throbber
Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 1 of 49 Page ID #:15
`
`r D
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`20;1 r_ ° (cid:9)6 (cid:9)f,!; 10: 1 3
`
`CLERK U.S.
`CENT"
`LOS
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`'R !CT C C (cid:9)T
`
`. OF C1:1.1F.
`uL.LLS
`
`THOMAS P. LAMBERT (SBN 50952),
`tpl msk.corn
`JE T PIERRE NOGUES (SBN 84445),
`jpnmsk.com
`KEVIN E. GAUT (SBN 117352),
`k (cid:9)msk.corn
`HELL SILBERBERG & KNUPP LLP
`11377 West Olympic Boulevard
`Los Angeles, California 90064-1683
`Telephone: (310) 312-2000
`Facsimile: (310) 312-3100
`
`Attorneys for Plaintiffs
`Manwin Licensing International
`and Digital Playground, Inc.
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`MANWIN LICENSINO
`INTERNATIONAL S.A.R.L., a
`Luxemburg limited liability company
`(s.a.r.1.), and DIGITAL
`PLAYGROUND, INC., a California
`corporation,
`
`Plaintiffs,
`
`v.
`
`ICM REGISTRY, LLC, d/b/a .XXX, a
`Delaware limited liability corporation;
`INTERNET CORPORATION FOR
`ASSIGNED NAMES AND NUMBERS,
`a California nonprofit public benefit
`corporation; and Does 1-10,
`
`Defendants.
`
`°•Case (cid:9)11-9514 -1 s6
`y),
`
`COMPLAINT FOR:
`
`(1) VIOLATIONS OF SECTION 1
`OF THE SHERMAN ANTITRUST
`ACT [15 U.S.C. § 1];
`
`(2) VIOLATIONS OF SECTION 2
`OF THE SHERMAN ANTITRUST
`ACT [15 U.S.C. § 2];
`
`(3) VIOLATIONS OF THE
`CARTWRIGHT ACT [CAL. BUS. &
`PROF. CODE §§ 16720, 16722, AND
`16726];
`
`
`(4) UNFAIR CO
`MPEN (cid:9). [CAL
`
`RO
`CO
`
`
`BUS. & PF. DETITIO §§ 17200 ,
`17203]
`
`DEMAND FOR JURY TRIAL
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`Mitchell 28
`Silberberg &
`Knupp LLP
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`268925.1
`
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 2 of 49 Page ID #:16
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`Mitchell 28
`Silberberg &
`Knupp LLP
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`4268925.1
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`Plaintiffs Manwin Licensing International S.a.r.l. ("Manwin") and Digital
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`Playground, Inc. aver as follows:
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`I. NATURE OF THE ACTION
`
`1. Manwin owns and licenses the trademarks and domain names used for
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`many of the most popular adult-oriented websites, including YouPorn.com , the
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`single most popular free adult video website on the Internet, as well as xTube.com ,
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`Pornhub.com, and Brazzers.com , to cite only a few examples. Manwin also
`
`manages online content under the "Playboy" trademark and runs Playboy TV
`
`worldwide, both under license from Playboy Enterprises, Inc. This Complaint
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`refers to Manwin as "YouPorn." YouPorn and other Manwin licensed companies
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`operate "tube" sites that offer free user-generated and searchable adult content.
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`2.
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`In this lawsuit, YouPorn and Digital Playground seek redress for
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`monopolistic conduct, price gouging, and anti-competitive and unfair practices,
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`broadly harming competition, businesses, and consumers, and arising out of the
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`establishment of .XXX, a new Top-Level Domain Name ("TLD") intended for
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`adult-oriented content. (Other TLDs are, for example, .com and .org.) The
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`business practices at issue have enormous and worldwide consequences for the
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`Internet, an essential engine in all domestic and international commerce.
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`3.
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`Defendant the Internet Corporation for Assigned Names and Numbers
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`("ICANN") controls and is responsible for the entire worldwide Internet Domain
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`Name System ("DNS"). The DNS makes the Internet work by assigning unique
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`"domain names" to web sites, and by coordinating master computer servers which
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`ensure that all Internet users typing a domain name into their browsers reach the
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`same "host" computer and website. ICANN also determines whether to permit
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`new TLDs in the DNS. ICANN recently approved the .XXX TLD, and contracted
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`with defendant ICM Registry, LLC ("ICM") to make ICM the sole "registry" or
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`operator of that TLD. As explained more fully below, that approval and that
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`2
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 3 of 49 Page ID #:17
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`Silberberg &
`Knupp LLP
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`4268925.1
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`contract were rife with unfair, inappropriate, and anticompetitive conduct. For
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`example, YouPorn is informed and believes as follows:
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`(a)
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`The creation of the .XXX TLD is forcing owners of trademarks and
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`domain names in other TLDs to purchase from ICM expensive "defensive
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`registrations" (or the right to block or prevent the use by others) of those same
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`names in .XXX. Such defensive registrations are necessary to preclude others
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`from registering and using the owners' names in .XXX, and prevents the confusion
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`or dilution in value of those names that would otherwise result. For example,
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`YouPorn.com needs to block anyone else from establishing a website using the
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`confusingly similar name YouPorn.xxx. Otherwise, consumers seeking
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`YouPorn.com may instead reach YouPorn.xxx, causing YouPom.com to lose
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`business and harming its reputation.
`
`(b)
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`The significant costs and disadvantages of such defensive
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`registrations, and their detrimental effect on competition, outweigh any alleged
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`benefit of the .XXX TLD. Indeed, the .XXX TLD has been strenuously criticized
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`for extorting defensive registrations. For these and other reasons governmental
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`bodies, the adult entertainment industry, and other interested constituencies largely
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`opposed the formation of .XXX, which primarily serves to enrich ICM and its
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`affiliates.
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`(c)
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`In fact, ICM promoted .XXX in large measure first to create and then
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`exploit the need for just such defensive registrations. ICM has sold, during an
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`initial two-month pre-operation "Sunrise" period, almost 80,000 special .XXX
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`registrations at average fees to ICM of more than $150 per registration. These
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`registrations are apparently largely for defensive purposes. They do not include
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`hundreds of millions of additional dollars in annual fees that ICM has announced it
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`expects to earn from later defensive and also later "affirmative" .XXX
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`registrations. (Name holders "affirmatively" register names for use in operating an
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`3
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CART'VVRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 4 of 49 Page ID #:18
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`Silberberg &
`Knupp LLP
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`4268925.1
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`active .XXX website displaying new content, rather than for "defensively"
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`preventing someone else from exploiting the name in XXX.)
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`(d)
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`There is no reasonable substitute for defensive registration in .XXX.
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`For example, by blocking use of a domain name in a TLD other than .XXX, the
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`name holder does not prevent the harm suffered if a non-owner registers that name
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`in the XXX TLD. The .XXX TLD thus constitutes a separate antitrust market for
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`defensive registrations. Also, ICM is actively attempting to establish and
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`monopolize, and has a dangerous probability of establishing and monopolizing, an
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`additional separate market for affirmative registrations in TLDs with names that
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`uniquely connote (or that are otherwise predominately intended for) adult content.
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`For example , the letters ".XXX" connote adult content, as could other hypothetical
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`TLD names such as ".sex" or ".porn." However, .XXX is currently the only adult-
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`oriented TLD, giving ICM a present monopoly in such TLDs.
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`(e)
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`'CM initially attempted to coerce ICANN to approve the .XXX TLD
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`and to approve ICM's anti-competitive .XXX registry services. That coercion took
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`the form of misleading predatory conduct and aggressive litigation tactics,
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`described more fully below. Eventually, ICANN agreed to approve the .XXX
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`TLD, and to approve ICM as the XXX registry, not only in response to those
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`improper and coercive tactics but also because ICM promised to pay ICANN what
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`is expected to be millions of dollars in fees.
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`(f)
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`ICANN has a monopoly over the DNS and over the approval of TLDs
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`and their registries. There was no competitive process for the award of the .XXX
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`registry contract. ICANN awarded ICM that contract without soliciting or
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`accepting competing bids, and without any market considerations whatsoever, thus
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`awarding ICM monopoly control and free rein to impose anti-competitive prices
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`and practices within the distinct .XXX TLD. The .XXX registry contract itself
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`places no restrictions upon (and in fact enhances) ICM's abilities to exploit that
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`monopoly position to the disadvantage and harm of competition, consumers and
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`4
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 5 of 49 Page ID #:19
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`4268925.1
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`businesses. For example, the contract imposes no price restrictions of any kind on
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`ICM (despite such price restrictions in the contracts between ICANN and the
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`registries for other TLDs which host adult-content as well as other websites). It
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`also grants ICM a 10-year contract term which "shall" be perpetually renewed,
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`absent narrow exceptions, thus ensuring that ICM will continue to be forever
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`insulated from competition.
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`(g)
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`ICM has reacted to these circumstances with the anti-competitive
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`behavior expected of a monopolist. It has, for example, improperly exploited the
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`newly created market for .XXX defensive registrations by making such
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`registrations unreasonably expensive and difficult, and by placing onerous burdens
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`on parties seeking to protect their intellectual property rights. It has required that
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`registrants of names in .XXX waive legal rights and claims against ICM as a
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`condition of registering. It has reserved to itself some of the most popular or
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`desirable domain names, which it has sold at prices substantially above those in a
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`competitive market. Its Chairman Stuart Lawley has announced that he expects to
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`be able (and intends) to prevent the establishment of any other (potentially
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`competing) adult-content TLDs, including through a contractual promise by
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`ICANN not to approve such TLDs. Lawley has also announced that he projects
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`that ICM will earn annual profits of $200 million from operating the .XXX TLD —
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`profits to be earned by charging prices well above those in a competitive market.
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`Indeed, ICM is charging $60 annually for .XXX registrations, more than ten times
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`the annual registration charges in other relevant TLDs. As Lawley admitted in a
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`March 18, 2011 USA Today article in responding to complaints about such prices:
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`"This was always going to be a very lucrative arrangement."
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`(h) These activities have not only restrained trade among businesses by
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`making .XXX TLD services more expensive and of lower quality, but will
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`detrimentally affect consumers. For example, businesses forced to pay excessive
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`fees for .XXX defensive registrations will pass those expenses on to consumers,
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`5
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 6 of 49 Page ID #:20
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`4268925.1
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`either by charging consumers more or by offering consumers fewer or less costly
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`(and less appealing) services.
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`(i) Through their actions, ICANN and ICM have knowingly conspired to
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`eliminate competitive bidding and competition in the markets for certain .XXX
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`TLD registry services, with the intent to injure competition and consumers.
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`II. THE PARTIES
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`4.
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`Plaintiff Manwin Licensing International S.a.r.l. is and at all relevant
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`times was a business entity organized as a "Societe a responsabilite limitee" under
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`the laws of Luxembourg, and having its principal place of business in the City of
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`Luxembourg, Luxembourg. Manwin owns and licenses one of the largest
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`portfolios of premium adult-oriented website domain names and trademarks.
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`These include "YouPorn.com ," the domain name for the website which is the
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`world's most popular source for free adult-oriented streaming videos. Indeed,
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`YouPorn.com is consistently one of the top 100 most visited sites on the entire
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`Internet. Domain names and trademarks owned by Manwin also include
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`Pornhub.com, xTube.com, Brazzers.com , and numerous other of the world's most
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`popular adult entertainment websites. In addition, under license from Playboy
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`Enterprises, Inc., Manwin operates and manages all "Playboy" online content and
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`runs Playboy Television worldwide, using the "Playboy Premium Entertainment"
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`label. This Complaint refers to Manwin as "YouPorn."
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`5.
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`Plaintiff Digital Playground, Inc. ("Digital Playground") is and at all
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`relevant times was a corporation organized and existing under the laws of
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`California, and having its principal place of business in Van Nuys, California,
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`within the Central District of California. Digital Playground is a world leader in
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`adult-oriented filmmaking and interactive formats, boasting one of the world's
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`largest high definition libraries of original adult content. Digital Playground
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`6
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 7 of 49 Page ID #:21
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`Silberberg &
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`4268925.1
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`operates and makes this content available through its websites, including
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`digitalplayground.com .
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`6.
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`Defendant ICANN is a:California non-profit public benefit
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`corporation, with its principal place of business in Marina Del Rey, California,
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`within the Central District of California. ICANN was created in 1998, in response
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`to a policy directive of the United States Department of Commerce, to administer
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`the Domain Name System. ICANN is charged by the Department of Commerce
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`with, among other things, selecting and entering into agreements with TLD registry
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`operators.
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`7.
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`Defendant ICM Registry, LLC ("ICM") is a Delaware limited liability
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`corporation, with its principal place of business in Palm Beach Gardens, Florida,
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`and doing business in the Central District of California. ICM currently acts under
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`contract with ICANN as the registry for the .XXX TLD.
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`8.
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`Plaintiffs are unaware of the true names or capacities of the
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`Defendants sued under the fictitious names DOES 1 through 10, inclusive.
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`Plaintiffs are informed and believe that DOES 1 through 10, and each of them,
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`either participated in performing the acts averred in this Complaint or were acting
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`as the agent, principal, alter ego, employee, or representative of those who
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`participated in the acts averred in this Complaint. Accordingly, Defendants
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`DOES 1 through 10 are each liable for all of the acts averred in this Complaint.
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`Plaintiffs will amend this Complaint to state the true names of Defendants DOES 1
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`through 10 when their identity is discovered.
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`III. JURISDICTION AND VENUE
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`9.
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`This is a case asserting claims under the Sherman Act, 15 U.S.C. §§ 1
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`and 2, et seq. This Court thus has subject matter jurisdiction pursuant to 28 U.S.C.
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`§ 1331 because this is a case arising "arising under ... laws of the United States."
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`7
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 8 of 49 Page ID #:22
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`10.
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`This Court also has supplemental jurisdiction pursuant to 28 U.S.C.
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`§ 1367 over Plaintiffs' claims that arise under the laws of the State of California.
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`11. Defendant ICANN is subject to personal jurisdiction in the State of
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`California, including because it is a public benefit corporation organized under the
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`laws of the State of California, because it has its principal place of business in
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`Marina del Rey, California, and because its acts and omissions and the events
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`which are the subject of this Complaint took place in substantial part and caused
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`impacts in the State of California.
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`12. Defendant ICM is subject to personal jurisdiction in the State of
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`California, including because its acts and omissions and the events which are the
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`subject of this Complaint took place in substantial part and caused impacts in the
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`State of California.
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`13. Venue is proper in this judicial district pursuant to 28 U.S.C.
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`§ 1391(b) and 15 U.S.C. § 22 in that: (a) Defendants may be found and transact
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`business in this judicial district and are subject to personal jurisdiction in this
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`judicial district; and (b) a substantial part of the acts, omissions and events giving
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`rise to the claims asserted in this complaint occurred in this judicial district.
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`IV. FACTUAL BACKGROUND
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`A.
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`The DNS System
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`14. The Internet is an international network of interconnected servers and
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`4268925.1
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`15. The World Wide Web is a collection of files, or "websites," hosted on
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`computers and servers and made available to consumers via the Internet,
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`containing text, graphics, audio, and video.
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`16. Consumers typically access the World Wide Web using a software
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`application known as a browser (e.g., Microsoft Internet Explorer, Google Chrome
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`or Apple Safari).
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`8
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 9 of 49 Page ID #:23
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`17. Each computer or host server connected to the Internet has a unique
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`identity, established by its Internet Protocol address ("IP address"). An IP address
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`consists of four numbers between 0 and 255, separated by periods (e.g.,
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`123.45.67.89). The unique IP address ensures that users are directed to the
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`computer or host server for the particular website they intend to visit.
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`18. Because the string of numbers contained in IP addresses is difficult to
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`remember, the Domain Name System ("DNS") was introduced to allow individual
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`users to identify a computer using an easier-to-remember alphanumeric "domain
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`name" such as "YouPorn.com ." The unique domain name is incorporated into a
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`Uniform Resource Locator ("URL"). Internet users connect to a website by typing
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`the URL into (or linking to the URL through) their browser. The DNS ensures that
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`each unique alphanumeric "domain name" and URL corresponds to a specific
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`numerical IP address.
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`19. When an Internet user enters a domain name and URL into a browser,
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`the URL is sent to a DNS server. The server looks up the IP address assigned to
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`16 .
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`that domain name. The browser then links to the server having that IP address and
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`4268925.1
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`which hosts the desired website.
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`B.
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`Top Level Domains
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`20. Within each domain name, the alphanumeric field to the far right is
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`the Top Level Domain ("TLD"). The field to the left of the period preceding the
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`TLD is the Second Level Domain ("SLD"). The field (if any) to the left of the
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`period preceding the SLD is the Third Level Domain, and so on. For example, in
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`the domain name "YouPorn.com ," the TLD is ".com," and the SLD is "YouPorn."
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`(That name has no Third Level Domain.) Accordingly, TLDs are the highest
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`subdivisions of Internet domain names.
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`21. Most TLDs with three or more characters are referred to as "generic"
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`TLDs ("gTLDs"). Common gTLDs include .com, .org, and .biz. gTLDs can
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`either be "sponsored" or "unsponsored." A sponsored TLD ("sTLD") is a
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`9
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

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`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 10 of 49 Page ID #:24
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`specialized TLD that has a sponsor, usually an organization representing by
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`consensus the narrower industry, interest group, or community most affected by or
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`interested in the particular TLD. The sponsor makes policy decisions for the
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`sTLD. An example of an sTLD is .museum, the sTLD sponsored by and for the
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`use of museums, museum associations and museum professionals.'
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`22. There are currently twenty-two gTLDs, fourteen of which are sTLDs.
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`23. A particular assigned organization is responsible for operating each
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`TLD. These operating responsibilities include overseeing the sale and allocation
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`of domain names in the TLD and maintaining a database directory or "zone file,"
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`also commonly known as a "registry," ensuring that each Second Level Domain
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`name within the TLD is assigned and "resolves" to a unique numerical IP Address.
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`The organization responsible for operating a particular TLD is referred to as a
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`"registry operator" or "registry." Registries in turn authorize separate companies
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`called "registrars" to directly sell the TLD domain names to the ultimate
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`businesses or consumers owning and using those names in the TLD. The ultimate
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`owners or users are called "registrants." Registrars like GoDaddy.com and
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`Network Solutions are approved by many TLDs to sell Second Level Domain
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`Names in those TLDs. Registrants buy domain names through such registrars
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`which then register those names with the TLD registry. Registrants pay fees to
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`registrars, which themselves then pay fees to the registries (usually on an annual or
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`other periodic basis), to register domain names within particular TLDs. The
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`registries for the TLDs in turn pay fees to ICANN, periodically (e.g. quarterly) on
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`a per-registration or per-renewal basis.
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`C.
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`ICANN's Internet Role
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`24. Before ICANN's formation in 1998, overall management of the
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`Domain Name System was carried out under contractual arrangements between the
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`27
`Mitchell 28
`Silberberg &
`Knupp LLP
`
`4268925.1
`
`1 See http://about.museum/background/
`
`10
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

`
`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 11 of 49 Page ID #:25
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`Silberberg &
`Knupp LLP
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`4268925.1
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`United States Government, which developed and initially controlled the Internet,
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`and other parties.
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`25.
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`In 1998, the U.S. Department of Commerce ("DOC") and ICANN
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`entered into the first of a series of agreements that assigned to ICANN overall
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`authority to manage the DNS. Under those agreements, ICANN's duties include
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`determining what new TLDs to approve, choosing registries for existing or newly
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`approved TLDs, and contracting with the registries to operate the TLDs. ICANN
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`also has some responsibility over the root server system. The root server system is
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`the physical system of related computers which store the authoritative master list
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`of all TLDs and which thus permit users of the Internet to reach the intended
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`websites and email addresses.
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`26. According to its Articles of Incorporation, ICANN was established
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`"for the benefit of the Internet industry as a whole." ICANN's Articles of
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`Incorporation state its purposes as follows: "the Corporation shall . . . pursue the
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`charitable and public purposes of lessening the burdens of government and
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`promoting the global public interest in the operational stability of the Internet by
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`(i) coordinating the assignment of Internet technical parameters as needed to
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`maintain universal connectivity on the Internet; (ii) performing and overseeing
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`functions related to the coordination of the Internet Protocol (IP') address space;
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`(iii) performing and overseeing functions related to the coordination of the Internet
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`domain name system (`DNS'), including the development of policies for
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`determining the circumstances under which new top-level domains are added to the
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`DNS root system; (iv) overseeing operation of the authoritative Internet DNS root
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`server system; and (v) engaging in any other related lawful activity in furtherance
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`of items (i) through (iv)."
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`27.
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`Pursuant to its Bylaws, ICANN receives input from several Advisory
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`Committees. One of those committees is the Governmental Advisory Committee
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`("GAC"). Membership in the GAC is open to all national governments. In
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`11
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

`
`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 12 of 49 Page ID #:26
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`addition, other multinational inter-governmental or economic organizations may
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`under certain circumstances participate in the GAC. ICANN's Bylaws provide
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`that "the advice of the Governmental Advisory Committee on public policy matters
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`shall be duly taken into account, both in the formulation and adoption of policies."
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`28.
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`In 2009, in one of its agreements with the DOC, ICANN reaffirmed
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`its commitments to the DOC that: "ICANN will ensure that as it contemplates
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`expanding the top-level domain space, the various issues that are involved
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`(including competition, consumer protection, security, stability and resiliency,
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`malicious abuse issues, sovereignty concerns, and rights protection) will be
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`adequately addressed prior to implementation." In other bylaws and agreements
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`with the DOC, ICANN also confirms that its activities in approving TLDs and
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`registries will appropriately consider the need for market competition and the
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`protection of rights in names and other intellectual property.
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`29.
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`In order to fulfill its commitments under its agreements with the DOC
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`and to comply with its Articles of Incorporation and Bylaws, the ICANN Board in
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`2006 instructed ICANN to conduct economic studies regarding TLD competition
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`issues. These issues included the question whether individual TLDs compete with
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`one another or function as self-contained markets. The U.S. Department of Justice
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`reiterated the need for such studies in 2008.
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`20 (cid:9)D. History Of The .XXX TLD
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`21 (cid:9) 1. (cid:9)ICM Fails To Obtain .XXX Approval In 2000.
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`22 (cid:9)30. In about 2000, ICM first applied to ICANN for approval of a new
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`23 .XXX TLD, intended primarily for adult content. ICANN rejected the application,
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`24 finding among other things that "ICM Registry's application for an .xxx TLD does
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`25 not appear to meet unmet needs. Adult content is readily available on the
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`26 Internet." ICANN also "not[ed] the opposition of at least some segments of the
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`27 adult online content industry to a .xxx TLD." That opposition was based in part on
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`28 concerns that a .XXX TLD could lead to "ghettoization" of adult content solely
`
`Mitchell
`Silberberg &
`Knupp LLP (cid:9)
`
`4268925.1
`
`12
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

`
`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 13 of 49 Page ID #:27
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`within a single TLD, and thus to enhanced risks that such materials could be easily
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`and improperly censored.
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`2. (cid:9)ICM Fails to Obtain .XXX Approval In 2004.
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`31.
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`In 2004, ICM applied again to have ICANN approve the .XXX TLD,
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`this time as a sponsored TLD. Under its rules, ICANN would not approve
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`sponsored TLDs unless they "address[ed] the needs and interests of a clearly
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`defined industry (the Sponsored TLD Community), which can benefit from the
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`establishment of a TLD operating in a policy formulation environment in which
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`the community would participate." The ICANN rules also required that the
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`"Sponsored TLD Community" be "precisely defined"; that the Community have
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`"differentiated" needs that would benefit from a separate sTLD; that the sTLD
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`applicant propose a "sponsoring organization" that would produce sTLD polices
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`benefitting and that would represent the Sponsored Community; and that the
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`proposed sTLD enjoy "broad-based support" from the Sponsored Community.
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`32. As part of its application, ICM proposed the International Foundation
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`for Online Responsibility ("IFFOR") as the required sponsoring organization for
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`the .XXX TLD. IFFOR supposedly was an independent organization representing
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`the "responsible" adult entertainment community. However, Plaintiffs are
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`informed and believe that ICM and its Chairman Stuart Lawley in fact created
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`IFFOR for the sole purpose of the .XXX TLD application, and that they dominated
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`and manipulated IFFOR as expedient for the attempted approval of the .XXX
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`TLD. Plaintiffs are informed and believe that IFFOR does not represent the
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`responsible (or any significant) adult entertainment community.
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`33. On or about August 27, 2004, ICANN rejected ICM's 2004
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`application for a .XXX TLD in part because ICM had failed to demonstrate a
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`defined sponsorship community which broadly supported and would benefit from
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`.XXX.
`
`27
`Mitchell 28
`Silberberg &
`Knupp LLP
`
`4268925.1
`
`13
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRIAL
`
`

`
`Case 2:11-cv-09514-PSG-JCG Document 1 Filed 11/16/11 Page 14 of 49 Page ID #:28
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`3. (cid:9)ICM's. Misleading And Predatory Campaign To Obtain
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`.XXX Approval.
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`34.
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`Plaintiffs state the averments in paragraphs 35-45 below on
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`information and belief.
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`35.
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`Leading to and after the rejection of its 2004 application, ICM
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`embarked on a predatory campaign of misrepresentations and other misconduct in
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`an effort to persuade ICANN that ICM and the .XXX TLD met the sponsorship
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`criteria. More specifically:
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`(a) Anticipating ultimate ICANN approval of its proposed .XXX TLD,
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`ICM permitted members of the adult entertainment industry to preregister in .XXX
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`names that such members already used for other websites. Members desired such
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`pre-registration in order to prevent their names from being misappropriated by
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`others in the .XXX TLD. While desiring to thus protect their names, many such
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`members also opposed .XXX, and ICM promised them that it would not "count"
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`their registrations as support for the .XXX proposal. Despite that promise, ICM
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`represented to ICANN that the pre-registrants supported .XXX.
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`(b). ICM continued to claim support from several major adult
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`entertainment industry companies, when in fact those companies subsequently
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`opposed the .XXX application or took neutral positions.
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`(c)
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`ICM attempted to obtain support for .XXX from the Free Speech
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`Coalition ("FSC"), an adult entertainment industry umbrella group, by offering
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`various inducements, including cash and Board memberships on IFFOR, and by
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`attempting to "stack" FSC meetings with supporters.
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`(d)
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`ICM generated fake comments in support of its application by posting
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`a link that purported to lead to additional information about the .XXX proposal, but
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`which in fact automatically generated emails to ICANN supporting IOM's .XXX
`
`27
`Mitchell 28
`S ilberberg &
`Knupp LLP
`
`4268925.1
`
`application.
`
`14
`COMPLAINT FOR VIOLATIONS OF THE SHERMAN ANTITRUST ACT, THE CARTWRIGHT ACT,
`AND UNFAIR COMPETITION; DEMAND FOR JURY TRI

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