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Case Title

Manwin Licensing International S a r l et al v. ICM Registry LLC et al

Docket Number

2:11-cv-09514

Court

California Central District Court

Document Title

No. 40 MINUTES: (In Chambers) Order GRANTING in Part and ...

Date Filed

08/14/2012
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Case 2:11-cv-09514-PSG-JCG Document 40 Filed 08/14/12 Page 1 of 17 Page ID #:814

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

Present:

The Honorable Philip S. Gutierrez, United States District Judge

Wendy K. Hernandez
Deputy Clerk

Not Present
Court Reporter

n/a
Tape No.

Attorneys Present for Plaintiff(s):

Attorneys Present for Defendant(s):

Proceedings:

Not Present
Not Present
(In Chambers) Order GRANTING in Part and DENYING in Part the
Motions to Dismiss

Before the Court are Defendants’ motions to dismiss. Dkts. # 29, 30. The Court finds the
matters appropriate for decision without oral argument. See Fed. R. Civ. P. 78(b); L.R. 7-15.
After considering the supporting and opposing papers, the Court GRANTS in part and DENIES
in part the motions to dismiss.

I.

Background

It is necessary to begin with a brief overview of the functioning of the internet in order to
understand the specific allegations in this case. The internet is an international network of
interconnected servers and computers. FAC ¶ 13.1 Each computer or host server connected to
the internet has a unique identity that is established by an Internet Protocol address (“IP
address”). FAC ¶ 16. An IP address consists of four numbers between 0 and 255 that are
separated by periods. Id. The IP address ensures that users are directed to the computer or host
server for the particular website that they intend to visit. Id. Because strings of numbers are
difficult to remember, the Domain Name System (“DNS”) was introduced to allow users to
identify a computer using alphanumeric domain names, such as “YouPorn.com.” FAC ¶ 17.
Within each domain name, the letters to the right of the last period indicate the Top Level

1 For purposes of these motions to dismiss, the Court accepts Plaintiff’s allegations as true. See
Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164
(1993).

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

Domain (“TLD”). Id. For example, in the domain name “YouPorn.com,” the TLD is “.com.”
Id.

Most TLDs with three or more characters are referred to as generic TLDs. FAC ¶ 19.
Generic TLDs can be sponsored or unsponsored. FAC ¶ 20. A sponsored, generic TLD is a
specialized TLD that has a sponsor, usually an entity representing a narrower group or industry.
Id. The sponsor makes policy decisions for the sponsored TLD. Id. For example, the sponsored
TLD “.museum” is operated for the benefit of museums, museum associations, and museum
professionals. Id. There are currently twenty-two generic TLDs, fourteen of which are
sponsored TLDs. FAC ¶ 21.

Each TLD is operated by an assigned organization, referred to as a registry operator or
registry. FAC ¶ 22. Operating responsibilities include overseeing the sale and allocation of
domain names in the TLD and maintaining a database directory. Id. Registries, in turn,
authorize separate companies called registrars to directly sell the TLD domain names to
businesses or consumers owning and using those names in the TLD. Id. Registries then collect
fees from registrars, usually on an annual basis. Id.

In 1998, the Internet Corporation for Assigned Names and Numbers (“ICANN”) was
created to operate the DNS. FAC ¶ 6. ICANN is a non-profit public benefit corporation. Id.
ICANN’s duties include determining what new TLDs to approve, choosing registries for existing
or newly approved TLDs, and contracting with the registries to operate the TLDs. FAC ¶ 25.
According to its Articles of Incorporation, ICANN was established “for the benefit of the
Internet industry as a whole.” FAC ¶ 27. In its founding documents, ICANN has further agreed
that it would appropriately consider the need for market competition and the protection of rights
in names and other intellectual property when approving TLDs and registries. FAC ¶ 29.
ICANN earns fees from approving new TLDs, new registry operators, and new registrars. FAC
¶ 32. ICANN also charges registries and registrars fixed annual fees as well as per-transaction
fees (e.g., registries and registrars pay ICANN a certain amount of money for every domain
name registered). Id.

In about 2000, Defendant ICM Registry, LLC (“ICM”) first applied to ICANN for
approval of a new .XXX TLD, intended primarily for adult content. FAC ¶ 34. ICANN rejected
the application, finding there was no unmet need for the .XXX TLD and that some segments of
the adult online content industry opposed establishing a .XXX TLD. Id. ICM applied for
approval of the .XXX TLD again in 2004. FAC ¶ 35. This time ICM applied as a sponsored

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

TLD. Id. ICM proposed an organization named the International Foundation for Online
Responsibility (“International Foundation”) as the sponsoring organization for the .XXX TLD.
FAC ¶ 36. ICM claimed that the International Foundation represented a significant portion of
the adult entertainment community. Id. However, the International Foundation was in fact
created by ICM for the sole purpose of attempting to gain approval for the .XXX TLD and the
International Foundation did not actually represent any significant portion of the adult
entertainment community. Id. ICANN once again rejected the application for a .XXX TLD.
FAC ¶ 37.

After the 2004 rejection, ICM embarked on a campaign to persuade ICANN to approve
the .XXX TLD. FAC ¶ 39. One facet of this campaign concerned entities that ICM allowed to
preregister for .XXX domain names. Id. These entities only registered in order to protect their
names from being misappropriated if the .XXX TLD came into existence. Id. ICM promised
these entities that it would not claim that these registrations showed support for the proposed
.XXX TLD. Id. However, ICM then misrepresented to ICANN that these preregistrations
showed support for the .XXX TLD. Id. In addition, ICM offered various inducements to other
organizations to support the .XXX TLD, generated fake comments online supposedly showing
support for the .XXX TLD, submitted misleadingly edited videos and photos from an adult
entertainment conference to falsely suggest there was limited opposition to the .XXX TLD, and
touted support from adult entertainment celebrities without disclosing that these celebrities were
employed by ICM or otherwise receiving benefits from ICM. Id.

As a result of ICM’s misleading campaign, in 2005 ICANN preliminarily authorized its
president and general counsel to begin negotiating with ICM to establish the .XXX TLD. FAC ¶
40. After this announcement, certain governmental organizations, including the United States
Department of Commerce and Department of State, voiced their opposition to the creation of a
.XXX TLD. FAC ¶ 41. In response, ICM made an intentionally overbroad and baseless
Freedom of Information Act request for documents regarding the .XXX TLD from these federal
agencies. FAC ¶ 42. ICM eventually filed a lawsuit over the Freedom of Information Act
request. Id. Despite the pressure from ICM, ICANN decided in 2006 to stop preliminary
negotiations and again reject the proposed .XXX TLD. FAC ¶ 43.

In 2008, ICM filed an Independent Review Proceeding, challenging ICANN’s rejection
of the .XXX TLD. FAC ¶ 44. The Independent Review Proceeding is a non-binding, quasi-
arbitral process established by ICANN to resolve disputes concerning ICANN’s activities. Id.
In the Independent Review Proceeding, ICM asserted that ICANN had approved the .XXX TLD

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

in 2005 and could not then reconsider that decision. Id. In the proceedings, ICM again made
false statements about the level of support for the .XXX TLD. FAC ¶ 45. A three member panel
presided over the proceeding. FAC ¶ 46. The panel did not judge whether ICM had advanced
misleading or fraudulent evidence of support for the .XXX TLD, nor did the panel consider
antitrust or other competition issues related to the .XXX TLD. Id.

In 2010, the majority of the panel, over a dissent, issued a non-binding decision that
ICANN had determined ICM met the sponsorship criteria for the .XXX TLD in 2005, and could
not thereafter properly reopen the issue. Id. ICANN then publicly mulled whether to accept the
majority decision of the panel or to reject it. FAC ¶ 47. ICM threatened to sue ICANN and its
board of members if ICANN did not adopt the panel’s decision. Id. ICANN then agreed to
approve the .XXX TLD and sign a registry contract for ICM to operate the .XXX TLD. FAC ¶
48.

The registry contract allegedly contains several anti-competitive and monopolistic
provisions. These include a lack of price caps or restrictions of any kind on the prices ICM can
charge for .XXX registry services. FAC ¶ 56. This is in contrast to other registry contracts
executed by ICANN for other TLDs which contain express price caps. Id. Before the .XXX
registry contract was executed, ICM informed ICANN of the higher-than-market prices ICM
would be charging. Id. Rather than dispute the institution of the non-competitive prices,
ICANN agreed to profit from these prices. Id. Under the registry contract, ICANN receives an
enhanced fee from .XXX domain name registrations. Id. This fee is greater than fees charged
for most other TLDs. Id.

The registry contract lasts for a minimum of ten years and provides that it “shall” be
renewed subject to an obligation to negotiate certain terms in good faith. Id. This virtually
unlimited term of the contract will prevent any competitive bidding for renewal of the contract
and will thus insulate ICM from market restraints or any threat of competition in .XXX registry
services. Id. The contract also contains provisions which ICM itself proclaims will preclude
ICANN from approving any other TLDs designated for adult content, such as “.sex” or “.porn.”
Id.

In November 2011, Plaintiffs Manwin Licensing International S.A.R.L. (“Manwin”) and
Digital Playground, Inc. (“Digital Playground”) (collectively “Plaintiffs”) filed this action
against Defendants ICANN and ICM (collectively “Defendants”). Manwin owns and licenses
one of the largest portfolios of adult-oriented website domain names and trademarks in the

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

world. FAC ¶ 4. Digital Playground is a leader in adult-oriented film making and interactive
formats. FAC ¶ 5.

Plaintiffs assert five causes of action, alleging various violations of the Sherman Antitrust
Act, 15 U.S.C. §§ 1, 2 (“Section 1” and “Section 2” of the “Sherman Act”). FAC ¶¶ 93-139.
Plaintiffs assert three causes of action against both Defendants: a Section 1 claim for conspiracy
in restraint of trade; a Section 2 claim for conspiracy to monopolize; and a Section 2 claim for
conspiracy to attempt to monopolize. FAC ¶¶ 93-121. Plaintiffs also assert two causes of action
solely against ICM: a Section 2 claim for monopolization; and a Section 2 claim for attempted
monopolization. FAC ¶¶ 122-139.

Defendants move to dismiss the First Amended Complaint under Federal Rule of Civil
Procedure 12(b)(6). Dkts. # 29, 30.

II.

Legal Standard

a.

Rule 12(b)(6)

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a defendant may move to
dismiss a cause of action if the plaintiff fails to state a claim upon which relief can be granted.
See Fed. R. Civ. P. 12(b)(6). In evaluating the sufficiency of a complaint under Rule 12(b)(6),
courts should be mindful that the Federal Rules of Civil Procedure generally require only that
the complaint contain “a short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required
to survive a Rule 12(b)(6) motion to dismiss, a complaint that “offers ‘labels and conclusions’ or
‘a formulaic recitation of the elements of a cause of action will not do.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, (2007)). Rather,
the complaint must allege sufficient facts to support a plausible claim for relief. See id.

In evaluating a Rule 12(b)(6) motion, the court must engage in a two-step analysis. See
id. at 1950. First, the court must accept as true all non-conclusory, factual allegations made in
the complaint. See Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit,
507 U.S. 163, 164 (1993). Based upon these allegations, the court must draw all reasonable
inferences in favor of the plaintiff. See Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 943, 949
(9th Cir. 2009).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

Second, after accepting as true all non-conclusory allegations and drawing all reasonable
inferences in favor of the plaintiff, the court must determine whether the complaint alleges a
plausible claim for relief. See Iqbal, 556 U.S. at 679. Despite the liberal pleading standards of
Rule 8, conclusory allegations will not save a complaint from dismissal. See id.

b.

Elements of Sherman Act Claims

Section 1 of the Sherman Act provides: “Every contract, combination in the form of trust
or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with
foreign nations, is declared to be illegal.” 15 U.S.C. § 1. To establish a Section 1 claim, a
plaintiff must show (1) concerted action among two or more independent entities, (2) an
unlawful restraint of trade, and (3) antitrust injury. See Kendall v. Visa U.S.A., Inc., 518 F.3d
1042, 1047 (9th Cir. 2008).

Section 2 of the Sherman Act imposes liability on “[e]very person who shall monopolize,
or attempt to monopolize, or combine or conspire with any other person or persons, to
monopolize any part of the trade or commerce among the several States, or with foreign
nations.” 15 U.S.C. § 2. For a Section 2 monopolization claim, a plaintiff must establish (1)
possession of monopoly power by defendant in a relevant market, (2) predatory conduct, and (3)
causal antitrust injury. MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1130 (9th Cir.
2004). A conspiracy to monopolize claim requires (1) the existence of a combination or
conspiracy to monopolize, (2) an overt act in furtherance of the conspiracy, (3) the specific
intent to monopolize, and (4) causal antitrust injury. Paladin Assoc., Inc. v. Montana Power
Co., 328 F.3d 1145, 1158 (9th Cir. 2003). And an attempted monopolization claim requires (1)
specific intent to control prices or destroy competition, (2) predatory or anticompetitive conduct,
(3) a dangerous probability of success, and (4) causal antitrust injury. McGlinchy v. Shell Chem.
Co., 845 F.2d 802, 811 (9th Cir. 1988).

III.

Discussion

Defendants move on various grounds to dismiss the First Amended Complaint. ICM
requests dismissal of all five causes of action for failure to allege (1) an antitrust injury, (2) a
conspiracy between ICM and ICANN to restrain trade or monopolize a relevant market, and (3)
anticompetitive or exclusionary conduct by ICM. For its part, ICANN argues for dismissal
because (4) ICANN does not engage in trade or commerce, (5) ICANN acted unilaterally and

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

did not conspire with ICM, (6) Plaintiffs fail to identify relevant markets, and (7) the Third
Cause of Action for conspiracy to attempt to monopolize does not exist under the Sherman Act.

The Court will address these seven arguments for dismissal in turn. Ultimately, the Court
finds, with two exceptions, that the First Amended Complaint adequately pleads antitrust claims.
The first exception is the Third Cause of Action for “conspiracy to attempt to monopolize,”
which is not a recognized cause of action. Second, the Court finds insufficient the allegations of
a relevant market for affirmative registrations of names within TLDs connoting or intended
exclusively or predominately for adult content. The insufficiency of this market requires the
dismissal of the Third and Fifth Causes of Action.

a.

ICANN’s Involvement in Trade or Commerce

By its terms, the Sherman Act applies to monopolies or restraints of “trade or commerce.”
15 U.S.C. §§ 1, 2. The identity of a defendant as a nonprofit or charitable organization does not
immunize that organization from antitrust liability. NCAA v. Bd. of Regents of Univ. of Okla.,
468 U.S. 85, 101 n.22 (1984) (“There is no doubt that the sweeping language of § 1 [of the
Sherman Act] applies to nonprofit entities.”). To the contrary, nonprofit organizations that act in
trade or commerce may be subject to the Sherman Act. Big Bear Lodging Ass’n v. Snow
Summit, Inc., 182 F.3d 1096, 1103 n.5 (9th Cir. 1999) (“A nonprofit organization that engages in
commercial activity . . . is subject to federal antitrust laws.”). Rather than focusing on the legal
character of an organization, an antitrust inquiry focuses on whether the transactions at issue are
commercial in nature. Virginia Vermiculite, Ltd. v. W.R. Grace & Co. – Conn., 156 F.3d 535,
541 (4th Cir. 1998) (“We emphasize that the dispositive inquiry is whether the transaction is
commercial, not whether the entity engaging in the transaction is commercial.”). “Courts
classify a transaction as commercial or noncommercial based on the nature of the conduct in
light of the totality of surrounding circumstances.” United States v. Brown Univ. in Providence
in State of R.I., 5 F.3d 658, 666 (3rd Cir. 1993). In any circumstance, “[t]he exchange of money
for services . . . is a quintessential commercial transaction.” Id.

The Court finds the transactions between ICANN and ICM described in the First
Amended Complaint are commercial transactions. ICANN established the .XXX TLD. FAC ¶
49. ICANN granted ICM the sole authority to operate the .XXX TLD. FAC ¶ 48. In return,
ICM agreed to pay ICANN money. FAC ¶ 53. This is “quintessential” commercial activity and
it falls within the broad scope of the Sherman Act. Even aside from collecting fees from ICM
under the contract, ICANN’s activities would subject it to the antitrust laws. In Goldfarb v. Va.

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

State Bar, the Supreme Court concluded that an attorney bar association was not exempt from
the Sherman Act even where the bar association made no pecuniary gain from its alleged
conduct. 421 U.S. 773, 788 (1975). The bar association could be liable because it played “an
important part” in commerce and its anticompetitive activities could exert a restraint in
commerce. Id. As in Goldfarb, ICANN’s activities play an important role in the commerce of
the internet and ICANN’s actions could exert a restraint on that commerce.2

In arguing it is not subject to antitrust laws in this matter, ICANN leans heavily on the
Ninth Circuit’s decision in Dedication & Everlasting Love to Animals v. Humane Soc’y of the
United States, Inc., 50 F.3d 710 (9th Cir. 1995) (“DELTA”). In DELTA, the Ninth Circuit held
“[f]idelity to the language of the statute and its interpretation by the Supreme Court forbids
extension of the Sherman Act to charitable fundraising never envisaged as trade by the common
law.” Id. at 713. Thus, the activity of the Humane Society in soliciting donations was not trade
or commerce under the Sherman Act. Id. at 714. ICANN’s reliance on DELTA fails because the
activities of ICANN set forth in the First Amended Complaint are not solicitations of donations.
Instead, ICM is contractually obligated to pay ICANN fees for each registration of a .XXX
domain name. FAC ¶ 53. Neither DELTA, nor any other case cited by ICANN, stands for the
proposition that the payment of contractually agreed upon fees is not commercial activity within
the Sherman Act.

2 A case that will be frequently discussed in this order, Coal. for ICANN Transparency, Inc. v.
VeriSign, Inc., 611 F.3d 495 (9th Cir. 2010), is also instructive on this point. VeriSign did not
require the Ninth Circuit to decide whether ICANN’s activities were commercial, because
ICANN was not a defendant in the action when it came before the Ninth Circuit. However, in
analyzing whether the plaintiff had stated a conspiracy to restrain trade, the Ninth Circuit
described ICANN’s half of the conspiracy thus: “Beyond ICANN’s decision not to use
competitive bidding to reach the .com agreement, [plaintiff] has also alleged that ICANN was
economically motivated to conspire with VeriSign because VeriSign agreed to share its
monopoly profits with ICANN and to cease its predatory behavior, which had put ICANN in
financial jeopardy.” Id. at 503. Insofar as ICANN was the other half of the alleged conspiracy
in VeriSign – a conspiracy that closely parallels the conspiracy alleged in the present matter –
there is little doubt ICANN could have been liable for the allegations in VeriSign. See also
Virginia Vermiculite, 156 F.3d at 541 (describing how even labor unions exempt from the
Sherman Act may be liable for anticompetitive conspiring with non-exempt parties).

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

ICANN also spends much time recounting its charitable purpose and arguing that it only
collects fees to carry out this charitable purpose. ICANN Mot. 13:18-18:8. However, these
arguments are irrelevant to an analysis of whether ICANN’s activities are commercial. See
Virginia Vermiculite, 156 F.3d at 541 (holding it was “not necessary” that the nonprofit
defendant “have shared [its co-conspirator’s] alleged anticompetitive motive in entering into a
proscribed restraint,” but rather, it was sufficient that the nonprofit defendant, “regardless of its
own motive, merely acquiesced in the restraint with the knowledge that it would have
anticompetitive effects”); Am. Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel Corp., 456 U.S. 556,
573-74 (1982) (holding that whether a nonprofit’s agents acted to benefit the nonprofit was
irrelevant to antitrust liability because the “anticompetitive practices of [the nonprofit’s] agents
are repugnant to the antitrust laws even if the agents act without any intent to aid [the
nonprofit]”).

Accordingly, ICANN may be held liable under the Sherman Act for the actions alleged in
the First Amended Complaint.

b.

Relevant Markets

An antitrust plaintiff must “identify the markets affected by [a defendant’s] alleged
antitrust violations.” Big Bear Lodging Ass’n v. Snow Summit Inc., 182 F.3d 1096, 1104 (9th
Cir. 1999). The plaintiff must allege “both that a ‘relevant market’ exists and that the defendant
has power within that market.” Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044
(9th Cir. 2008). A relevant market “can be broadly characterized in terms of the cross-elasticity
of demand for or reasonable interchangeability of a given set of products or services.” Coal. for
ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 507 (9th Cir. 2010) (quotation marks
omitted). A relevant market must “encompass the product at issue as well as all economic
substitutes for the product.” Newcal, 513 F.3d at 1045 (9th Cir. 2008). The validity of a
relevant market is subject to factual inquiry and proof, but a court may dismiss allegations of a
relevant market if the definition is “facially unsustainable.” Id.

Plaintiffs allege two different relevant markets.

1.

Defensive Registration Market

The first market is for blocking services and defensive registrations in the .XXX TLD.
FAC ¶ 60. Plaintiffs allege owners of trademarks, owners of domain names in other TLDs, and

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CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

owners of other name rights purchase domain names in the .XXX TLD for “defensive or
blocking purposes.” Id. In other words, these owners seek to prevent others from using their
names in the .XXX TLD. Id. These owners may wish to protect their names from loss of
goodwill, prevent consumer confusion, or prevent association with adult entertainment. FAC ¶¶
60, 62. There is no reasonable substitute for these defensive registration services, because the
only way to block a name in the .XXX TLD is to register a name in the .XXX TLD. FAC ¶ 61.

ICANN argues this is not an appropriately defined market. ICANN Mot. 22:1-23:12.
ICANN contends the market fails because there is no market for all .XXX defensive
registrations. Rather, each .XXX domain name would be its own individual market. Each name
owner would only be seeking to purchase the rights to block that individual name from being
used as a .XXX website name. In support of this argument, ICANN primarily relies on two, out-
of-circuit, district court cases. See Weber v. Nat’l Football League, 112 F. Supp. 2d 667 (N.D.
Ohio 2000); Smith v. Network Solutions, Inc., 135 F. Supp. 2d 1159 (N.D. Ala. 2001).

The Court finds this argument is foreclosed by VeriSign. In VeriSign, the plaintiff alleged
a market of “expiring domain names.” VeriSign, 611 F.3d at 501. “Expiring domain names are
names that have fallen back, or are about to fall back into the registry database as a result of non-
renewal by their current owners.” Id. The defendant argued this market was insufficient
because each expiring domain name would be its own market, and there was no such thing as a
market for all expiring domain names. Id. at 507. In evaluating this argument, the Ninth Circuit
considered the same out-of-circuit, district court cases raised by ICANN. Id. at 508. The Ninth
Circuit rejected these cases. Id. The Ninth Circuit held the plaintiff had properly alleged a
market of all expiring domain names, not just those a particular consumer would like to acquire.
Id. Similarly, here Plaintiffs allege a market of all defensive registrations in the .XXX TLD, not
just individual registrations. FAC ¶ 60.

Accordingly, Plaintiffs have adequately pled a relevant market for defensive registrations.

2.

Affirmative Registration Market

The second market described by Plaintiffs is for affirmative registrations of names within
TLDs connoting or intended exclusively or predominately for adult content. FAC ¶ 66. “There
is a serious danger that ICM will establish and monopolize such a distinct market because of the
unique association of the ‘XXX’ name with adult content and the resulting self-reinforcing

CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 10 of 17



Case 2:11-cv-09514-PSG-JCG Document 40 Filed 08/14/12 Page 11 of 17 Page ID #:824

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Link to docs # 29 & 30

CIVIL MINUTES - GENERAL

Case No.
Title

Date August 14, 2012
CV 11-9514 PSG (JCGx)
Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al.

pattern that will arise from that association with adult content.” Id. Plaintiffs posit that through
“network effects” the .XXX TLD could attract more and more providers of adult content and
consumers of adult content, until a point is reached when .XXX is the exclusive purveyor of
adult content on the internet.3 Id. Plaintiffs also allege that the registry agreement between ICM
and ICANN has provisions making it unlikely that any other TLD connoting adult content will
be approved. FAC ¶ 68. In addition, ICANN has allegedly adopted new rules and procedures
that will effectively block new entrants into this market by allowing governmental objectors to
veto any new adult-oriented TLDs. FAC ¶ 70. Lastly, Plaintiffs assert that Congress has
previously considered, and may consider again, legislation that would force all adult content on
the internet into the .XXX TLD. FAC ¶ 68.

The Court finds Plaintiffs have failed to adequately plead the affirmative registration
market. Plaintiffs have not alleged why other currently operating TLDs are not reasonable
substitutes to the .XXX TLD for hosting adult entertainment websites. To the contrary,
Plaintiffs allege that Manwin’s own website YouPorn.com is the most popular free adult video
website on the internet. FAC ¶ 1. It thus appears from the face of the First Amended Complaint
that an adult content website registered in the .com TLD is an adequate economic substitute for
an adult content website registered in the .XXX TLD. Thus, because the relevant market also
includes .com domain names, Plaintiffs have not only failed to include all substitute products in
their relevant market, but they have failed to allege that Defendants have or will have market
power in this greater market. See Newcal, 513 F.3d at 1044-45 (the relevant market must
include all substitute products and defendant must have market power in the relevant market).

In opposition, Plaintiffs argue that although there may be current substitutes to the .XXX
TLD, there may not be such substitutes in the future because of legislation or network effects.
Plts. ICANN Opp. 19:10-24:5. However, Plaintiffs point to no authority for the proposition that
they may adequately allege a market that does not include substitute products that presently
exist, merely because Plaintiffs allege those substitute products may disappear in the future.
Indeed, this proposition would entirely negate the requirement that an antitrust plaintiff describe

3 In more detail, Plaintiffs argue: “Viewers looking for adult content will gravitate toward the
.XXX because the letters uniqu

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