level domains that become available each day after their owners fail to pay renewal fees, said Bill Mushkin, the chief executive officer of Name.com, one of the registrars behind the lawsuit.
Under the existing system, popular domain names are often back-ordered and then auctioned to the highest bidder when they become available again. While customers may pay a higher fee for a back-ordered domain - on average they cost between $30 and $60 - they only pay for the domains when they obtain them.
Under the WLS system, back-ordered domains would be awarded on a first-come, first-serve basis, but customers would pay an annual fee to back-order the domain, regardless of whether it becomes available for purchase during the year, Mushkin said.
Mushkin and the other plaintiffs argued that this system could help Verisign create "insurance" services which would be used by companies looking to ensure that their own domain names never become available to the general public.
"The WLS thereby allows VeriSign and Icann to generate fees by playing their unknowing customers against each other for merely maintaining the status quo," the court filings said.
The WLS implementation will also reduce the amount of money smaller registrars make from back-ordered domains.
"From a smaller registrar's perspective, the amount of money from these can be the difference between profitability and a loss," Mushkin said. "A lot of the smaller registrars are going to go out of business if WLS gets implemented."
VeriSign vice-president of government relations Tom Galvin defended the WLS system, claiming it would help remove the uncertainty involved in back-ordering domain names.
"It enables a person who wants a domain name that's already registered to know in certainty that if a domain name ever expires, they will get it," he said.
The eight companies named as plaintiffs in the suit are: ABR Products, Name.com, Lee Chambers Company, Fiducia, Spot Domain , !$6.25 Domains Network, Ausregistry Group and Bid It Win It.
Robert McMillian writes for IDG News Service