1
1 UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
2 ------------------------------x
3 PGMEDIA, INC.,
d/b/a NAME.SPACE,
4
Plaintiff,
5
v. 97 Civ. 1946 (RPP)
6
NETWORK SOLUTIONS, INC. and
7 NATIONAL SCIENCE FOUNDATION,
8 Defendants.
9 ------------------------------x
10 July 20, 1998
4:15 p.m.
11
Before:
12
HON. ROBERT P. PATTERSON, JR.,
13
District Judge
14
APPEARANCES
15
BLUMENFELD & COHEN
16 Attorneys for Plaintiff
GLENN B. MANISHIN
17 GARY COHEN
18 SULLIVAN & CROMWELL
Attorneys for Defendant Network Solutions, Inc.
19 WILLIAM M. DALLAS, JR.
20 HANSON AND MOLLOY
Attorneys for Defendant Network Solutions, Inc.
21 PHILIP L. SBARBARO
22 MARY JO WHITE
United States Attorney for the
23 Southern District of New York
STEVEN M. HABER
24 MARLA ALHADEFF
Assistant United States Attorneys
25
2
1 THE COURT: Please be seated.
2 Just give me a second.
3 (Pause)
4 THE COURT: Mr. Manishin, you are going to do the
5 arguing?
6 MR. MANISHIN: Yes, your Honor, I will be arguing
7 for the plaintiff.
8 THE COURT: Mr. Dallas, you are going to make the
9 argument, too?
10 MR. DALLAS: For Network Solutions, your Honor,
11 yes.
12 THE COURT: Mr. Haber, you are going to do the
13 argument --
14 MR. HABER: For NSF, your Honor.
15 THE COURT: All right, and I am somewhat set.
16 MR. MANISHIN: Take your time, your Honor.
17 (Pause)
18 THE COURT: All right.
19 MR. MANISHIN: Good afternoon. Glenn Manishin
20 for plaintiff, pgMedia. I am accompanied today by my
21 partner, Gary Cohen. Mr. Leffell, from Paul, Weiss, could
22 not be here today.
23 Your Honor, we are here today on plaintiff's
24 motion for partial summary judgment on Count Six of the
25 Second Amended Complaint.
3
1 As your Honor may recall, the present proceedings
2 began with a filing by plaintiff in May for a motion for a
3 preliminary injunction. At the status conference before the
4 Court on May 27, all the parties agreed and your Honor
5 subsequently signed an order June 1 deeming that motion to
6 be a motion for partial summary judgment on three
7 potentially dispositive issues:
8 First, whether NSF has the statutory or other
9 authority to order defendant NSI to make no changes to the
10 so-called Internet Root Zone Server, which I will describe
11 in further detail in a moment;
12 Second, whether that directive, if authorized,
13 provides any antitrust immunity for NSI from the scope of
14 Section 2 of the Sherman Act; and
15 Third, if so, whether defendant NSF, as the
16 government, by precluding the addition of new top-level
17 domains to the Internet, engaged in a prior restraint of
18 speech. So there are two basic claims before you, antitrust
19 and the First Amendment.
20 The Court need not, however, reach the First
21 Amendment claim if you find, as plaintiff alleges, that
22 defendant NSF doesn't have the authority that it claims to
23 control the Internet's Domain Name System, because that
24 control, that statutory and contract control, is a predicate
25 to defendant NSI's assertion that they are immune from the
4
1 antitrust laws under what they term the Federal
2 Instrumentality Doctrine.
3 I will start, with the Court's indulgence, with a
4 very brief overview of the case and then turn to the issues.
5 This case is really not technically complex
6 except for the extraordinary amount of acronyms that are
7 necessary to describe the Internet.
8 Pursuant to a contract between the government --
9 National Science Foundation -- and defendant NSI -- Network
10 Solutions -- NSI controls all registration of domain names
11 in the top-level domain, ".com." Those are the three
12 letters to the right of the dot in an Internet address.
13 Under that contract, NSI also has exclusive rights to
14 register all domain names in .net and .org. No one is
15 permitted to compete with them.
16 As a result of inheriting those functions when it
17 took over from the government, NSI also controls what is
18 known as the Internet's Root Server. That is R-O-O-T, as in
19 roots of a plant. The Root Server is described in great
20 detail in the affidavits of Paul Garrin, for the plaintiff,
21 and Messrs. Strawn and Graves, respectively, for defendants.
22 But, essentially, the root server, very simply, allows all
23 Internet users to communicate. It permits the resolvability
24 of domain names. It permits the matching of a domain name
25 and an Internet protocol number, or address, assigned to a
5
1 computer. So, without access to this Root Zone Server,
2 which is a computer operated in Virginia by defendant
3 Network Solutions, any competitor who wants to offer
4 different top level domains -- .web, .arts, .law, dot
5 whatever -- can't get that business because its customers
6 will not be able to be seen or communicated with by other
7 people on the Internet.
8 This case started in March 1997, when pgMedia,
9 one of the first potential competitors in that market, the
10 domain name registration for new top-level domains, or TLDs,
11 of NSI to list its TLDs in the Root Server, when NSI said
12 no, the lawsuit was filed, based upon the All Essential
13 Facilities Doctrine. It has been around in the antitrust
14 laws since 1920.
15 After the case was filed, Defendant NSF asserted
16 itself saying that it controlled access to this root server,
17 and it did it in a letter dated June 25, 1997, which appears
18 as Exhibit 13 to my declaration in support of the
19 preliminary injunction motion. It is a letter that
20 instructed NSF -- and I will quote the operative part, that
21 "NSI take no action to create additional TLDs or to add any
22 other new" --
23 THE COURT: What is the designation on that
24 exhibit?
25 MR. MANISHIN: It is Manishin Exhibit 13. So, it
6
1 is the original exhibits filed with the preliminary
2 injunction motion near the end of the action.
3 "NSI take no action to create additional TLDs or
4 to add any other new TLDs to the Internet root zone file."
5 And there is additional verbiage there that basically
6 suggests that NSF will have "in consultation with other U.S.
7 government agencies" complete policy deliberations on the
8 issues.
9 That put this case essentially into limbo, and in
10 hearings before your Court last summer, my predecessor,
11 Mr. Donovan, as counsel for plaintiff, agreed to add
12 defendant NSF as a defendant in order to litigate the legal
13 validity of that directive. Essentially, the question
14 before you on antitrust is, is there statutory or
15 contractual authority for NSF to assert that control over
16 the addition of any new top-level domains on the Internet,
17 and, if so, does that provide antitrust immunity to Network
18 Solutions?
19 I want to make very clear at the outset that
20 pgMedia does not challenge the monopoly grant of .com and
21 the other monopolies over registrations to Network
22 Solutions. This is not a case where we're coming into the
23 court and saying that the Court should set aside the
24 contract called the Cooperative Agreement and substitute us
25 for Network Solutions.
7
1 We are challenging, rather, defendant's use of
2 its monopoly power to exclude plaintiff from competing for
3 other TLDs, of which plaintiff has developed about 500
4 ranging from, again, .law to .zone. We think that would
5 actually be a very positive development for the Internet.
6 As the papers set out, NSF's asserted control of
7 this essential facility, the Internet Root Zone Server, even
8 if true factually -- and we don't believe it is at all
9 proven by the summary judgment documents introduced by
10 defendant -- does not grant NSI any measure of antitrust
11 immunity.
12 It is inconsistent with the binding precedent in
13 this circuit by implied antitrust immunity defenses, which
14 are very difficult to find in the absence of a pervasive
15 regulatory scheme that is directly inconsistent with
16 antitrust laws. That does not exist in this case. And it's
17 also inconsistent with the limited lines of cases that the
18 defendants have articulated to you.
19 But I think the most serious part of this case,
20 as I conclude the introductory remarks, is an effort
21 particularly by the government to suggest to your Honor that
22 plaintiff is attempting to derail the government's efforts
23 to bring stability to the Internet. And I refer
24 specifically to the introduction to Defendant NSF's reply
25 memorandum where they said that our civil action here was
8
1 "An effort to derail the Policy Statement's carefully set up
2 process." I don't know if that is exactly right, but an
3 effort to derail is an exact quote.
4 THE COURT: They say you are trying to derogate
5 to yourselves, to pgMedia, its concepts as to how it ought
6 to be run or how the Internet ought to be run instead of
7 letting the government do it.
8 MR. MANISHIN: That is essentially correct, your
9 Honor. We believe that the normal laws attended to
10 commercial activities on the Internet should apply to the
11 Internet roots as much as they do anywhere else. The
12 government takes the position that they should have the
13 ability, because they have set up a policy process,
14 essentially to usurp this Court of its jurisdiction. And
15 that is not the case, and it can't be the case for two
16 simple reasons:
17 First, the government's actions in the Policy
18 Statement, which exists as an exhibit to Mr. Dallas'
19 affidavit, Exhibit 10 to the Dallas -- I'm sorry, it is
20 Exhibit 10 in the NSI group of exhibits. It just came out.
21 That document makes very clear that it is not a legally
22 binding document of any sort. I think I will just read that
23 to you, that it does not define or impose any substantive
24 regulatory regime for the domaining system. It is not a
25 substantive rule. It does not contain mandatory provisions
9
1 and does not itself have the force and effect of law.
2 So the government had a chance in the proceedings
3 before the Commerce Department, which postdated this case,
4 to take legal action and assert legal authority over the
5 Internet, contrary to what's claimed by plaintiff in this
6 case. They chose not to do so, and the government yet,
7 nonetheless, comes before this Court in a cross-motion
8 asking the Court to stay the antitrust action on the grounds
9 that we are attempting to end-run the policy process.
10 I respectfully submit that the opposite is the
11 case. The antitrust action was filed first. Only after
12 this antitrust action did the government commence
13 deliberation on what it should do on the Internet Root
14 Server, and they concluded that they would set no binding
15 rules, they would pass no laws, they would not promulgate
16 any regulations. They would only issue a general statement
17 of policy that doesn't have the force and effect of law.
18 I don't believe it is appropriate for this Court
19 to give the government through the back door the legal
20 authority that they refuse to assert directly, but I will
21 back that up, as I move into substance, by showing you why
22 in our view NSF doesn't have either the authority under the
23 cooperative agreement or the authority under its statutes to
24 assert this control over the Internet's root system.
25 Those two questions, the scope of their authority
10
1 and their immunity, are really the flip side of the same
2 point; that is, if they have the authority, then almost by
3 definition under defendant's view of the words, that
4 authority means there is antitrust immunity. Conversely, if
5 they don't have the authority, then it doesn't matter
6 whether they could grant antitrust immunity because they did
7 it.
8 If you look at the statutes governing NSF's role,
9 which are cited in all of the papers, those are the National
10 Science Foundation Act and the Federal Grant and Cooperative
11 Agreement Act, you will find that those statutes don't
12 provide any authorization for regulatory oversight or
13 control of the Internet, of any parts of the Internet
14 infrastructure, or of any private parties. What they
15 authorize is that defendant NSF can support and fund
16 research activities involving computers and computer
17 networks.
18 When you go beyond the statutes to see whether in
19 the Cooperative Agreement Contract between NSF and NSI there
20 is any authority for NSF to issue the directives, you find
21 that the Cooperative Agreement says very clearly that unless
22 NSF reserves specifically powers for itself, that all powers
23 to implement the program rest with the awardees, which is
24 Network Solutions. One can search in vain for any reference
25 in the Cooperative Agreement to any control or not for the
11
1 National Science Foundation over the Root Server System or
2 the creation or addition of new top-level domains.
3 In fact -- and this is set forth in the reply
4 memorandum that we filed on Thursday, and it is verified by
5 the affidavit of Mr. Strawn, for Defendant National Science
6 Foundation, the Cooperative Agreement cross-references
7 certain Internet standards known as RFCs, or Requests for
8 Comment. And those RFCs make clear that in deciding whether
9 or not new top-level domains, or TLDs, should be added to
10 the Internet, the Internet Registry, NSI was required to
11 "consult" with IANA -- IANA, another acronym. It stands for
12 the Internet Assigned Numbers Authority.
13 THE COURT: The what?
14 MR. MANISHIN: Internet Assigned Numbers
15 Authority.
16 I don't need to say too much about IANA except
17 two points: One, it is undisputed that IANA is not the
18 government. It is not a government agency, and it is not a
19 government-owned corporation.
20 Second, after this case was filed, Network
21 Solutions took the position that it did not have the power
22 to add new top-level domains to the Root Server but that
23 IANA had the power. In a letter which is part of the
24 exhibits attached to my declaration from April 1997 -- it
25 was quoted in all of our papers -- IANA said, we are aware
12
1 of no authority which provides IANA with any power over
2 Network Solutions. So IANA declined to exercise any
3 authority because it said it didn't have any.
4 What Defendant NSF really says is that because
5 IANA, the private entity based in California, refused to
6 consult with NSI, they sort of had to jump into the lurch,
7 take over the control of the issue because IANA refused to
8 do what its job was.
9 I don't see anything, and they haven't cited
10 anything in the Cooperative Agreement that gives them the
11 power to do that. And going back to my first point, the
12 Cooperative Agreement says unless there is a specific
13 reservation for the government, all powers remain with the
14 private party, Network Solutions. Hence, the conclusion is
15 that if there was any power to control NSI, it was private
16 power from this IANA group out of California, and, in
17 addition, that NSF's assertion of the ability to jump over
18 IANA to take over finds no support in the text of the
19 agreement.
20 The second point: Even if NSF has the power
21 under the Cooperative Agreement, they haven't actually
22 exercised that power. Meaning -- I read you the language
23 just before, your Honor, from the June 1997 Directive where
24 it said NSI shall create No additional TLDs, and I will note
25 for the record that the word "No" is capitalized in the
13
1 original there -- NSI has in fact created more than a dozen
2 new top-level domains since October of '97.
3 THE COURT: That was before the date of that
4 letter, wasn't it?
5 MR. MANISHIN: No, it is undisputed that they
6 have, in fact, created new top-level domains on the Internet
7 since June of 1997. That is not contested.
8 What is contested is only whether that letter,
9 which says no new TLDs, means what it says. In affidavits
10 filed by the defendants in opposition to summary judgment,
11 the Strawn Declaration and the Graves Declaration, both
12 defendants now take the position that "no new TLDs" only
13 means no new generic TLDs or gTLDs. It doesn't apply -- I
14 apologize for the increasing number of acronyms. It does
15 not apply to ccTLDs, or country code TLDs.
16 The basis --
17 THE COURT: You had better alert me as to the
18 distinction being made there.
19 MR. MANISHIN: Sure. I am not sure of how they
20 derive that distinction from the language of the letter
21 which I read to you before, which makes no distinction among
22 TLDs, which is my point, but a generic top-level domain is a
23 TLD that is not associated with a particular country. So,
24 for example, in the United Kingdom, many second-level domain
25 names, many domain names end with the TLD.UK. In Germany
14
1 they end with the TLD.DE. Every country in the world has
2 one of these top-level country code domains. There are also
3 domains that are not necessarily associated with any one
4 nation; those are .com, .net, .org and the new TLDs that
5 the plaintiffs would like to add to that.
6 THE COURT: What is the significance -- maybe I
7 don't pick it up correctly, but what is the significance of
8 adding the six TLDs if they are country TLDs?
9 MR. MANISHIN: The significance is very simple.
10 They are TLDs which they are told not to add them and they
11 added them anyway. So the Directive either does not mean
12 what it says or it has not been followed.
13 It also is important for another reason, Judge,
14 and that is if you look at the history of this case, I
15 explained to you before that the first response of
16 defendants was that IANA was in control of whether they
17 could add new TLDs to the root. Then it turned out that
18 IANA said no, and when they said no, the National Science
19 Foundation was in control, and they issued a directive that
20 said no new TLDs.
21 Then they said that NSF is only in control with
22 regard to some TLDs, because if you look at the Strawn
23 Declaration and the Graves Declaration, it says that NSF
24 controls generic TLDs, but IANA, the same group that
25 disclaimed authority in the beginning, is in control of
15
1 country code TLDs. So it is a shell game, to be perfectly
2 honest. Every time we look under a shell and ask who is in
3 control, it turns out to be somebody different.
4 THE COURT: But your company is only interested
5 in generic TLDs, isn't that correct?
6 MR. MANISHIN: That is right.
7 Again, the significance of the addition of
8 country code TLDs is only that the directive purports to say
9 no additional TLDs. That directive was not in fact
10 followed. The defendants are now trying to say it doesn't
11 mean what it says.
12 Let me turn to the effect of this.
13 Even if the Court concludes that there are
14 statutory authority for NSF to control the root of the
15 Internet and that that authority was exercised in the
16 Cooperative Agreement, the two points that I just covered,
17 that doesn't make a difference; it is completely irrelevant
18 to the question of antitrust immunity.
19 And that's there for a very simple reason.
20 Antitrust immunity is very hard to find. If it's expressed
21 in the statute and Congress has decided it, a party, a
22 transaction or an industry can be exempt from the antitrust
23 laws. But the Court has made clear, almost since the
24 Sherman Act was passed, that implied repeals of the
25 antitrust laws are disfavored and that implied immunity is
16
1 very difficult to obtain.
2 The defendant seizes upon what they say is the
3 public purpose of NSI's actions, the public purpose of the
4 Cooperative Agreement, and suggesting that for some reason
5 the Court should be more liberal in deciding questions of
6 antitrust immunity in this case. But that public purpose,
7 even if it exists, is also immaterial. Because the Federal
8 Grant Act, the statute under which NSF issued this contract,
9 allows such contracts, such cooperative agreements, when
10 they serve a public purpose. Yet, the Grant Act, admittedly
11 and concededly, contains no grant of antitrust-immunizing
12 authority. In other words, when an agency enters into a
13 cooperative agreement, they have no power to immunize the
14 other party from the antitrust laws.
15 In this circuit, the Strobl case is a successor
16 to Silver v. The New York Stock Exchange and Gordon v. The
17 New York Stock Exchange, two well-known Supreme Court cases.
18 Strobl says that implied antitrust immunity is only
19 available if, first, there is a pervasive regulatory scheme
20 and, second, there is a plain repugnancy, a direct
21 inconsistency between antitrust laws, on the one hand, and
22 the statute, on the other.
23 That does not apply in this case. The defendants
24 concede that NSF does not regulate the Internet and does not
25 regulate NSI. So what are they left with? They are left
17
1 with what they call the Federal Instrumentality Doctrine.
2 I have prepared an exhibit to help explain that.
3 I also did an eight-and-a-half-by-eleven form, which all
4 other counsel have seen. With the Court's indulgence, I
5 will bring it up to your law clerk right now.
6 THE COURT: Yes, you can hand it up.
7 MR. MANISHIN: The Federal Instrumentality
8 Doctrine is a derivation, as this chart shows, of the
9 antitrust immunity that the U.S. Government enjoys. Because
10 the U.S. Government is not a person under the antitrust
11 laws, and because there is sovereign immunity to the U.S.
12 Government, the government can't be sued for antitrust
13 violations.
14 If you take it down one level and ask about
15 federal instrumentalities, for example, the Sea-Land case
16 from the D.C. Circuit talked about wholly owned and operated
17 entities, the courts have said that because the government
18 is immune from an antitrust lawsuit, a federal
19 instrumentality controlled by the federal government is
20 equally immune. That would be a government corporation, a
21 government agency or the like.
22 The federal instrumentality case on which
23 defendants rely -- and there is approximately seven of them
24 that we have been able to find, and all of them are cited in
25 all of the papers -- relate to a contract between a federal
18
1 instrumentality and an exclusive contractor, a private party
2 which has been given some sort of monopoly franchise under a
3 contract.
4 For example, the IT&E case, which I have some
5 language from over there, involved the Guam Telephone
6 Authority, which was a corporation established by the
7 Territory of Guam. The federal instrumentality therefore
8 contracted for monopoly telephone service for the island.
9 Those cases hold very simply that if the federal
10 instrumentality enters into an agreement to trade an
11 exclusive franchise, that that contract does not equal an
12 unlawful conspiracy. That monopoly franchise, that contract
13 cannot be attacked as a violation of the antitrust laws.
14 Again, as I said at the beginning, we do not
15 challenge the .com monopoly. We don't challenge the
16 existence of that monopoly. We don't say it is illegal. We
17 don't say that the Cooperative Agreement, as the plaintiffs
18 did in the case in Washington called Thomas that defendants
19 rely on, we do not say that that contract is an unlawful
20 antitrust conspiracy. We challenge the use of that contract
21 to exclude plaintiffs from competing in the market for other
22 top-level domains.
23 That is the extension the defendants want this
24 Court to take from a contract between a federal
25 instrumentality and a third party, to the third party's
19
1 relationship -- the contractor's relationship with
2 competitors. And there are no cases which say that just
3 because a private party operates under contract to the
4 government it is free to do anything it wants, however
5 exclusionary, granted competitive, in competition with a
6 private party.
7 So we think that the Federal Instrumentality
8 Doctrine actually stands for a very unremarkable
9 proposition, that if you contract with the government for an
10 exclusive franchise, assuming that the government has the
11 authority to enter into the contract, the contract is valid
12 and no one can come up and say that that contract somehow is
13 an illegal conspiracy to monopolize that market.
14 But it doesn't say that if you, as the
15 contractee, have a contract you can do whatever you want
16 against any of your competitors and abuse your monopoly
17 power. From that perspective, it is very consistent with
18 antitrust laws that existed for 15 years at the very least,
19 50 years at the most, since Terminal Railroad and the AT&T
20 case, meaning, if you will, a lawful monopoly, however it is
21 acquired, the maintenance or use of your monopoly power to
22 exclude rivals is illegal.
23 So the offensive monopolization includes not only
24 obtaining the monopoly but also using it to preserve it or
25 extend it, which is what we challenge here.
20
1 Another consequence of their extension of this
2 Federal Instrumentality Doctrine would be perverse, and
3 that's why we think it can't apply here. That is that there
4 is a corollary doctrine call the State Action Doctrine.
5 Under State Action immunity, a state or its political
6 subdivisions enjoys qualified antitrust immunity if they
7 articulate a system other than market competition and
8 actively supervise the conduct.
9 Under this approach, the Federal Instrumentality
10 immunity, parties all the way down the food chain here would
11 receive absolute immunity for all of their activities in
12 excess, in excess of the immunity granted to states,
13 sovereign states and political subdivisions under the
14 antitrust laws.
15 That doesn't seem to make sense as a policy
16 matter.
17 It also doesn't make sense as a question of
18 policy and a question of judicial approach to change in the
19 law. Very simple, Strobl is the law of this circuit.
20 Defendants take the position that the Federal
21 Instrumentality cases are an exception to Strobol;
22 therefore, they don't have to show pervasive regulation or a
23 plain repugnancy. But Strobl makes it very clear that
24 antitrust immunity should be hard to get. Therefore, if an
25 exception is to be made to Strobl based upon the existence
21
1 of a federal contract, we think, in all respect, your Honor,
2 it should come from the Second Circuit.
3 I will make just a couple of more points about
4 this and then I will move on to First Amendment.
5 The cases about Federal Instrumentality Doctrine
6 show that we are right in our interpretation that it should
7 be limited. First, I pointed to the IT&E language on the
8 chart. The IT&E language says that what was challenged
9 there and held immunity was agreements with
10 instrumentalities of the federal government. That is, the
11 Cooperative Agreement can be immunity, not the conduct. In
12 fact, in that case a monopolization count was maintained
13 even after a Section 1 unlawful contract count was
14 dismissed.
15 Second is the Otter Tail case cited in our
16 papers. That is one of the seminal cases on the Essential
17 Facilities Doctrine. In that case the Supreme Court was
18 faced with almost identical facts: A defendant with a
19 monopoly refused to deal with competitors. The defendant
20 said we have a contract with the federal government that
21 should immunize our conduct, and the Supreme Court
22 unequivocally said government contracting officers have no
23 power to create immunity from the Sherman Act whether they
24 flow from Congress or not at all.
25 Once again, let me just come back very briefly to
22
1 public purpose. The defendants, in defending immunity, say,
2 well, we're not providing services to the government, we're
3 providing services for the government. That is, since we're
4 doing a public purpose, we're implementing a public program,
5 we should sort of stand in the shoes of the government for
6 antitrust purposes.
7 This public purpose idea, again, doesn't find any
8 roots in the statute, but it also doesn't make much sense.
9 Because electricity and telephone service are definitely
10 public purposes. They are regulated by public service
11 commissions. And yet for each of those industries and those
12 actors immunity rests upon the Strobl test. Is there
13 pervasive regulation? And is there a plain inconsistency
14 between antitrust and that regulatory scheme? And I daresay
15 it is more than that, because electricity and telephone
16 service are necessary to get on the Internet in the first
17 place.
18 So to suggest that somehow there is a public
19 purpose behind the Cooperative Agreement that is useful for
20 providing antitrust immunity flies in the face of the fact
21 that electric utilities and telephone companies, although
22 they provide public services and are regulated by a public
23 utility commission, merit less antitrust immunity than NSI
24 would under its theory. That doesn't make sense.
25 Finally, under their theory, any time the
23
1 government wanted to privatize any conduct, that is, when
2 the government wanted to create a contract, have a private
3 party do a function that it normally did, that private
4 entity would be immune in all of its conduct, and that
5 doesn't make any sense, as well.
6 Let me just sum up by saying that NSI also
7 challenges plaintiff's standing to raise the antitrust
8 claims, arguing that because our injury was caused by the
9 government, that we don't have standing under Brunswick.
10 If you actually look at the arguments, they
11 merely repeat the immunity arguments and others. Also, it
12 wasn't one of the three issues that your Honor said they
13 could brief here. So, if they do have a standing argument,
14 it should come later.
15 We don't think it is meritorious, however,
16 because under their approach, the cases they rely on, Thomas
17 and Beverly and IT&E, should never have been decided because
18 all of those plaintiffs would have lacked standing. The
19 court should have dismissed on standing grounds and not
20 reached the merits of the antitrust case.
21 One final point. The statutory authority
22 argument of NSF boils down to one thing. They say that we,
23 the government, have been involved with the Internet for
24 decades. We funded it. We helped build part of it.
25 Therefore, it's our job.
24
1 But they don't say, importantly, your Honor, that
2 they assert any ownership claim to this Root Server, or that
3 any government proprietary interest in the technology gives
4 them the right to do what they are saying.
5 In a very real sense, therefore, their position
6 is we have some general language authorizing support for
7 science in our statute, but since we have been doing the
8 work on the Internet, if not us, who? It must be us. We
9 have been doing it traditionally; therefore, we have the
10 power.
11 But tradition doesn't matter in the law.
12 Tradition might be Fiddler on the Roof, but it does not
13 belong in the antitrust laws.
14 I will speak very briefly on the First Amendment.
15 I think most of the issues there are the defendants'.
16 The First Amendment claim is very
17 straightforward. Top-level domains are speech. They can be
18 and are used as communicative messages. We have given many
19 examples of those in our papers, from for.mayor to
20 Microsoft.bytes to other uses of esoteric and parody ideas
21 as well as core political values.
22 This Court held in Planned Parenthood several
23 years ago that there is First Amendment protection for
24 domain names. Very simply, the Court said that a trademark
25 infringement action would not lie if the defendant's use of
25
1 the mark was a communicative expression under the First
2 Amendment. So the First Amendment would trump the trademark
3 laws.
4 It's actually the same First Amendment right that
5 NSI asserts as a defendant, that is, the right to publish
6 domain names on the Internet. And the Garrin Declaration
7 and the Mueller Declaration attached to plaintiff's motion
8 papers show that there are numerous communicative expression
9 possibilities of domain names. In fact, you might analogize
10 them to the headline of a newspaper article; the domain name
11 is the headline, the Web site itself is the content.
12 We believe that a rule that says you cannot use
13 these other TLDs is a core unlawful prior restraint of First
14 Amendment protected speech. That prior restraints are only
15 justified in extraordinary circumstances, like wartime, that
16 do not exist here. That, at the very least, they have to
17 meet the Reno test established by the Supreme Court in 1997
18 for a compelling governmental interest, and that the
19 government admits they have no compelling governmental
20 interest, which is why they try and categorize their
21 restriction as a time, place and manner restriction. But it
22 can't be because it says to the plaintiff, you must speak
23 our words, .com, .net, .org; you can't speak .arts, .web,
24 and you can only speak if your speech complies with the
25 guidelines that we limit.
26
1 And they are doing it since -- they are doing it
2 before the plaintiff has been able to engage in speech. It
3 falls under the prior restraint test, and it must fall.
4 Unless the Court has any questions, that is all I
5 have.
6 THE COURT: No. Thank you.
7 Mr. Dallas or Mr. Sbarbaro, who is it?
8 MR. DALLAS: I will wait for Mr. Manishin to sit
9 down so that you can see me. I can see you. Can you see
10 me?
11 Listening to Mr. Manishin speak, there is a
12 certain -- and I don't mean this pejoratively -- but there
13 is a certain Alice-in-Wonderland quality to our discussion
14 here. He is talking about a contract to which his client is
15 not a party, and interpreting it as to how he thinks it
16 ought to be interpreted. A letter that wasn't sent to his
17 client, interpreting it as to how he thinks it ought to be
18 interpreted. A statute that doesn't govern his
19 relationship, telling you how it should be interpreted.
20 But the real question here, Judge, really is:
21 Who is in charge? And I'm not talking about who is in
22 charge of the Internet per se, but who is in charge of
23 oversight over the relationship between the National Science
24 Foundation and my client. And it is not pgMedia. It is the
25 National Science Foundation.
27
1 And your Honor doesn't have to spend a lot of
2 time finding the source of that. It is in black and white
3 in the Cooperative Agreement. Article 6B1 of the
4 Cooperative Agreement says that "The National Science
5 Foundation shall have the responsibility for oversight and
6 monitoring Network Solutions' activities."
7 Now, the last time I checked a dictionary
8 definition of what "oversight" meant, the dictionary told me
9 "oversight" means supervision. And when I looked at what
10 "supervision" said, supervision means not only oversight,
11 but also direction, an overall authority. A supervisor is
12 entitled to direct the activities of those whom it
13 supervises.
14 This is not an earthshaking, novel proposition.
15 It is a basic principle of contract law into how
16 organizational things, organizational relationships are.
17 You have somebody who has the primary responsibility
18 operationally to do things; that's Network Solutions, being
19 my client. You then have the supervisory responsibility;
20 that's the National Science Foundation. The National
21 Science Foundation is an agency of the federal government.
22 No dispute about that.
23 What Mr. Manishin's basic pitch to your Honor
24 was, I think, was basically a plea, your Honor, to disregard
25 the Federal Instrumentality Doctrine and to ignore the two
28
1 cases that were decided within the last three and a half
2 months which have applied that doctrine to the very same
3 Cooperative Agreement that's before your Honor. And those
4 two cases are Thomas v. Network Solutions and the National
5 Science Foundation, a decision by Judge Hogan in the
6 District of Columbia District Court, and Beverly v. Network
7 Solutions, a decision handed down last month by Judge Vaughn
8 Walker in the Northern District of California.
9 And I would point out to your Honor that in the
10 Thomas case, the plaintiffs there asserted a Section 2
11 monopolization claim that was a virtual carbon copy of the
12 Essential Facilities claim being asserted by pgMedia here,
13 and Judge Hogan dismissed that claim under the Federal
14 Instrumentality Doctrine, as he did the Section 1 conspiracy
15 claim.
16 So, to suggest that the Federal Instrumentality
17 Doctrine is limited to conspiracy claims is simply not the
18 case.
19 Now, let me talk a little bit about what the
20 Federal Instrumentality doctrine is all about, because I
21 think Mr. Manishin has somewhat confused that doctrine with
22 the other immunity doctrines.
23 The Federal Instrumentality Doctrine is really
24 quite a different doctrine. It is different because, as
25 Mr. Manishin acknowledged, the United States government and
29
1 its agencies are entirely outside the reach of the antitrust
2 laws. Nobody else in the world, your Honor, has that
3 status. I guess your Honor does, but that's because you are
4 acting as part of the United States government. But states,
5 municipalities, foreign governments are all subject to the
6 antitrust laws. The federal government and its
7 instrumentalities are not.
8 So, when we talk about the Federal
9 Instrumentality Doctrine, we really are not talking about an
10 immunity doctrine as it applies to the federal
11 instrumentalities, because when you talk about immunity, you
12 are talking generally about people who would be subject to
13 the antitrust laws but for the immunity. That is not the
14 case with the federal government and federal
15 instrumentalities. They are completely outside the reach of
16 the antitrust laws under all circumstances.
17 That's the critical difference between the
18 Federal Instrumentality Doctrine and the State Action
19 Doctrine and the Regulatory Immunity Doctrine that
20 Mr. Manishin is talking about. The starting point is the
21 federal government and its instrumentalities are not subject
22 to the antitrust laws, not because of immunity, but because
23 of statutory interpretation.
24 This was interpreted long ago by the Supreme
25 Court, 57 years ago, in United States v. Cooper Corporation.
30
1 All of that history is reviewed in the leading decision on
2 the Federal Instrumentality Doctrine, a decision, Sea-Land
3 Services v. Alaska Railroad, authored by then Circuit Judge,
4 Ruth Bader Ginsburg, back in 1981. And that decision, the
5 Sea-Land Services decision, Judge, has been followed by
6 every court that I am aware of that has been called upon to
7 consider the Federal Instrumentality Doctrine.
8 Now, that doctrine applies not only to units of
9 the federal government, it also applies to private entities
10 that are acting on behalf of the government in carrying out
11 governmental programs.
12 That does not mean, Judge, that every contract
13 between a private entity and the federal government is
14 immune under the antitrust laws. Not at all. Routine
15 commercial services contracts or procurement contracts where
16 you are providing services to the government are not covered
17 by this doctrine, and that is your Otter Tail decision.
18 That is the situation in the Otter Tail case, where you have
19 a contract between a private utility and an agency of the
20 federal government, to wheel electricity. It was a service
21 contract for the government.
22 The Instrumentality Doctrine -- the Federal
23 Instrumentality Doctrine says that where the private party
24 is assisting the government in carrying out the government's
25 programs or policies, then it is entitled to the same
31
1 immunity as the government.
2 Now, that is not a shocking proposition. That is
3 essentially the same rule that applies under the State
4 Action Doctrine.
5 THE COURT: How do you make that distinction?
6 MR. DALLAS: The distinction between state --
7 THE COURT: As to whether a company is working
8 for the government or providing services to the government?
9 MR. DALLAS: Well, I think the way you can look
10 at it, Judge, in our case -- and there are going to be gray
11 areas -- is whether the primary purpose of the agreement is
12 to benefit the government in supplying a service, or is it
13 benefiting the government by carrying out the government's
14 statutory mission to help others. I mean, it is one thing
15 to be supplying electricity or telephone service to the
16 government for its own use -- that is a procurement
17 contract. Cooperative agreements, I think the greatest aid
18 here, your Honor, is what Congress has said. How do they
19 distinguish between contracts that are for the benefit of
20 the government and contracts that are not, that are to be
21 used for public purpose?
22 And the Federal Grant and Cooperative Agreement
23 Act contains three sections. One section deals with
24 contracts to provide services to the government. Another
25 section talks about grant agreements. The third section
32
1 talks about cooperative agreements.
2 And what did Congress say cooperative agreements
3 were? Congress told federal agencies that they were to use
4 cooperative agreements when they expected to be -- and I am
5 quoting this -- "substantially involved with the recipient,"
6 the other contract party, "in carrying out a public purpose
7 of stimulation or support as authorized under the Agency's
8 statutes." That's how Congress in its wisdom has
9 distinguished between "Cooperative Agreement," which are to
10 benefit others, and "contracts," where the primary
11 beneficiary is the government itself.
12 So Congress itself has had no difficulty in
13 distinguishing between agreements that are basically
14 procurement contracts -- they fit in one category -- and
15 cooperative agreements, which are intended to carry out a
16 public purpose, which are entirely different.
17 The Cooperative Agreement Act, I think, is the
18 best example of a statutory scheme that basically embodies
19 the Federal Instrumentality Doctrine.
20 Mr. Manishin said, well, the Federal Cooperative
21 Agreement Act contain no express grant of immunity. That's
22 true. You won't find it there.
23 But, your Honor, it wasn't needed. It's not
24 needed. In no case that has applied the Federal
25 Instrumentality Doctrine has any court suggested that
33
1 Congress has to specifically state that an agreement between
2 a private party and the government to carry out a
3 governmental program must be given specific express immunity
4 by Congress. That isn't the basis for immunity under the
5 Federal Instrumentality Doctrine. It starts with the fact
6 that the antitrust laws, to begin with, don't apply to the
7 federal government, and that the doctrine is extended to
8 private entities in those limited circumstances where the
9 private entity has a relationship with the federal agency to
10 carry out that agency's mandate. So that basically the
11 agency is looking to the private entity to fulfill one of
12 its obligations, which, if the agency itself did it
13 directly, it would be immune. Therefore, as a matter of
14 policy, the courts have said in those circumstances it makes
15 sense, and it is proper, to give the same level of immunity
16 to the private entity.
17 That's what the courts have done in the State
18 Action Doctrine. The Supreme Court in the Southern Motor
19 Freight Conference decision said, look, it makes no sense to
20 say that the states can adopt a policy that is entitled to
21 antitrust immunity under the State Action Doctrine but if a
22 private party acts in furtherance of that policy it can be
23 subject to antitrust liability, because that would frustrate
24 the ability of the government to carry out its programs if
25 they could not use private parties to help them without
34
1 subjecting the private party to antitrust liability. That
2 just is not a sensible policy approach, and that's what the
3 Supreme Court has said, and that's how that doctrine has
4 been applied similarly in the Federal Instrumentality
5 situation.
6 So that is the basis here for it. I think, your
7 Honor, there is no dispute that the services being provided
8 by Network Solutions under the Cooperative Agreement are
9 services that are in furtherance of the statutory mission of
10 the National Science Foundation.
11 Congress told the National Science Foundation you
12 are directed to support and foster Internet access by
13 research and educational communities as well as others, and
14 part and parcel of that is to provide, through the services
15 of Network Solutions, some of the backbone functions that
16 are necessary for the operation of it. And one of those is
17 the Internet Root Server.
18 Now, let me tell you what that Root Server is,
19 Judge. It is not a very impressive thing. It is a
20 computer. We operate the Primary Root Server. There are
21 twelve others -- I guess eleven others that we don't operate
22 at all that are in many cases operated by the federal
23 government or by private contractors operating for the
24 federal government.
25 The Root Server itself is nothing special. What
35
1 it has is the Root Zone File. I didn't hear Mr. Manishin
2 talk about that at all. But the Root Zone File is the
3 computer program that contains the identifying information
4 needed to identify all of the top-level domains on the
5 Internet. And we maintain the master copy, and the other
6 Root Server administrators can download periodic updates
7 whenever they want. That is our function.
8 But all of these are -- we don't have a monopoly
9 over the Root Server System or the Root Zone File. All we
10 do is provide the top point in the process so that everybody
11 else can operate in the same way.
12 THE COURT: Where is that in your papers?
13 MR. DALLAS: It is in our statement of facts, I
14 think, your Honor. I mean, do you want me to --
15 THE COURT: It is the --
16 MR. DALLAS: It is in the declarations of --
17 Mr. Graves describes that in his declaration, and
18 Mr. Holtzman goes through that. I believe Mr. Strawn
19 adverts to it in his declaration, but the details are all
20 there.
21 Now, Mr. Manishin says that he is not attacking
22 the Cooperative Agreement; that he acknowledges that under
23 the Federal Instrumentality Doctrine, the Agreement is
24 lawful, it can't be challenged. But he says that doesn't
25 immunize conduct.
36
1 Your Honor, the antitrust laws are directed to
2 conduct.
3 Agreements by themselves, if no one acts on them,
4 violate no principle of antitrust law. The Agreement and
5 our performance of that Agreement are inseparable. And to
6 say that it is lawful to enter into a contract but you are
7 subject to antitrust liability if you perform in accordance
8 with that contract renders the Instrumentality Doctrine, the
9 Federal Instrumentality Doctrine, a nullity.
10 In each of the cases that Mr. Manishin talked
11 about that dealt with exclusive franchises, it was the
12 conduct of operating the exclusive franchise that was being
13 challenged, and in Thomas it was our administration of the
14 root zone system -- of the Root Zone File -- it is late in
15 the day, Judge, I am getting confused with the terms -- but
16 the Root Zone File that was supposedly the essential
17 facility, and that was dismissed on the pleadings under the
18 Federal Instrumentality Doctrine.
19 So, the conduct and agreement cannot be
20 separated. I am unaware of any case which has said that the
21 instrumentality doctrine applies only to agreements but not
22 to performance of those agreements. I would be shocked if
23 it said that, because that would then render the Doctrine an
24 extremely impotent doctrine.
25 Now, let me turn briefly to the NSF directives,
37
1 because that is an entirely separate basis for granting
2 summary judgment to Network Solutions.
3 The Instrumentality Doctrine applies to our
4 functions under the Cooperative Agreement. In the two cases
5 I've cited earlier, the NSF directives were not at all the
6 basis for granting or granting us dismissal of antitrust
7 claims based on the Cooperative Agreement and our activity
8 under the Cooperative Agreement.
9 The NSF directives are a separate basis, and what
10 we say is that pgMedia point to those directives as the
11 reason why they have not been able to add hundreds and
12 hundreds of TLDs to the Root Zone File. Our response is the
13 following:
14 First, those directives by the National Science
15 Foundation cannot be attacked on antitrust grounds. Why?
16 Because the NSF is outside the reach of the antitrust laws,
17 so they don't constitute an antitrust claim or an antitrust
18 violation.
19 Second, those directives cannot be attacked for
20 lack of authority. Going back to the point I made at the
21 beginning, Judge, NSF had the authority to issue those
22 directives to Network Solutions. They didn't issue them to
23 the world at large. They issued them to their contract
24 counterpart, and they were entitled to do that because they
25 had oversight responsibility under the Agreement, and that's
38
1 what their directives were, the exercise of oversight
2 responsibility, directing their subordinate as to what they
3 wanted the subordinate to do.
4 Thirdly, those directives cannot be challenged as
5 being unreasonable. Why? Because those directives were
6 issued to maintain the status quo. They were issued just
7 days before President Clinton, in a Rose Garden
8 presentation, directed the Secretary of Commerce, with other
9 agencies and widespread public input, to study the future of
10 the Domain Name System and, among other things, specifically
11 to study the issue of global TLDs.
12 That was one of the things they were to study.
13 So this was to maintain the status quo to allow that study
14 to go forward without it being preempted or mooted or upset
15 or prejudiced.
16 Now, your Honor was quizzical about what are
17 global or generic TLDs and what are these country code TLDs
18 and how do country code TLDs fit into this case.
19 They don't. As I think your Honor now
20 understands, country code TLDs are used to identify
21 countries. Those are administered, with the acquiescence or
22 approval of the NSF, by the IANA. Now, the IANA is a
23 private entity but it is a government contractor. It does
24 everything it does under a contract with an agency of the
25 Department of Defense. And one of the things they do is
39
1 decide when to have new country codes added to the Internet.
2 As a practical matter, virtually all of the
3 country codes have already been added, and they were added
4 well before the Directive given by the NSF to Network
5 Solutions. There were about ten that have been added since
6 then, but that's a far different kettle of fish than adding
7 hundreds or thousands of global TLDs or generic TLDs, and
8 that has been a very, very contentious issue in the Internet
9 community.
10 What the NSF did was to simply say to us, don't
11 do anything about TLDs until we give you further guidance,
12 and we understood that to mean global TLDs. NSF says that's
13 what they meant.
14 So, I don't know, Mr. Manishin or his client may
15 not have understood it that way, but the parties who
16 counted --
17 THE COURT: He said there were six more -- six
18 have been added since that letter.
19 MR. DALLAS: Ten country codes, your Honor, done
20 by IANA. Nothing to do with any decisions by my client.
21 IANA, the IANA makes those --
22 THE COURT: I understand, but Mr. Manishin's
23 argument, as I understand it, is that the letter doesn't
24 seem to be accurate or observed by IANA, at least.
25 MR. DALLAS: No, the letter was not directed to
40
1 IANA, Judge.
2 THE COURT: No, I know it wasn't.
3 MR. DALLAS: It was directed to us, and it told
4 us to add no TLDs. It has been -- I mean, to make no
5 decisions to add TLDs.
6 We have not made any decisions to add any TLDs.
7 The only party that's made decisions to add TLDs is the
8 IANA, which has always done it for country codes and only
9 country codes.
10 And that is a separate issue. I mean, that's not
11 really part of this case. Mr. Manishin's client doesn't
12 want to be a country code registrar. They are concerned
13 about global TLDs.
14 THE COURT: That's the way I understood it.
15 MR. DALLAS: Yes. And there is no dispute from
16 anybody in this part of the courtroom --
17 THE COURT: I was merely clarifying my mind as to
18 whether or not the country code issue was in the picture.
19 MR. DALLAS: No, and it is not.
20 What has happened is that after a year of study,
21 massive public discussion, getting endless comment, the
22 government has adopted their final Policy Statement. It is
23 a policy statement, it is not a mandate; deliberately so
24 because what the government has said is we want the Internet
25 community -- not us, the U.S. Government, not Mr. Manishin
41
1 and his client, or any one single group or entity -- to
2 decide on how the Internet should be operated. What we want
3 is to privatize it. We want a new, nonprofit, private
4 corporation form that would be representative of the
5 interests of the Internet community as a whole worldwide to
6 make these very difficult decisions about what global TLDs
7 should be added, when, how, etc.
8 I submit that it is plainly reasonable for the
9 status quo to be maintained while the government allows this
10 process to go through, and it is going on right now.
11 Because otherwise, if new TLDs, global TLDs are added, you
12 are going to preempt one of the major functions of this new
13 corporation, and, instead, your Honor is going to find
14 yourself in the rather unenviable position -- I heard the
15 term "Internet czar," well, your Honor, you would become an
16 Internet czar and you would be having to decide issues about
17 what new TLDs should be added, who should add them, how
18 many, under what circumstances, technical requirements, and
19 I said --
20 THE COURT: Don't worry about that. I am
21 sensible enough not to do that. That doesn't mean other
22 things.
23 MR. DALLAS: I am sensible about the relief that
24 is being sought here, your Honor, and that I think, as your
25 Honor wisely acknowledges, is not the position you want to
42
1 find yourself in nor should any court.
2 The government has set in process an orderly
3 procedure to privatize the arrangement. And what this
4 means -- what do the directives mean to Network Solutions?
5 Very simply, your Honor, it means that we should be
6 entitled -- are entitled to comply with those directives
7 without being subjected to potential antitrust liability.
8 It is as simple as that.
9 So, to bring this to a close, we have two grounds
10 for summary judgment: One, the Instrumentality Doctrine
11 that immunizes our activities under the Agreement, and, two,
12 the NSF's directives, which we are entitled to comply with
13 without running afoul of the antitrust laws.
14 Thank you, Judge.
15 THE COURT: Thank you.
16 MR. DALLAS: Unless you have questions.
17 THE COURT: Mr. Haber will do the First Amendment
18 issue?
19 MR. DALLAS: I think I will leave it to eminent
20 counsel to handle that, Judge.
21 THE COURT: All right.
22 MR. HABER: Good afternoon, your Honor. Before I
23 start off the argument, I wanted to address one point that
24 your Honor raised regarding the root server system and the
25 relationship between that and the Root Zone File. In the
43
1 government's declaration of George Strawn, it is at
2 paragraphs 20 through 26 that that information is contained,
3 if your Honor wants to take a look at it.
4 With respect to the stay issue, I think it is
5 important to lay out a little bit of the chronology and the
6 history here regarding the government's efforts to privatize
7 the Domain Name System.
8 In March of 1997, as set forth in the Strawn
9 Declaration, the government began thinking about what was
10 going to happen to the management of the Domain Name System
11 come the end of the Cooperative Agreement, which was
12 scheduled to end either in March of the following year,
13 March of '98, or September of '98, depending on whether the
14 six-month extension was invoked, which it has been; so
15 September 30th of 1998 marks the end of the Cooperative
16 Agreement.
17 So in March of '97, the government started
18 thinking about the issue. This is before pgMedia even sued
19 NSI. It is six months before pgMedia sued NSF. So there is
20 absolutely nothing to the inference raised by Mr. Manishin
21 that somehow the government's position regarding the
22 management of the DNS, of the Domain Name System, has been
23 in response to this lawsuit.
24 THE COURT: But the letter is dated 1997, isn't
25 it?
44
1 MR. HABER: The first letter sent by NSF is late
2 June of 1997, at which point the process -- and the letter,
3 in fact, references the ongoing discussions within the
4 government amongst various executive agencies as to what was
5 going to happen to the management of the Domain Name System
6 at the end of the Cooperative Agreement.
7 So it is quite clear that even before pgMedia was
8 known at all to the government, the government was thinking
9 about how to manage, or was thinking about how the Domain
10 Name System would be managed after the Cooperative
11 Agreement.
12 THE COURT: Well, this suit was begun before June
13 1997.
14 MR. HABER: It was begun before June 1997, it was
15 not --
16 THE COURT: So what is the evidence of the
17 government seeking the status quo earlier than June 1997?
18 MR. HABER: Your Honor, I wasn't intimating that
19 the government didn't seek the status quo. The government
20 began the process of looking into the Domain Name System
21 issue in March of 1997. The government wasn't added to the
22 lawsuit until September of 1997, long after, and itself
23 issued its directive not to add any generic TLDs to the
24 system.
25 I just want to skip forward in the process to
45
1 February of 1998, which is when the government issued
2 something that's colloquially known as the Green Paper that
3 was the government's first or extended take on how it
4 viewed, as one possibility, how it viewed the management of
5 the Domain Name System going forward at the end of the
6 Cooperative Agreement, and it laid out certain proposals
7 that the government had and it asked for comment from the
8 Internet community.
9 THE COURT: What is the document you are
10 referring to?
11 MR. HABER: Your Honor, it is called the Green
12 Paper. It is in the Federal Register, and in our paper it
13 is Exhibit D to my declaration. It may, in fact, be
14 exhibits to other declarations, as well. It is Exhibit D to
15 the Haber Declaration.
16 Importantly, for this case, in the Green Paper,
17 the government said the following with respect to the
18 addition of new generic top-level domain names. It said
19 that optimally it would like to leave that issue for the
20 private, not-for-profit, internationally representative
21 entity that the government proposed or the government hoped
22 would be in place in time to take over management of the
23 Domain Name System at the end of September of this year.
24 But the Green Paper also proposed that in the
25 interim, i.e., between February of this year and the end of
46
1 September of this year, that five new generic top-level
2 domain names be added.
3 The response on that point was overwhelmingly
4 against the government's proposal, and that's evidenced in a
5 June 1998 document called the White Paper that I believe
6 Mr. Dallas has adverted to. That document is at Exhibit B
7 to my declaration, and that's the final statement of the
8 government's policy with regard to privatization of the
9 Domain Name System.
10 And in the White Paper -- and I will just briefly
11 read the section -- the White Paper said that "The comments
12 received evidenced very strong support for limiting
13 government involvement during the transition period on the
14 matter of adding new gTLDs." Specifically, most
15 commentators, both U.S. and non-U.S., suggested it would be
16 more appropriate for the new locally representative
17 corporation to decide these issues once it is up and
18 running.
19 That's exactly what the government set forth in
20 the White Paper. The government retreated from its proposal
21 in the Green Paper to add new gTLDs on its own and heeded
22 the call of the Internet community to not act on this issue
23 and to leave it up to the new not-for-profit corporation.
24 In this record, there is an interesting comment I
25 think made by Mr. Manishin who said that pgMedia wishes to
47
1 add 500 new generic TLDs to the system, and I think his
2 words were, in substance, that we think -- we, pgMedia,
3 think that this would be a good idea.
4 It is instructive in this regard to look at
5 Exhibit G to my declaration which set forth various -- the
6 responses received to the initial proposal, responses
7 received from international entities. And if your Honor
8 looks at the response received from the European community,
9 from Japan and from Australia that are set forth in that
10 exhibit, your Honor will note that all of those
11 international entities and sovereigns stated that they did
12 not wish to see new generic TLDs added to the system until
13 an international consensus and a new not-for-profit agency
14 were in place to make that decision. Again, the government
15 heeded that call.
16 That is the basis upon which the government
17 states that the relief that plaintiff seeks in this case,
18 the immediate addition of 500 generic TLDs, will preclude
19 the international community from being heard on that issue.
20 I would note in this regard, it is highly ironic
21 that, given that situation, given that the international
22 community has asked that no new TLDs be added, it is ironic
23 that plaintiff is relying on international law as a support
24 for its position in this case, although Mr. Manishin didn't
25 refer to it in his presentation, so I won't repeat the
48
1 international law argument in mine.
2 Turning, your Honor, to the statutory authority
3 issue.
4 This is not a case, as plaintiff would have it,
5 of raising the question of whether the government has the
6 authority to regulate generally the Internet or even raising
7 the question of whether the government has general
8 regulatory authority over the Domain Name System. It raises
9 a very discrete issue, and the issue is: Did the NSF have
10 the authority to issue a directive under the Cooperative
11 Agreement to the awardee of that Cooperative Agreement,
12 Network Solutions?
13 PgMedia has conceded in its papers, and here
14 today in argument, that it is not asking the Court to set
15 aside the Cooperative Agreement, so it concedes that the
16 Cooperative Agreement is appropriate and that the NSF had
17 statutory authority to enter into it.
18 Rather, what pgMedia seems to argue is that while
19 the NSF has the authority to foster and support access to
20 networks by entering into the Cooperative Agreement and
21 funding NSI, it somehow lacks the authority to impose any
22 conditions on NSI's conduct, to have any requirements as to
23 what NSI can and can't do; it somehow lacks the authority to
24 make sure that NSI is conducting itself in accord with the
25 Cooperative Agreement. That's all that's going on here.
49
1 There was a request made by NSI to add new gTLDs.
2 It was a request that was referring basically from plaintiff
3 to the NSF, and the government said, no, you may not add
4 those gTLDs pursuant to the Cooperative Agreement and the
5 documents referenced therein.
6 So this case isn't about authority to regulate
7 the Internet. It is about a Cooperative Agreement and what
8 authority the government has under it.
9 And, as pgMedia has conceded, the government had
10 full statutory --
11 THE COURT: What provision of the agreement are
12 you relying on?
13 MR. HABER: Your Honor, let me turn to that.
14 The Cooperative Agreement, as a whole, makes
15 clear -- there are two relevant documents, your Honor.
16 There is the Cooperative Agreement, which is Exhibit F to
17 the Strawn Declaration, and there is also something called
18 the Grant of General Conditions, which is Exhibit A to the
19 Haber Declaration. I apologize for not putting them in the
20 same declaration.
21 The Cooperative Agreement contains language
22 regarding the reservation of responsibilities, and you've
23 heard the plaintiff refer to this today. It is Article 6A.
24 What you haven't seen in plaintiff's papers
25 anywhere is a complete quote of that provision. The
50
1 provision states that, according to plaintiff, that NSF has
2 to specifically reserve responsibilities under the
3 Cooperative Agreement --
4 THE COURT: Is that page 4 you are on?
5 MR. HABER: Page 4, yes, your Honor, Article 6A.
6 The plaintiff's argument is that a general
7 condition cannot be a specific reservation. But the
8 language of the Article, which has never been fully quoted
9 by the plaintiff, belies that contention, because it
10 specifics says, "To the extent that NSF does not reserve
11 specific responsibility for accomplishing the purposes of
12 this Agreement," -- and this is the part that is highlighted
13 by plaintiff -- "by either special condition or general
14 condition of this Agreement, all such responsibilities
15 remain with the awardee."
16 So it is clear that a general condition can be a
17 specific reservation of rights.
18 And then, your Honor, you turn to the General
19 Grant of Conditions.
20 THE COURT: I don't quite follow your argument.
21 MR. HABER: I am sorry. Plaintiff has contended
22 that under Article 6A, NSF has to specifically reserve
23 responsibility, and if it doesn't specifically reserve it,
24 the responsibility rests with NSI.
25 THE COURT: Right.
51
1 MR. HABER: And the government agrees.
2 PgMedia then states that --
3 THE COURT: What?
4 MR. HABER: Excuse me.
5 THE COURT: I have followed you so far. There is
6 no disagreement.
7 MR. HABER: OK. The disagreement is pgMedia
8 contends that a General Grant Condition, because it is a
9 general condition, cannot act as a specific reservation of
10 rights.
11 And that argument is belied by the language of
12 Article 6A, which specifically says that NSF can reserve
13 specific responsibility by either a special condition or a
14 general condition, and those general conditions are in fact
15 the grant in general conditions. Those are referred to --
16 THE COURT: Which ones are you relying on? That
17 is what I am trying to get to.
18 MR. HABER: OK, your Honor. I am sorry. The
19 General Grant Condition, it is Article 8 of the General
20 Grant Conditions, and those again are set forth in --
21 THE COURT: Article what?
22 MR. HABER: Article 8, your Honor.
23 And Article 8 states that "The grantee is
24 required to obtain prior written approval from the NSF
25 Grants Officer whenever there are significant changes in the
52
1 project or its direction."
2 THE COURT: Where are you?
3 MR. HABER: That is at page 2 of Haber
4 Declaration Exhibit A. That is Article 8 of the general
5 grant --
6 THE COURT: The other agreement?
7 MR. MANISHIN: The other declaration, your Honor.
8 MR. HABER: That is why I apologize as attaching
9 it to two declarations, your Honor.
10 THE COURT: Now, where are you, page what?
11 MR. HABER: Exhibit A, page 2. It is the
12 paragraph numbered 8.
13 THE COURT: Page 3?
14 MR. HABER: Page 2, your Honor.
15 THE COURT: Page 2?
16 MR. HABER: Yes, Article 8. It is entitled
17 "Significant Project Changes."
18 THE COURT: All right.
19 MR. HABER: And it is that provision that gave
20 rise to the Directive here, and I will have to backtrack a
21 little bit --
22 THE COURT: What is your position, that the
23 adding of a TLD is a significant project change?
24 MR. HABER: Your Honor, it is not the
25 government's position that the adding of a TLD is a
53
1 significant project change. What is a significant project
2 change is the adding of a TLD through a process other than
3 that that was contemplated by the Cooperative Agreement and
4 the documents referenced therein.
5 That's where I have to turn now. It gets a
6 little messy, I understand. But it is not just that new
7 TLDs were to be added --
8 THE COURT: It is not important that you
9 understand, it is important that I understand.
10 MR. HABER: It is messy, your Honor, and let me
11 see if I can cut to the heart of it.
12 The Cooperative Agreement, as pgMedia concedes,
13 incorporated by reference certain documents that are called
14 Requests for Comment or RFCs. These are documents that are
15 issued by various entities, by two entities having some sort
16 of general oversight in the Internet community with respect
17 to the Domain Name System. It is a consensual mode of
18 governance. So what happens is these requests for comments
19 are put out for comment, essentially, on the Internet.
20 But there is only one Request for Comment that is
21 relevant here and --
22 THE COURT: Let's just go back to page 2.
23 MR. HABER: Sure.
24 THE COURT: Because page 2 of Exhibit A talks
25 about a significant change and then it talks about a
54
1 transfer of a project effort and then it talks about a
2 change in objectives or scope, and the third item in that
3 section doesn't seem to me to be relevant, but maybe it is.
4 What are you relying on under B, "Significant Project
5 Changes," just so I've --
6 MR. HABER: Your Honor, I think it would be --
7 although I don't necessarily think that A, B and C represent
8 the sum total of things that could be significant changes,
9 but we think this falls within B. This falls within a
10 proposed change --
11 THE COURT: That's what I thought.
12 MR. HABER: -- in the phenomenon --
13 THE COURT: Yes.
14 MR. HABER: And the way it does is as follows:
15 The Requests for Comment that's incorporated into the
16 Cooperative Agreement is Requests for Comment 1591. It is
17 at Exhibit H to the Strawn Declaration. And that request
18 for comment --
19 THE COURT: Just let me get back to Strawn, then.
20 MR. HABER: Yes.
21 THE COURT: All right.
22 MR. HABER: The Cooperative Agreement required
23 that NSI provide services pursuant to the Requests for
24 Comments, including this one.
25 THE COURT: Where is that?
55
1 MR. HABER: This gets even a little more messy in
2 terms of referring to documents. At least you are still in
3 the Haber Declaration. Exhibit F is the Cooperative
4 Agreement.
5 THE COURT: I have gone to Strawn.
6 MR. HABER: I'm sorry, you are right.
7 MR. DALLAS: You are in the right room, Judge.
8 MR. HABER: It is page 3. It is Article 3C, and
9 it says --
10 THE COURT: Of what?
11 MR. HABER: I'm sorry, it is the Cooperative
12 Agreement. It is Exhibit F to the Strawn Declaration.
13 The Cooperative Agreement --
14 THE COURT: I've got that. Now what page?
15 MR. HABER: Page 3, your Honor, at the very top.
16 THE COURT: "Estimated Requirements and Review?"
17 MR. HABER: No. I'm sorry, your Honor.
18 MR. MANISHIN: Page 6 of the exhibit is page 3 of
19 the contract.
20 MR. HABER: Excuse me. Page 3 of the contract --
21 page 3 of the Cooperative Agreement, and it is Article 3C,
22 although Article 3 starts at the bottom of the prior page.
23 Article 3 is called "Statement of Work," and Article 3C is
24 at the very top of page 3.
25 THE COURT: Page 3?
56
1 MR. HABER: "The awardee shall provide
2 registration services in accordance with the provisions of
3 RFC 1174."
4 Exhibit G is RFC 1174. Exhibit H is RFC 1591,
5 which is the successor to RFC 1174, and there is no dispute
6 about that. It was set forth in the Strawn Declaration, and
7 I have not seen any argument from plaintiff to the contrary.
8 This now I think gets us back to Exhibit H.
9 THE COURT: You've got to hold a second.
10 MR. HABER: Sure, your Honor.
11 (Pause)
12 THE COURT: You are saying I've got to find that
13 NSI had to provide registration services in accordance with
14 the provisions of RFC 1174?
15 MR. HABER: Correct, your Honor. And as set
16 forth in the Strawn Declaration, RFC 1591 is the successor
17 to RFC 1174, and, again, in the reply brief from pgMedia, I
18 saw no statement to the contrary, certainly no argument to
19 the contrary.
20 So under the Cooperative Agreement, therefore,
21 the --
22 THE COURT: I have to get Exhibit G out now.
23 MR. HABER: Actually, your Honor, Exhibit G is
24 the first RFC. It is there --
25 THE COURT: That only applies to IANA?
57
1 MR. HABER: No, your Honor, RFC 1174 was the RFC
2 that was referenced in the Cooperative Agreement. RFC 1591,
3 which spoke to the same issue but at greater length, that's
4 Exhibit H, your Honor; that is the successor to Exhibit G.
5 THE COURT: It has known of its existence since
6 March of '94?
7 MR. HABER: Yes, your Honor. In fact, you will
8 note that it is issued -- on top of page 1 on Exhibit H, you
9 will note that it was issued by J. Postel, who is Jon
10 Postel, who is essentially IANA. He is the director, I
11 believe, in title, but I believe that John Postel is the
12 IANA.
13 THE COURT: Are you saying he is a/k/a?
14 MR. HABER: Essentially, your Honor.
15 MR. DALLAS: A/k/a The Big Kahuna.
16 MR. MANISHIN: There is a czar.
17 MR. HABER: Page 3 of Exhibit H, page 3 of RFC
18 1591, this is where the process is set forth as to how new
19 top-level domain names are to be added to the system.
20 Again, I will just read from the document. It
21 says, "The IANA is responsible for the overall coordination
22 and management of the Domain Name System, and especially the
23 delegation of portions of the name space called top-level
24 domains."
25 And I will skip down to the next paragraph.
58
1 "A central Internet Registry" -- and, again, it
2 is conceded by all parties that NSI serves as the Internet
3 Registry here.
4 "A central Internet Registry has been selected
5 and designated to handle the bulk of the day-to-day
6 administration of the DNS. Applications for new top-level
7 domains (for example, country code domains) are handled by
8 the IR" -- again, which is Network Solutions -- "with
9 consultation with the IANA."
10 And that's the crucial statement, your Honor.
11 Because what happened in this case was when NSI
12 forwarded to the IANA pgMedia's request to add 500 new
13 generic top-level domains, the response was not anything
14 that could be called "consultation with the IANA." The
15 response was on an April 4, 1997 letter from counsel for
16 IANA, which essentially disclaimed any responsibility for
17 opining on this issue.
18 The plaintiff argues that "consultation with the
19 IANA" does not mean participation by the IANA. That is
20 simply an absurd way of looking at the RFC and the
21 requirement of consultation.
22 "Consultation" in the dictionary is defined as a
23 deliberation among two or more parties as to a particular
24 matter. There was no deliberation here. There was a
25 request made to the IANA. The IANA refused to opine as to
59
1 whether or not any new generic top-level domain names should
2 be added.
3 In NSF's reasonable view, that was not
4 "consultation with the IANA." And that, your Honor, is
5 where the significant project change arises. Had the IANA
6 opined and said, yes, you may add new TLDs, or, no, you may
7 not add new TLDs, that would have been the end of the
8 matter. There would have been no role for NSF under those
9 circumstances, because the process that was set up in the
10 Cooperative Agreement through the Requests for Comment would
11 have been followed.
12 But it's because IANA declined to say anything on
13 the subject --
14 THE COURT: You mean Postel?
15 MR. HABER: Mr. Postel, yes, your Honor.
16 THE COURT: He is one man with all of this power?
17 MR. HABER: Well, he is, as Mr. Dallas
18 referenced, a government contractor, and he has been an
19 integral player in the management of the Domain Name System
20 since the late 1960s, early 1970s.
21 THE COURT: Well, you can't ascribe it to
22 campaign contributions, then.
23 MR. HABER: Your Honor, with respect to the
24 addition of country code TLDs, I only want to add one point,
25 which is pgMedia makes the claim that it was only when they
60
1 filed their May 1998 brief this year that NSF started taking
2 the position that the Directive meant only no generic
3 top-level domain names. That's just inconsistent with the
4 Directive in this case.
5 It was clear to NSF from shortly after --
6 THE COURT: What part of the record is it
7 inconsistent with?
8 MR. HABER: Your Honor, it is inconsistent with
9 the chronology, which is, as I think plaintiff will concede,
10 new country code names were being added starting in
11 September or October of 1997, that they had been added over
12 a period of time since then. So NSF was aware that there
13 were new country code names being added long before pgMedia
14 filed its brief in this case, and --
15 THE COURT: I don't get your point.
16 MR. HABER: The significance, your Honor, is that
17 it isn't the case that NSF articulated a distinction between
18 generic top-level domains and country code top-level domains
19 only in response to plaintiff's brief, which is what the
20 plaintiff has stated. In fact, the addition of country code
21 TLDs was long known to the NSF, and the reason why that
22 wasn't a problem under the Directive was that IANA was
23 participating in that process. As NSI has demonstrated,
24 IANA gave the authority to add those country code top-level
25 domains, and so there wasn't an issue about process.
61
1 Had IANA not been authorizing it, presumably they
2 wouldn't have been added, and that might have been an issue.
3 But that is simply not the case.
4 IANA has participated in the country code
5 process, as evidenced in the April '97 letter. They did not
6 participate in the generic TLD process.
7 THE COURT: Isn't IANA a private entity?
8 MR. HABER: It is a private entity, your Honor,
9 that receives substantial government funding to do the
10 particular functions that it does regarding the Domain Name
11 System. It is associated with the University of Southern
12 California, so it is certainly not a government entity, but
13 it is a government contractor with respect to these issues.
14 THE COURT: So you really have got two government
15 contractors, then?
16 MR. HABER: Yes, your Honor.
17 THE COURT: Is it a necessary party here?
18 MR. HABER: We don't believe so, your Honor.
19 They were named, I would note, as a -- I think they were
20 named as a nonparty co-conspirator in the First Amended
21 Complaint, which I would note was filed shortly before IANA
22 decided that it wasn't going to participate in the Generic
23 top-level domain name discussion. So there is --
24 THE COURT: Wait a minute. Which did they do,
25 and what are you relying on on the record, that they were
62
1 able to participate, or that they instructed NSI not to add
2 any more domain names?
3 MR. HABER: Your Honor, it is that they did not
4 participate, they did not consult. Had they instructed NSI
5 not to add --
6 THE COURT: Your point is that until a certain
7 point they were supposed to be consulted before any names
8 were added, as I understand your reading of the regulation?
9 MR. HABER: It is actually --
10 THE COURT: Is it Regulation 1591?
11 MR. HABER: 1591.
12 Actually, your Honor, it is our position that
13 they were supposed to be consulted and they were supposed to
14 consult with NSI throughout. There is no date by which they
15 no longer had an obligation to consult. They were --
16 THE COURT: I didn't say that. You said they
17 weren't going to --
18 MR. HABER: In April of '97.
19 THE COURT: And then after they said that they
20 weren't going to do anything, the Foundation itself --
21 MR. HABER: Issued a Directive.
22 THE COURT: -- issued a Directive in June?
23 MR. HABER: Yes, your Honor. Because IANA's lack
24 of participation in the process was a significant project
25 change. And that's why the addition of generic top-level
63
1 domains without the IANA's consultation had to be approved
2 by the NSI.
3 THE COURT: I see. Now I've got it.
4 MR. HABER: Your Honor, let me turn to the First
5 Amendment.
6 Your Honor, I will not put up the Cooperative
7 Agreement for any awards for draftsmanship, but it
8 incorporates by reference the documents we've indicated, and
9 we think ultimately it is clear that this was a significant
10 project change.
11 Your Honor, turning to the First Amendment
12 argument, I note that the plaintiff hasn't argued the
13 standing point. I just want to make one quick statement
14 there with regard to the Metromedia case, since we haven't
15 had an opportunity to respond to it. It is at 453 U.S. at
16 504 -- the Metromedia case involved a substantial amount of
17 noncommercial advertising -- by the Supreme Court.
18 It is our position that the overbreadth analysis
19 doesn't apply here because of the overwhelmingly commercial
20 nature of the Internet, and so the plaintiff lacks standing
21 to raise the speech interests of others.
22 THE COURT: Let me understand that again. I'm
23 sorry. I was still writing notes when you were speaking.
24 MR. HABER: Your Honor, the government argued in
25 its brief that pgMedia was seeking to raise the speech
64
1 rights of others, namely, of its putative customers,
2 individuals who have registered names with it. In a
3 response, the plaintiff cited the Metromedia case --
4 actually, let me back up.
5 The government also argued that because of the
6 overwhelmingly commercial nature of the Internet, the
7 Overbreadth Doctrine didn't apply because the Overbreadth
8 Doctrine, in long-settled Supreme Court case law, does not
9 apply where the speech at issue is commercial. So, I just
10 wanted to point out the distinction between the Metromedia
11 case, where there was a substantial amount of noncommercial
12 speech at issue.
13 Turning to the merits, pgMedia makes two separate
14 arguments that they tend to conflate or at least they did so
15 at argument today. The first argument is an argument they
16 raised in their original brief, which is the prior restraint
17 argument.
18 In response to that, NSF demonstrated two very
19 salient facts. First, that the words used by pgMedia in its
20 proposed top-level domains, for example, "beyond.hope," is a
21 name that they have proposed or is one of the TLDs that they
22 would like to add. Those words can all be used in a domain
23 name under the present system. It is simply a matter of
24 using those words and then adding one of any number of
25 different top-level domain names, .com, .org, .net, .west.
65
1 There are a number of different domain names that can be
2 added, so it is not as if the words -- it is not as if any
3 restraint on the words themselves being used on whatever
4 communicative value might be had in the domain name because
5 the same words appear in the domain name.
6 The government also demonstrated that, given the
7 speed of computer searches, there is really no distinction
8 between how quickly a search could be done under the present
9 system and how quickly a search could be done under
10 plaintiff's proposed system, and, in fact, the present
11 system is in many ways more efficient in terms of allowing
12 people to search out the relevant information contained in a
13 particular Web site.
14 In the reply brief, pgMedia does not refute these
15 statements. Instead, they raise an entirely new argument;
16 that you will search in vain their initial brief and the
17 Mueller Declaration for the argument that was contained in
18 the reply brief, namely, a forced or compelled speech
19 argument. So the government is responding to that today for
20 the first time.
21 In the reply brief, at pages 27 and 29, pgMedia
22 argues that they were supposed to add content to their
23 domain name under the present system. Now, they don't
24 identify exactly what the substantive content is that they
25 were forced to add; presumably, it was the addition of
66
1 either .net, .com, or .org.
2 Nowhere does plaintiff describe, much less prove,
3 what content an Internet user would attach to those generic
4 top-level domain names. In fact, there is no content
5 attached to those terms.
6 In terms of compelled speech cases, your Honor,
7 they run a continuum. On one end is a case like, for
8 instance, Woolley v. Maynard, which is not cited by
9 plaintiff but which is the fairly well-known New Hampshire
10 license plate case where the state motto "Live free or die"
11 was required to be -- was on each license plate, and
12 plaintiff challenged the authority of the state to require
13 that he have that very content-laden phrase on his license
14 plate.
15 Another similar type case is the Tornillo case,
16 which is cited by plaintiff, which is a requirement that
17 when a newspaper publishes an editorial criticizing a
18 candidate, the candidate get equal time to present again his
19 very content-laden opposing views. That is at one end of
20 the compelled-speech spectrum.
21 At the other end, we could hypothesize that
22 rather than .com, .org and .net, it was .A, .B and .C, or
23 .in, .under and .over. Presumably, even plaintiff wouldn't
24 be arguing that that's compelled speech because there is
25 really no content to that speech. Nothing is being learned
67
1 about the nature of the individual who has registered the
2 domain name simply by virtue of the fact that they have a .A
3 or .B after the name. So you have to have some content to
4 the speech in order for there to be a compelled speech.
5 The following fact unfortunately is not in the
6 record, because the argument was raised for the first time
7 in reply, but we can certainly supply it to the Court. It
8 is my understanding that for some time now, certainly long
9 before the lawsuit was commenced, there were no restrictions
10 on the types of entities that can register under .org, .net
11 or .com. So, for example, as stated in the Bucci case that
12 is cited by the government in the Facts section of its
13 brief, individuals can register under .com, not-for-profit
14 organizations can register under .com. My understanding is
15 networks can register under .com; they can register under
16 .org. The bottom line is there is simply no information
17 that is imparted about the entity registered under one of
18 those three generic top-level domain names. If I see a name
19 and it has .com at the end of it, I have no way of knowing
20 whether that is an individual, it is a not-for-profit, if it
21 is a profit, if it is a network; it could be anything. And
22 because of that, there is absolutely no way that there is
23 compelled speech.
24 Because for there to be compelled speech, there
25 has to be content, there has to be a viewpoint or a
68
1 content-based imposition on an individual to say something
2 that's revealing, and the bottom line is there is simply
3 nothing revealing about .com, it is generic. And plaintiff
4 was free to register under .com. They could have registered
5 under .org. There is simply no compulsion here and no
6 content that's being foisted upon the plaintiff.
7 In any event, your Honor, even assuming that
8 there is some content to .net or .org, it is extremely
9 limited. It is nowhere near "Live free or die." As even
10 the Supreme Court recognized in the "Live free or die" case,
11 the state can have interests that outweigh the speech right.
12 Here, given their extremely limited, if any, content to
13 something like .net or .org or .com, the government's
14 interests, which had been laid out in the government's
15 brief, we think are more than sufficient to overcome
16 whatever First Amendment challenge might be brought on the
17 basis of compelled speech.
18 So, unless the Court has any further questions,
19 thank you, your Honor.
20 MR. MANISHIN: We have kept you here for two
21 hours, so I would appreciate five minutes more.
22 There was a lot of discussion from both
23 Mr. Dallas and Mr. Haber about how many TLDs should be added
24 and the effect that it will have on the Internet, etc. We
25 are not arguing relief today; we are only arguing the
69
1 question of whether there is antitrust immunity or whether
2 there is a First Amendment violation. What should happen,
3 it is not an issue before the Court. That's why we
4 bifurcated briefing.
5 First, liability questions, antitrust immunity,
6 First Amendment. Then if we win, we go on. If we lose, the
7 case is over. That's why we did that. So I'm not going to
8 respond to questions of the impact that 500 TLDs will have.
9 I will respond directly to Mr. Haber --
10 THE COURT: 500 what?
11 MR. MANISHIN: I won't respond to the
12 implications that 500 new top-level domains will destabilize
13 the Internet or slow it down.
14 If there is some reason why your Honor is less
15 capable of --
16 THE COURT: I am not -- go ahead.
17 MR. MANISHIN: The other thing I think we found
18 out is that the Internet is run by people, and it is a
19 question I think in this case of whether this Court,
20 applying the antitrust laws, is any less capable of deciding
21 how the Internet should be run than John Postel.
22 But what our position is on that, your Honor, is
23 very simple. As I said before, the law in this Circuit is
24 clear: Unless and until Congress speaks, the only kind of
25 immunity that's available under the Strobl test is implied
70
1 immunity for pervasive regulation. If this Court wants to
2 adopt the Federal Instrumentality Doctrine, which has never
3 been applied by the Southern District, never been
4 implemented by the Second Circuit, and is directly
5 inconsistent with Strobl, we think that decision should be
6 accorded an appeals decision, because you would be creating
7 new law that's inconsistent with the controlling precedent
8 on how difficult it should be to get antitrust immunity.
9 Now, let me point, if I could, to one important
10 thing that Mr. Dallas said. He said that the Federal
11 Instrumentality Doctrine means -- and I believe I got this
12 quote correctly -- that private entities acting on behalf of
13 the government and carrying out a public program are immune
14 from liability because they are "assisting the government."
15 None of the cases that he cites to you make that
16 distinction. None of them discuss private entities carrying
17 out a government program.
18 I would point to the Court a case cited by both
19 parties, Champaign-Urbana News Agency, which is 632 F.2d
20 680. That is a Seventh Circuit --
21 THE COURT: 632?
22 MR. MANISHIN: 632 F.2d 680, a Seventh Circuit
23 decision from 1980.
24 A simple case. Essentially, an army base
25 contracts with a publisher to be the exclusive provider of
71
1 books and magazines. That is a simple procurement contract.
2 Your Honor asked how do you distinguish between
3 procurement and the theory that Mr. Dallas had. The
4 Champaign-Urbana case, which Mr. Dallas relies on for his
5 distinguishing the Federal Instrumentality Doctrine from the
6 implied immunity lines of cases, is a plain old procurement
7 case. His idea that somehow government agencies can
8 implement a public purpose and that the contractor stands in
9 the shoes of the government is made up; it finds no support
10 in the precedent.
11 The question of timing is answered by two things.
12 First, the timing -- being Mr. Haber's point that the
13 government had started thinking about how to address domain
14 name issues before this case was filed. First, if you look
15 to Haber Exhibit C, Mr. Haber's Exhibit C is the Green
16 Paper. That is when the government formally asked for
17 comment. And we quote this in all of our papers, Judge.
18 THE COURT: Exhibit C?
19 MR. MANISHIN: Exhibit C to the Haber
20 Declaration.
21 THE COURT: I've got Strawn.
22 MR. MANISHIN: That should be the thin one, if I
23 remember right. Exhibit C to the Haber Declaration --
24 MR. HABER: Are you talking about the Green Paper
25 or --
72
1 THE COURT: I don't think you are right on C.
2 MR. HABER: C is not the Green Paper.
3 THE COURT: C is the Federal Registry.
4 MR. MANISHIN: C.
5 MR. HABER: That is not the Green Paper.
6 MR. MANISHIN: I'm sorry, Exhibit C is the first
7 time that the government acted to look at the DNS. That is
8 correct, it is not the Green Paper. The date at the very
9 top is July 2, 1997. That is when they first asked for
10 comment. It is the first formal action taken by the
11 government, which postdated this lawsuit, postdated the
12 directive. We were first, they followed; those are the
13 facts.
14 And they concluded, as I said in my opening, with
15 a statement that Mr. Haber called the White Paper but which
16 is really a general statement of policy, and that's because
17 everyone thought the government --
18 THE COURT: You are referring to which exhibit
19 now?
20 MR. MANISHIN: I am referring to NSI Exhibit --
21 MR. HABER: It is Exhibit B in my declaration,
22 your Honor, if you are already in my declaration.
23 MR. MANISHIN: The 10th. OK.
24 THE COURT: The June 10, 1996?
25 MR. MANISHIN: June 10, 1998.
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1 THE COURT: June 10, 1998.
2 MR. MANISHIN: "Management of Internet Names and
3 Addresses."
4 Now I direct the Court's attention to page 3 of
5 that exhibit, which is Federal Register 31743, the
6 right-hand column, underneath Section 1, the last full
7 paragraph on that page entitled "Response," the third
8 sentence of that paragraph reads: "In addition, this policy
9 is not intended to displace other legal regimes,
10 (international law" --
11 THE COURT: I've lost you.
12 MR. MANISHIN: OK. It is 31743, the right-hand
13 column.
14 THE COURT: I've gone there.
15 MR. MANISHIN: The last paragraph on the page,
16 under "Response," and it is the third sentence of that
17 paragraph, about the seventh line down.
18 THE COURT: "In addition?"
19 MR. MANISHIN: "In addition, this policy" --
20 meaning this Policy Statement -- "is not intended to
21 displace ... competition law."
22 The government has said that their Policy
23 Statement is not intended to displace antitrust laws, and as
24 you and your clerk read this in full letter, you will find
25 that the Policy Statement says very clearly that the
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1 antitrust laws apply to the new corporation to be formed to
2 have a salutary effect and that the government deliberately
3 chose that antitrust laws should still apply.
4 Our position is that the government decided that
5 antitrust laws should apply in the future, and there is no
6 Congressional authorization to exempt them in the past, that
7 they applied to past conduct predating this Policy Statement
8 just like they will apply in the future.
9 Finally, Mr. Haber had a long and I think
10 convoluted explanation of why IANA's response was or wasn't
11 consultation under the Cooperative Agreement. That is an
12 issue that I think can be summarized best by looking not at
13 what NSF said in this case but what NSF said in the Thomas
14 case in Washington. A case, by the way, your Honor,
15 notwithstanding Mr. Dallas' insinuations, that we provided
16 to the Court with our initial motion papers, explained and
17 distinguished in our initial memorandum. So we are not
18 hiding that case from your Honor. We think it is clearly
19 distinguishable, and to the extent it is not, it was wrongly
20 decided, what the law is, in this Circuit.
21 In any event, at page 7 of our initial Memorandum
22 of Law we quote a declaration that NSF submitted in the
23 Washington case, and it says very simply that NSI must
24 "follow the policy guidance of a non-governmental body,"
25 quote continuing, "in consultation with the Internet
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1 Assigned Numbers Authority ('IANA'), another
2 non-governmental entity."
3 Those are the exact phraseologies of RFC 1591
4 that Mr. Haber laboriously walked you through.
5 Consultation. "Consultation" implies a request
6 for an opinion. This is what Network Solutions asked, and I
7 will refer you to Exhibit 10 of the Manishin Declaration.
8 THE COURT: Wait a minute.
9 MR. MANISHIN: I will wait for you to get there.
10 (Pause)
11 THE COURT: Which Manishin?
12 MR. MANISHIN: There was only one from me. It
13 was in the original papers filed in May.
14 THE COURT: May 15?
15 MR. MANISHIN: Exactly.
16 THE COURT: That's right.
17 MR. MANISHIN: My declaration is -- if you just
18 go to the Exhibit 10 tab, there is only one Exhibit 10 in
19 that whole stack, and it should be a March 27, 1997, letter
20 on the stationery of Mr. Dallas' law firm to Mr. Jon Postel,
21 who, we have learned today and as we said in our brief, is
22 the IANA.
23 If you look at the very last sentence on that
24 page, you can see what NSI asked.
25 THE COURT: What page is it do you want me to
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1 look at?
2 MR. MANISHIN: It is a two-page letter, so look
3 at the last paragraph on page 1, the last sentence on page
4 1.
5 "NSI maintains the information on that
6 root-server under the authority" --
7 THE COURT: I see where you are now.
8 MR. MANISHIN: The last sentence.
9 THE COURT: Yes.
10 MR. MANISHIN: "NSI maintains the information on
11 that root-server under the authority and at the direction of
12 the IANA and NSI can only make changes to the Configuration
13 File" -- which is another name for the Root Server file --
14 "at the direction of the IANA."
15 What this letter shows, Judge, is that NSI asked
16 IANA to say IANA has authority to direct NSI what to do with
17 the Root Zone Server File, and since they didn't ask for
18 consultation, what your opinion is, IANA internationally
19 responded by saying, I'm sorry, we don't have any binding
20 legal authority or any contract to give you directions.
21 So I think the bit about consultation, frankly --
22 THE COURT: Where is their response?
23 MR. MANISHIN: The response should be, if I am
24 right, the very next exhibit, which should be Manishin 11.
25 Yes, exactly right.
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1 Manishin 11 says, "The statement made in your
2 letter concerning the relationship between the IANA and NSI
3 is not correct. We are aware of no contract or other
4 agreement that gives IANA authority over your client's
5 operations. The IANA has no authority to establish a
6 generic top-level domain without an Internet community
7 consensus arrived at through committee review and ample
8 opportunity for public input." Indeed, "the restriction in
9 expansion of gTLDs" --
10 THE COURT: I think it is "Instead."
11 MR. MANISHIN: "Instead" -- thank you, Judge.
12 "Instead, the restriction in expansion of gTLDs
13 has thus far been due to consensus which your client has
14 chosen to accept in refusing requests from potential
15 registrars of new gTLDs."
16 That is not the clearest statement of everything,
17 but it is very clear that IANA is saying you asked us to
18 tell you that we had authority to authorize new gTLDs, we
19 don't, and in the past you have profited from this Internet
20 consensus by refusing requests from competitors.
21 They continued to do that and it wasn't --
22 THE COURT: Where did they say that?
23 MR. MANISHIN: "Which your client has chosen to
24 accept in refusing requests from potential registrars of new
25 gTLDs."
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1 Finally, this is a strange case. It is strange
2 in one way: Despite the fact that --
3 THE COURT: I have other people after you. I've
4 still got people in the back of the room who are very
5 patient.
6 MR. MANISHIN: I appreciate that. This is my
7 last point.
8 It is strange in that, since I took over as
9 counsel for the plaintiff in this case, I have been
10 receiving an ungodly amount of what they call spam,
11 unsolicited Internet e-mail, from everybody, everyone in the
12 world and every subject under the sun. I happened to get an
13 e-mail this morning from someone who said I read your brief
14 and I read Mr. Strawn's declaration for NSF, but he is
15 wrong, and I have a letter in which NSF says they don't
16 control the root servers. So I asked him to fax it to me.
17 I have it here.
18 THE COURT: Have you given it to counsel?
19 MR. DALLAS: No.
20 MR. HABER: No, your Honor.
21 MR. MANISHIN: It just came up. I just got it
22 today.
23 THE COURT: You have to give a copy to them.
24 MR. HABER: It presumably didn't come up before
25 my argument, Mr. Manishin, unless you have a fax machine at
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1 counsel table.
2 MR. DALLAS: Undated.
3 MR. MANISHIN: I will hand a copy to the Court.
4 THE COURT: OK. We'll get it.
5 MR. MANISHIN: I am obviously not attesting to
6 the authenticity of this, but I will say that this was given
7 to me by Mr. Jim Fleming and this letter --
8 THE COURT: This is a letter from Mr. Strawn, I
9 see.
10 MR. MANISHIN: It is a letter from Mr. Strawn,
11 the declarant, to Mr. Fleming.
12 THE COURT: No date?
13 MR. MANISHIN: Correct, no date. It doesn't
14 matter, the date, though, your Honor, because as you read
15 the letter, it talks about NSF's history, NSF's relationship
16 to the Internet Council and the Internet, and it says in the
17 next-to-last-paragraph, "NSF does not control root name
18 servers."
19 Now, Mr. Dallas and Mr. Haber both told you about
20 how many root servers there are in the world and the fact
21 that there is thirteen and etc., etc. There is one fact in
22 this case which is not disputed by anyone, and it is a fact
23 that NSI put in its comments to the Department of Commerce.
24 That fact is listed at paragraph 17 of our Rule 56.1
25 statement; that is, that there can be only one Root
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1 Server -- in this case it is called the Root A Server -- for
2 the Internet to achieve universal resolvability and
3 interconnectivity. That Root A Server is the server that
4 NSF is asserting that they control. When I alleged that NSI
5 controlled the Root Server, NSF says, no, we do, they don't.
6 And here they are saying exactly the opposite.
7 The conclusion, with whether or not this
8 particular piece of correspondence is genuine -- and I have
9 no reason to believe it is not. Obviously, I haven't had
10 the opportunity to take Mr. Strawn's deposition, so I don't
11 know that. But the conclusion is very simple: That the
12 government and the defendant, NSI, have been trying to shift
13 responsibility from one party to another, from NSI to IANA
14 to NSF to the Commerce Department and now to a new
15 corporation that may or may not be formed under this Policy
16 Statement. None of those shifts can change the basic fact,
17 which is that Congress grants antitrust immunity and that
18 there is no antitrust immunity in this case.
19 Since there is no antitrust immunity, the Court
20 can and should reach the merits, and because what the
21 government is doing is only a general policy, it doesn't
22 have the force of law, and it isn't going to change anything
23 at the very least until 2000, there is no reason for the
24 Court to stay its hand.
25 I thank you, your Honor. Unless you have any
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1 further questions?
2 THE COURT: As long as you can assure me that I
3 don't have to run the Internet.
4 MR. MANISHIN: I assure you, no matter what you
5 decide in this case, you don't have to run the Internet,
6 whether you decide one TLD, no TLDs or 500 TLDs. In fact, I
7 would say the relief we requested did not ask the Court to
8 decide the appropriate number of TLDs.
9 MR. HABER: Your Honor, if I may? I don't want
10 to take up the Court's time to reply to a letter that I had
11 just seen now, and I would like to talk to my client about
12 it. What I would like to do is to reserve the right,
13 whatever time the Court would like it, I would like to
14 reserve the right to at least put in a two-page letter to
15 respond to it, if I think that is necessary, by the end of
16 the week, given that, again, this is the first time we have
17 seen this document. I would like to at least maintain that
18 option, your Honor, if possible.
19 THE COURT: There has got to be an end to
20 everything.
21 MR. HABER: I don't have any great desire to add
22 to your burden.
23 THE COURT: I don't think that that is necessary
24 here to hear that.
25 MR. HABER: Thank you, your Honor.
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1 THE COURT: I think I've got to study these
2 documents a little more and get a copy of the transcript and
3 see where I come out.
4 MR. MANISHIN: Thank you, your Honor.
5 MR. COHEN: Thank you, your Honor. I appreciate
6 the time, sir.
7 MR. DALLAS: Thank you, your Honor.
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