Minding Your Business

Proskauer’s perspective on developments and trends in commercial litigation.

War of the World Wide Webs: D.C. Circuit Refuses Terror Victims’ Attempt to Seize Internet Domain Names

In early August, the D.C. Circuit refused to allow victims of terror attacks to take control of the Internet domain names of Iran, North Korea, and Syria as a means of satisfying previous money judgments awarded to the victims. In refusing this Internet domain seizure, the D.C. Circuit expressed concern about a “doomsday scenario” that could fundamentally disrupt the stability and accessibility of the Internet to the detriment of the general public. With this ruling, the D.C. Circuit acted with a degree of caution, mindful not to create waves amidst the global nature of Internet regulation.

Factual Background

Victims of terror attacks had previously won money judgments against Iran, North Korea, and Syria for claims brought under exceptions to the Foreign Sovereign Immunities Act (“FSIA”). In order to satisfy the judgment awarded to them, the victims attempted to seize control of the country-code top level domain names (“ccTLD”) and Internet Protocol addresses from these three countries. Simply stated, ccTLDs are Internet suffixes like “.com,” or in this case: “.ir” [Iran]; “.sy” [Syria]; “.kp” [North Korea]. The victims hoped to sell or license the ccTLDs and collect the proceeds. To do this, the victims served a writ of attachment on the Internet Corporation for Assigned Names and Numbers (“ICANN”), a non-profit that manages Internet domain names globally and protects the stability and interoperability of the Internet’s domain name system (“DNS”). ICANN moved to quash these writs. ICANN is based in California and works pursuant to a contract with the United States Department of Commerce. The global community voluntarily chooses to use ICANN as the manager of its Internet domain names.

D.C. Circuit Decision

Initially, the D.C. Circuit determined that certain victims could bring claims under the “terrorist activity” exception to the FSIA, 28 U.S.C. § 1610(g). Although the FSIA protects foreign governments from litigation in U.S. courts, there is an exception for claims based on terrorism. In such instances, a foreign state may be subject to an attachment of its property as a means of satisfying a judgment. The Court assumed, without deciding, that ccTLDs are property under the FSIA, and that Iran, North Korea, and Syria have attachable ownership interest in the ccTLDs.

Nevertheless, the D.C. Circuit rejected the victims’ writ to attach the domain names, noting that section 1610(g) of the FSIA provided it with express authority to consider and protect third party interests. Based on this authority, the Court ultimately determined that requiring ICANN to delegate foreign domain names under United States law could impair the interests of ICANN and the general public as a whole.

Specifically, the Court explained that foreign companies are not required to use ICANN for Internet domain name management. Instead, the global community allows ICANN to manage Internet domain names, and there was real concern that United States intervention with ICANN’s DNS management could cause foreign countries to defect from and form a competitor to ICANN. Scholars refer to a global ICANN defection as “splitting the root,” and they warn that it could precipitate the collapse of Internet stability. They advise that “splitting the root” could potentially yield a “doomsday scenario” for the global accessibility of Internet content, resulting in a fragmented Internet system devoid of central administration. The D.C. Circuit determined that this doomsday scenario is “not beyond imagining” and refused to grant the victims’ request to intervene with ICANN.

Takeaways

This opinion yields two immediate takeaways. First, the D.C. Circuit was reluctant to meddle with the global nature of ICANN’s Internet management. While the Court acknowledged that some scholars are skeptical as to whether the global community would actually defect from ICANN, it refused to challenge the status quo and rested its holding on its determination that the likelihood of the doomsday scenario was “not beyond imagining.”

Second, the D.C. Circuit’s caution coincides with a recent shift away from American involvement with ICANN. As some countries like China and Russia have bemoaned the United States’ involvement with ICANN, the United States has acted to limit its involvement. This summer, the United State Department of Commerce announced its support for plans to transition the United States government’s stewardship role away from ICANN’s Internet DNS by means of a privatization process. The D.C. Circuit opinion appears to continue this hands-off trend.

Antitrust Agencies Propose Updates to IP Licensing Guidelines and Invite Comments

On August 12, 2016, the Federal Trade Commission and the Department of Justice proposed changes to the Antitrust Guidelines for the Licensing of Intellectual Property, also known as the IP Licensing Guidelines. Since they were first issued in 1995, the agencies, courts, and businesses have relied on these Guidelines when considering or reviewing licensing practices. Therefore, companies with licensing programs or practices that may be affected by these Guidelines should review the proposed update and consider submitting comments. Comments are due by September 26, 2016.

Read the full text of the client alert here.

Court Finds Spanish-Language Movies May Be A Proper Antitrust Product Submarket

Can Spanish-language media content constitute a proper antitrust product submarket for purposes of a Sherman Act claim? A federal district court in Houston appears to be the first to address the issue and has signaled that, at least at the motion to dismiss stage, the answer may be sí, se puede. With 13.1% of U.S. residents speaking Spanish at home as of 2014, media companies with merger plans or business arrangements relating to Spanish-speaking consumers should pay close attention. Continue Reading

Not a Foreign Concept: Court Orders Production of Native ESI Files to Verify That Data Had Not Been Manipulated

email storage-3A common issue in almost any case involving the production of electronically stored information (“ESI”) is the format in which the parties will produce the ESI. Typically, ESI may be produced in one of four formats: native (the format in which it is maintained on the producing party’s system – e.g. a Microsoft Word or Excel file), near-native (files that need to be converted to a different file type for production purposes – e.g. converting emails from a .msg file to a .html file), image (e.g. TIFF images or PDF files), or hard copy. A main difference between these formats is the amount, if any, of metadata that is produced with the file. In layperson terms, metadata is information embedded in the ESI that describes certain characteristics of the electronic file (e.g. how, when and by whom it was received, created, accessed, and/or modified and how it is formatted). The production of native files typically includes most metadata associated with a document; near-native may include some or most; image format does not include metadata but may include a load file that contains certain select fields of metadata; and hard copy paper productions generally do not include any metadata.  Continue Reading

The Science Behind Expert Disqualification

Basic Test

Why stop at excluding expert testimony when you can exclude the expert? For years, expert witness conflicts doctrine has been developed through the federal common law. Although appellate courts have been relatively silent on the issue, trial courts regularly strike experts that have received confidential information from the opposing party. Courts generally disqualify expert witnesses when a prior relationship resulted in access to an adverse party’s confidential information, and that information could harm that party’s interests in the present case. Whether an expert has an impermissible conflict is generally determined by a two prong test: (1) did the party claiming a conflict reasonably believe they had a confidential relationship with the expert, and (2) did that party give the expert relevant confidential information. Wang Labs., Inc. v. Toshiba Corp. In addition to these two factors, some courts will also consider fundamental fairness and prejudice resulting from disqualification or the denial of disqualification.  See e.g. Veazey v. Hubbard.

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“Red Herring” or “Alternate [U-verse]”? Court Allows Cable Network to Go Beyond Written Contract in Claims Against Distributor

2015 and 2016 saw a wave of transactions among cable, satellite, and other linear programming distributors: AT&T & DirecTV, Altice and Suddenlink, etc. That transactional wave is beginning to spawn a litigation wave, principally over interpretation and application of the pre-existing licenses and contracts between networks and distributors. A recent ruling in one California case is noteworthy to the extent that it allowed a network to proceed against a distributor on multiple theories beyond the parties’ written contract. Continue Reading

Think Your Release is Ironclad? Consider California Civil Code Section 1542

Settlement agreements often include broad general releases covering claims existing from the “beginning of the world” to the settlement date – whether the claims are known or unknown to the releasing party. And in many states, such broad releases are valid and enforceable. Indeed, it is the peace provided by such releases that often makes settlement possible. Continue Reading

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