NeuLevel has won the first round in a legal fight over how it awarded new .biz Internet domain names to multiple applicants using a lottery.
A court injunction against the Sterling, Va.-based company, which holds the registry for the .biz domain, was dropped by a Los Angeles judge Wednesday after two plaintiffs who had sued NeuLevel in August failed to post a US$1.6 million bond in the case. The bond was to be held as a potential damage award by the court in the event that NeuLevel prevailed in the lawsuit.
Now that the injunction has been dropped, NeuLevel can continue to use a lottery to award Internet domain names being sought by multiple applicants -- until the remaining legal case is resolved by the court.
The plaintiffs, a Phoenix disc jockey and a Los Angeles-based online traffic safety school, filed their lawsuit in August, arguing that the method NeuLevel used to distribute .biz domain names constituted an illegal lottery. The company required applicants to pay a fee of $2 to seek a .biz domain name when multiple applications were received for the same name. All applicants, whether they ultimately got the domain name through the lottery or not, relinquished the fee to NeuLevel, which the plaintiffs charged was unfair and illegal.
Derek Newman, a Seattle attorney who represents the plaintiffs, said his clients didn't have the money to put up the bond, so they let it dissolve under the terms set by the court. The underlying legal issue -- that NeuLevel has unfairly been collecting fees from applicants even when they received nothing in return -- remains, he said. Instead, the company should return the fees to applicants who failed to win the lotteries, he said.
"They see they were wronged, and they don't want it to continue," Newman said of the plaintiffs.
Jeff Neuman, the director of policy and intellectual property at NeuLevel, said the company has returned to using the lottery to resolve applications that request the same .biz domain names and is confident that it will prevail in the legal fight.
"We're free to implement our system as planned," Neuman said. "Now, we go full bore into an actual trial. We're convinced that trial will show we used a fair and equitable system" to distribute .biz domain names.
About 40,000 to 60,000 .biz names had been frozen by the court injunction because they were requested by multiple businesses. About 80 percent of the approximately 282,000 applications received by NeuLevel so far are unaffected by the court case.
NeuLevel began accepting .biz domain name registrations several months ago on a phased-in basis but will open the process on Nov. 7 to all businesses.
The plaintiffs' lawsuit also named other defendants, including the Internet Corporation for Assigned Names and Numbers (ICANN, the nonprofit group that oversees the Internet domain naming system), Verisign Global Registry Services, Register.com, Yahoo Inc., and most ICANN-accredited registrars.
The lawsuit seeks a court order requiring ICANN, NeuLevel and the other defendants to halt such lotteries and refund money collected from applicants who didn't get the domain names they sought.
Last week, NeuLevel announced that it was delaying the launch of live first-come, first-served online registrations for .biz domain names from Oct. 23 until Nov. 7, citing higher-than-expected demands from potential customers. The company denied that the delay was related to the lawsuit and said the extra time would be used to upgrade its system architecture to handle what was expected to be a large rush for .biz names once the process was opened to businesses.
Earlier this month, Afilias Ltd., the domain name registry for .info Web sites, went off-line for several days after its debut because high demand from applicants slowed its servers to unacceptable levels.