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Eight years ago, the federal government handed a tedious-sounding contract to a little-known company called Network Solutions Inc. The contract granted Network Solutions the right to administer a server at its Herndon, Va., headquarters that stores virtually all Internet addresses. The database is the taproot of the information superhighway. The contract turned into a fortune, and Network Solutions was recently sold to Verisign Inc. for $15 billion. But with success came lawyers, and Network Solutions has been the target of several lawsuits over the years challenging the company’s exclusive deal to dole out domain names. Although the company was recently forced to give up its monopoly and open up domain registration to competitors, the suits haven’t stopped. In a $2.4 billion class action antitrust suit before U.S. District Judge Vaughn Walker, William Bode, of Washington, D.C.’s Bode & Beckman, charges that Network Solutions used its government-sanctioned monopoly to gouge customers. While courts have so far ruled that Network Solutions’ monopoly was government-sanctioned, Bode intends to prove that the company acted outside the four corners of its contract. Under the terms of the initial contract with the government, it’s doubtful Network Solutions would have ended up on the Nasdaq 100. At first, the company’s contract called for it to administer the database at cost, plus a fixed fee, which allowed for a nominal profit. But in 1995, Network Solutions got the contract amended and began charging $100 per registration, plus an annual renewal fee. That move made Network Solutions villains among disgruntled programmers and Webheads long before the Internet became crassly commercial. “I think it will go down in history. This was one of the great malfeasances of the 1990s,” Bode said. “I get e-mails every day from disgruntled registrants who want to become plaintiffs.” Last week, Walker heard Network Solutions’ motion to move the suit to Washington, D.C., which has been a successful stage for the company in past antitrust suits. “That court has very recently considered many of the same claims, and in that connection has analyzed the issues, the statutory schemes involved, and the relevant cases,” wrote Folger Levin & Kahn associate Michael Kelleher, a Network Solutions attorney, in court briefs. Washington, D.C.’s Wilmer, Cutler & Pickering, along with Hanson & Molloy, are also working the case for Network Solutions. It is the company’s policy not to allow lawyers to comment on pending cases. Bode has sued Network Solutions before, with decidedly mixed results. In the 1999 D.C. Circuit case, Thomas v. Network Solutions, 176 F. 3d 500, Bode challenged the fees NSI charged registrants. The court ruled that 30 percent of the $100 fee was diverted into a government fund for improving the Internet, which amounted to an unconstitutional tax. But Bode lost on his claim that the $70 NSI kept was a violation of antitrust law. To win in the San Francisco case, Hoefer v. Network Solutions, 00-0918, Bode will have to get around Thomas. But Bode sees hope in a recent 2nd U.S. Circuit Court of Appeals ruling, Name.Space v. Network Solutions, 202 F. 3d 573, which held that NSI was a monopoly, but acted at the direction of its government contract. “Clearly, any alleged abuse of monopoly power was specifically mandated by NSF and the Commerce Department. As the District Court recognized, ‘private parties, to the extent they are acting at the discretion or consent of federal agencies, also fall outside the pale of the [Sherman Act],’” wrote 2nd Circuit Judge Robert Katzmann in January. But Bode says Network Solutions acted outside the scope of its government contract and should never have been allowed to hike its registration fee in 1995. Bode also claims that NSI violated written protocol by allowing, even encouraging, businesses to register under more than one domain. For example, Yahoo.net, Yahoo.com and Yahoo.org all take the user to the same page. The domains .net and .org are intended for Internet-related companies and nonprofits organizations, respectively. Network Solutions has been in and out of courtrooms for most of its corporate career, but efforts to sue the company have proved quixotic. “You can’t sue Network Solutions,” said one lawyer familiar with a previous suit against the company, adding that the company’s interests are too closely tied to the interests of government agencies and the future of the Internet. Network Solutions has been before Walker in the past. As usual, they won. But Walker did express, in passing, his thoughts on the fees NSI charged registrants. In the pro se Beverly v. Network Solutions, 98-0337, Walker wrote: “The general public benefits from the contractual relationship because it affords relatively inexpensive Internet access.” Bode’s class period ended last November, when the company was forced to give up its monopoly and open up domain registration to competitors. Even then, Network Solutions fought the move. After a summer of contentious negotiations, an agreement was hammered out where every new company allowed to register domain names must pay NSI $6 for each registrant to maintain the central domain name database. “It’s no secret that they weren’t real psyched about giving up their government-mandated monopoly,” said Pam Brewster, spokesman for the recently created Internet Corporation for Assigned Names and Numbers, or ICANN, which oversees all registration companies. But since then, the company has had a run of good luck. On January 18, the U.S. Supreme Court denied certiorari in Thomas. The public was apparently more skeptical of Network Solutions’ case than the justices. On the news, the company’s stock shot up 500 percent. On Feb. 1, Network Solutions announced the Justice Department had ended a longstanding antitrust investigation of the company, with no charges brought. On March 7, the Verisign deal was announced. While Walker has given no inclination of how he’ll rule, Network Solutions found itself enmeshed in controversy again last week when the Washington Post reported that the company told delinquent domain-name holders that, instead of returning them to the pool of available names, it would auction off their addresses if accounts were not paid in full by June 28. That brought more charges of anti-competitive activity, and ICANN is investigating to see if the policy violates its agreement with Network Solutions.

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