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What If New gTLD Applicants Held Private Auctions Where Losing Applicants, Not ICANN Gets The Money

Michael Berkens

Over the last week at ICANN the arguably best idea coming out of the ICANN meeting is the concept that applicants for new gTLD strings with more than one application, hold a private auction amongst themselves with the winning amount going to the other losing applicants instead of to ICANN.

As a backdrop, under the Guidebook multiple applicants for a new gTLD extension are encouraged to work together and come to an agreement to resolve the conflict.

Under the Guidebook, if the parties can't work anything out, the winner of the string will be determined by an ICANN auction where the highest bidder will get the extension, the losing bidders get nothing.

If the losing applicant of an ICANN auction doesn't withdraw their application along the way, they even lose their entire $185,000 filing fee.

Under the Guidebook the proceeds of an ICANN auction would all go to ICANN, which as outgoing Rod Beckstrom pointed out this week, has almost 1/2 of billion in cash already.

The alternative would be that the applicants for a contested string, hold a private auction where the highest bidder coming out of the auction will be the agreed upon winner, with the proceeds of the auction not going to ICANN, but to the losing applicants in the auction, in the same ratio of the losers bid to highest bid.

The auctions would be conducted by an independent party, one having no interest, direct or indirect in the particular string, whom, would collect a small percentage of the fee for handling the auction.

Of course in world of he domain auctions, no one has held more auctions in terms of volume or sheer number of auctions than my partner in RightoftheDot.com Monte Cahn, so you could expect RightoftheDot.com would be one of the auctioneers for these types of auctions for strings in which we were not representing clients.

Beyond the facts that the funds from the auction would go to the other applicants rather than ICANN, there are other benefits to private auctions over ICANN auctions.

For one, parties can hold private auctions at anytime, rather than waiting for whenever ICANN is ready to hold them, thereby giving clarity on many strings which are in contention to all applicants.

As we know there are 751 applications out of 1,931 applications in contention.

ICANN is starting to go through the process of vetting applications which as we learned this week may take up to anywhere from one year to 15 months to get through them all.

No ICANN auction could be held until all applications in that particular string are vetted, the objection period which lasts 7 months ends with no objections for any applicant to that string and until all applicants passed the evaluation period.

Private auctions with the proceeds being placed into escrow subject to successful application evaluations, no objection and a few other factors theoretically can be held at any time assuming all parties agreed.

So applicants, especially those with multiple applications, could start to get clarity.

As all applicants know time is money and the sooner contented strings are decided some of the bleeding of time and money would stop.

As for the possible negatives, all of the applicants for each string would have to agree to participate and be bound by the outcome of the auction.

Applicants are from jurisdictions from around the world and this agreement between the parties may not be as enforceable in some of those jurisdiction if a loser of a private auction wants to later complain.

A bigger negative could possibly be that the winning bidder of the private auction, in many cases will be in other auctions against one or more of the same parties for other extensions, would be indirectly financing the losing applicant of one string by giving them a share of the winning bidders funds.

Many applicants have multiple applications and will face one or more of the same applicants in several contested strings and possible auctions.

I can see that some applicants would feel that they would be helping their competition by providing cash in the form of their winning big to help the losers bid higher in the next private auction, giving the losers of one auction a better chance to win the next auction or pushing the winning bidder even higher in the next private auction.

Yet at the end of the day, having the opportunity to resolve strings with multiple applicants, months and even possibly years ahead of what it would otherwise take waiting for an ICANN auction, coupled with not giving the money to ICANN, money that could total well into the tens and possibly hundreds of millions of dollars, to the other applicants who could then use those funds to market and run the extensions they do win, seems irresistible.

By Michael Berkens, President of Worldwide Media, Inc.. Michael H. Berkens is a member of the Florida Bar, President of Worldwide Media, Inc. which owns over 75,000 domain name, a Director in RightoftheDot.com and writes a blog at TheDomains.com.

Related topics: ICANN, Top-Level Domains

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Yup Kevin Murphy  –  Jun 29, 2012 9:05 AM PST

Private auctions have been envisioned from the outset.

Some applicants are surely banking on it.

How not to fund your competitors other bids Rubens Kuhl  –  Jun 29, 2012 12:44 PM PST

If the proceeds of the auctions return to losing applicants only after all auctions are closed, then the winning applicants are sure the money they pay won't bite them at other auctions. A chance factor can be added so the returns cannot generate bank assurances (so one couldn't get a loan based on those), for instance: one of losers won't get its money back and that's a chance factor.

Also, the proceeds of the auctions should return in proportion to the losing bids, keeping one from profiting by just being there.

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