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William Bode hopes the old adage “three times is a charm” holds true. The co-founder of D.C.’s Bode & Beckman has gone to the Eastern District of Virginia to file his third class action alleging that Herndon, Va.-based Network Solutions Inc., empowered by the federal government, swindled everyone who registered an Internet domain name between September 1995 and November 1999 out of some $800 million. Bode hasn’t fared too well in his first two challenges to what was then a $100 charge NSI and federal authorities levied on individuals and companies that sought to register domain names. One case was dismissed by a federal judge in the district. However, the judge in that case ruled that $30 of the fee was an unconstitutional tax, and several weeks later the government did away with the fee. Bode voluntarily pulled the second case. But now, he’s back for the remaining $70. Last month, a group led by Middleburg winery, the Chrysalis Vineyards Co., filed a class action seeking $1.7 billion from the Commerce Department, the National Science Foundation, and Network Solutions. Bode says an agreement between the government and NSI to allow the company to start charging Web site operators was unauthorized under federal law, and that NSI has been enriching itself as the ranks of domain name registrants has swelled from 100,000 in 1995 to more than seven million today. “This is an example of gross governmental misfeasance to the detriment of the public,” Bode says. “It will be a horrible precedent if the government is allowed to offer a private company a monopoly just because the technology is new.” In his complaint, Bode says NSI is only authorized to charge its costs for the service. While NSI currently asks $70 to register for two years a dot-com, dot-org, or dot-net, the complaint alleges it actually costs the company about $1 to do the work. Finally, the case alleges that a policy shift in 1997 that opened up dot-net and dot-org names to commercial enterprises — rather than just ISPs and nonprofits, respectively — has forced the named plaintiffs and others to pay to secure as many as three Web sites when they otherwise would only have needed one. As the Wilmer, Cutler & Pickering attorneys representing NSI in the case are quick to point out, much of what Bode alleges is not new. In 1997, he filed a similar suit in U.S. District Court for the District of Columbia. In that case, Thomas v. Network Solutions Inc., all the counts were either dropped or dismissed — except one. U.S. District Judge Thomas Hogan initially upheld the claim that a $30 portion of the fee to control a domain name for two years — money that went to an Internet infrastructure tax controlled by the National Science Foundation — was unconstitutional. Around the same time, Congress retroactively authorized the $30 tax, but eliminated it from future use. At the government’s request, Hogan then dismissed the last vestiges of Bode’s case. Some of the strands still linger. Although Bode did not prevail before Judge Hogan, the government altered its policy. TRY, TRY AGAIN Bode attempted again in July to bring the suit in the Northern District of California, but NSI got the case transferred back to the district, where the U.S. Court of Appeals for the D.C. Circuit had upheld Hogan’s decision in the earlier case. Bode dropped the case and filed a new one in the Eastern District of Virginia. “Plaintiff’s counsel brought the case in California in an obvious effort to shop for a forum as far away as possible from the District of Columbia,” Wilmer, Cutler partner Michael Burack, one of the attorneys representing NSI, says in court papers. “Three days later, they crossed the Potomac to file the instant case — his third one — in this court.” Network Solutions is asking that Bode’s case be dismissed. If Bode gets his day in court, the case will turn on the curious relationship NSI has had with the government since 1992. That was the year NSI was selected by the National Science Foundation to provide domain name registration services over a five-year period until the services could be privatized. Under the contract, the National Science Foundation would pay NSI $1 million annually to register Internet domain names to the public without charge. But in May 1995, NSI asked for the National Science Foundation’s permission to impose a revenue sharing arrangement in which Network Solutions would collect a $100 registration fee and split it 70-30 with the government. According to NSI’s counsel, the $1 million per year did not cover the growing expense of registering the domain names. As part of that deal, the National Science Foundation and NSI eliminated a clause in their contract that prohibited charging citizens more than the costs of registration. As a result, alleges Bode, Netizens have been fleeced for about $800 million through November 1999, when NSI lost monopoly control of the registration process. The Department of Commerce took over supervision of the registration process from the National Science Foundation in 1997 to oversee opening up domain name registrations to other companies. “The fees were picked arbitrarily by Network Solutions, which were then approved by the National Science Foundation, without a public hearing on reasonableness or any internal review,” Bode says. “We raised these issues in the Thomas case, but we were concentrating on the $30 fee more than anything,” Bode says. “We’ve resolved that, and now we are focusing on this.” Bode also claims an antitrust violation stemming from NSI’s 1997 decision to allow commercial enterprises to register as .org or .net, as well as .com. In court papers, he says that policy forces companies like Chrysalis to snap up — and pay for — more domain names. Burack’s response is that Bode has his argument “exactly backwards.” He says that NSI is actually opening the market, not undermining it, with that policy. He writes: “The idea that a seller — even a monopolist — violates the antitrust laws by offering to sell its services to anyone who wants to buy them is just plain silly.”
E-Commerce: Reinventing the Law. October 2-13.

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