Hi all, I just want to point out that it is possible the Board could approve a next round while prohibiting certain practices in relation to policy issues as to which we have a “lack of consensus”. This morning Jeff pointed out that we make recommendations and it’s up to GNSO Council to determine whether they will follow them or not. He said this in the context of GNSO Council replacing the WG deliberations and recommendations on the constitution of the SPIRT. His point was that despite the deliberations on the constitution of the SPIRIT, it is possible that Council will elect to restrict the participants to a smaller, more select group. (Some in the WG have pushed for this all along despite the public comment in favor of a “Standing IRT”.) In relation to the context of “ultimate authority”, I note that in the EPDP Phase I, the ICANN Board approved implementation of all the EPDP recommendations except one. The point here is that while we in the WG have relied on the default position in relation to several issues, the Board is not required to follow the GNSO Council recommendation as to what constitutes the default position in relation to either the String Contention Private Resolution process or the issue of Closed Generics. Under the ByLaws, it takes a 2/3 vote of the directors to overturn GNSO Council recommendations, but the Board could simply prohibit both or allow both by the votes of each director acting in his/her fiduciary capacity in relation to the Core Values. The Board could even delay the entire program until these major policy issues are resolved. (ICANN’s 5 year plan has NO new gTLD revenues figured into the plus side of the budget.) On the call this morning, there were several comments about the “default position” for the contentious issues as to Private Resolution of Contention Sets and as to Closed Generics. It was stated that the default position for private resolution is that it’s permitted, but this does not take into account the Board’s comment on this matter. In the Closed Generics discussion, there were also lots of arguments presented that the “default position” ought to be that they are allowed. In the same sense that GNSO Council is not bound by our recommendations, neither is the Board bound by what the WG and the Council think is the “default position”. So the bottom line is it’s important for us to seek the compromise positions Jeff is urging rather than backing into the extreme corners. If we don’t, we face another big “bottleneck” at the Board level since we know already that these are issues of concern to the Board. (I still don’t think there is anything that prohibits an application for the model that George and his group have proposed. It’s not a Closed Generic. And I don’t think the proposal by Kurt et al is realistic because it ignores standing GAC Advice.) Accordingly, I look forward to Jeff’s proposed model for Closed Generics and I look forward to changes that need to be made to Model 5 for Private Resolution of String Contention in order for the WG to reach compromises that have a better chance of making it through to both GNSO Council level action and Board level action. This morning’s discussion on Private Resolution of String Contention was very focused on brands. One business model for a major player might say go ahead and file for the .brand for a lot of the brands you sell and then offer them lots of services associated with running the TLD. This would be a good faith application for sure and would at least get you to the negotiating table with the trademark holder, who likely does not want to file an LRO (complainants generally don’t win) but who also likely does not want to lose out on having its own TLD. So based on the concerns expressed by Paul and Susan, maybe the resolution of the issues relative to required disclosures in the case of private resolution of string contention sets should be different for .brands than for other types of TLDs. In this regard, Phil’s question about tracing each separate type of application through the process would likely be useful. Anne From: Gnso-newgtld-wg <gnso-newgtld-wg-bounces@icann.org> On Behalf Of McGrady, Paul D. Sent: Monday, July 27, 2020 7:07 AM To: Jim Prendergast <jim@GALWAYSG.COM>; gnso-newgtld-wg@icann.org Subject: Re: [Gnso-newgtld-wg] Additional thoughts on Proposal 5 [EXTERNAL] ________________________________ Thanks Jim. Comments in line with your notes below. Best, Paul To receive regular COVID-19 updates from Taft, subscribe here<https://www.taftlaw.com/general/subscribe>. For additional resources, visit Taft's COVID-19 Resource Toolkit<https://www.taftlaw.com/general/coronavirus-covid-19-resource-toolkit>. This message may contain information that is attorney-client privileged, attorney work product or otherwise confidential. If you are not an intended recipient, use and disclosure of this message are prohibited. If you received this transmission in error, please notify the sender by reply e-mail and delete the message and any attachments. From: Gnso-newgtld-wg <gnso-newgtld-wg-bounces@icann.org<mailto:gnso-newgtld-wg-bounces@icann.org>> On Behalf Of Jim Prendergast Sent: Monday, July 27, 2020 6:28 AM To: gnso-newgtld-wg@icann.org<mailto:gnso-newgtld-wg@icann.org> Subject: [Gnso-newgtld-wg] Additional thoughts on Proposal 5 Apologies in advance. I will not be able to join the call later today as I am cohosting a workshop at RightsCon at the same time. I will review the notes and recording and respond on list as necessary. As Jeff noted during the last call, this is complicated because we are now allowing the resolution of contention sets in ways that were not allowed in the 2012 round. A very simple, clean way to settle contention sets without these measures is to have them all go to an ICANN auction of last resort or a random draw. But some people insist that losers should get paid so those are off the table. I also believe that we have to address BOTH Board concerns - Board Concern #1 - applications submitted for the sole purpose of receiving a payout for losing private auctions We have made good progress in addressing #1 and I think we can get there with some tweaks. Transparency requirements are good but they should not be rolled back for the creation of JVs. Not suggesting trade secrets be divulged but we should know who the operator of the JV is and we should also know the circumstances around what caused members of the contention set who are not part of the JV to drop out. The operator of the JV will be in the application update, so that is a red herring. As for parties that are not in a JV, there is no way for a JV to know why other applicants dropped out and no way for the JV or its constituent elemental parties to issue discover to determine why a third party dropped out. I also believe that the Bona Fide proffers should be reviewed and enforced by ICANN, not just the outside evaluators. Rationale is that at some point, the evaluators will disappear. They are temporary help. ICANN has the ultimate responsibility to administer this program so they should be the ones reviewing theses Bona Fide requirements. I don’t disagree, but unless we want to create the entire framework now instead of having the IRT do it (as Jeff suggested) we need to build out details around how ICANN would enforce these. And along these lines – ICANN should oversee all auctions, not just the Auction of Last resort. As currently constructed in Paul’s edit – there are too many steps for revealing the results of private auctions. With ICANN overseeing this, it’s a much cleaner process. ICANN involvement also adds a level of assurance that these auctions are being conducted in an aboveboard manner. This has been debated extensively. ICANN overseeing private auctions makes them ICANN auctions not private auctions. There is no stomach for the elimination of private auctions. As far as penalties for violations of the Bona Fide requirements – loss of registry has to be there. That is a major deterrent and should not be cast aside. This doesn’t make any sense. If the concern is that a party is losing to get money, how do you take away a registry from a party that didn’t win it in an auction? Even if you could, the disruption to any second level registrants would be intense. Board Concern #2 - gaming for the purposes of financing other applications. The base Proposal 5 does nothing to address Concern #2. Donna stated that she’s “not convinced that means we have to address it.” I couldn’t disagree more. Proposal 5 does address this by requiring a bona fide intention to run the registry. If we fail to address this now, there is a strong likely hood that the Board will either 1) come back to us and ask us to develop a plan (slowing things down again) or 2) develop a solution themselves. Neither is an ideal outcome so we have to do something to stop the gaming for purposes of financing other applications. Perhaps, but there are other items, such as Closed Generics, where the Board instructed us to find a solution and we aren’t going to do so. Also, sometimes the Board doesn’t get what it wants – that is what the bottom up process is all about. I and others believe that the Bona Fide requirements do not go far enough here. Others believe my sealed bid requirement goes too far. So what are alternative solutions that are enforceable and prevent this type of activity? Auction proceeds held in escrow? All auction conducted at once? All auctions conducted at once won’t work as all contention sets aren’t on the same timeframe (objections, etc.). Holding auction proceeds in escrow hurts smaller players who may not be able to borrow against the escrowed funds in time, sure, but would do nothing to hinder large corporations. These ideas sound good, but don’t actually accomplish anything other than ICANN interfering in private auctions. Timing on when these auctions happen is the key to stop this gaming and that is why I proposed the submission of all bids upfront. With bids upfront, auctions could be conducted whenever but there is a constraint on the ability to roll funds over and over. All bids up front has been discussed extensively and rejected repeatedly. It doesn’t work. Applicants cannot know the bid amounts until all public comments, GAC Early warnings, objections, etc. are over. We can’t deconstruct the entire New gTLD program to solve a problem that only a fraction of the WG even think is a problem. ICANN’s right to refer to competition authority. We never got around to discussing why Paul felt the need to delete this section completely and since the call there was a brief discussion on list about whether ICANN has this as an inherent right or whether it should be spelled out. My proposal was based upon the RSEP process which is already in force of all registry operators and will be required for all future operators. It specifically calls out competition authority referral if ICANN makes a determination such referral is necessary. I was surprised how representatives of contracted parties reacted so negatively to that since it is in existing registry agreements. My rationale for including this provision and calling it out specifically is simple – if a JV or other form of private resolution raises competition concerns for ICANN, they should have the right to refer it to relevant competition authorities to ensure they are ok with it. This protects ICANN the institution from charges that it is fostering anticompetitive behavior. We actually discussed this for a large portion of a call that you were on. I deleted it from the draft because we came to a conclusion on the call that there will be a general notice in the AGB that ICANN can refer whatever it wants whenever it wants to whatever competition authority it chooses – and not just for private auctions. So, this comment leaves me befuddled. Jim Prendergast The Galway Strategy Group +1 202-285-3699 ________________________________ This message and any attachments are intended only for the use of the individual or entity to which they are addressed. If the reader of this message or an attachment is not the intended recipient or the employee or agent responsible for delivering the message or attachment to the intended recipient you are hereby notified that any dissemination, distribution or copying of this message or any attachment is strictly prohibited. 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