UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

Pursuant to the Court’s June 1, 1998 Pretrial Order ("Pretrial Order"), plaintiff pgMedia, Inc., d/b/a Name.Space ("pgMedia"), by its attorneys, respectfully submits this memorandum in opposition to the cross-motions for summary judgment submitted by defendants Network Solutions, Inc. ("NSI") and the National Science Foundation ("NSF"),1/ in opposition to NSF’s accompanying motion for stay, and in support of pgMedia’s motion for partial summary judgment on Count VI of the Second Amended Complaint.2/

The Pretrial Order directed the parties to brief three potentially dispositive issues related to NSF’s legal authority to (1) issue the June 1997 "directive" to NSI -- in which it told NSI not to add new TLDs to the Internet root zone server -- and (2) immunize NSI from liability under Section 2 of the Sherman Act. Instead of directly answering these limited questions, the defendants are now trying to transform this litigation into a political case tied to the United States government’s recent "policy statement" on Internet administration.3/ This effort to distract attention from the legal merits should be rejected, because the law is well-settled that unless and until Congress acts by granting express immunity, or by authorizing an agency to extend immunity, private conduct is fully subject to the antitrust laws. No express immunity is claimed, and no implied immunity is available under long-standing Second Circuit cases, so the antitrust issues presented in this litigation are actually quite straightforward.

The government complains that this case is "an effort by plaintiff to derail [the policy statement’s] carefully developed process." NSF Opp. at 2. That is backwards. pgMedia’s requests for access to the Internet’s root zone, and this litigation, both preceded by months the initiation of the government’s policy process. More importantly, the policy statement is not a legally binding document. It is expressly not "a substantive regulatory regime for the domain name system . . . . [It] is not a substantive rule, does not contain mandatory provisions and does not itself have the force and effect of law." 63 Fed. Reg. at 31748. In reality, NSI pleaded with the government to declare its legal authority over the root server system, but the Commerce Department decided not to do so.4/ At least in part, this may be because pgMedia argued forcefully in that proceeding that the Commerce Department lacked statutory authority to restrict addition of new TLDs on the Internet. In any event, the simple fact is that it is the government -- which refused to take any legally binding action in the Commerce Department proceedings and declined NSI’s request to clarify Internet jurisprudence by asserting governmental authority over the DNS -- that now wants this Court to find the very legal authority it declined to exercise in the "policy statement." Raising the policy statement as a barrier to judicial action is thus disingenuous.

In this memorandum, pgMedia focuses on the specific factual and legal questions posed by the Court. The responses of NSI and NSF to these questions are plainly off-point. Both rely on general assertions of NSF’s power to control the root server system without demonstrating any specific basis for such power in the statutes or contract governing the NSF-NSI relationship. Both base their arguments either on contested facts for which they have failed to introduce any admissible evidence or which violate the burden of proof standards governing summary judgment. Finally, NSI’s claim of antitrust immunity grossly misreads controlling precedent from this Circuit and improperly tries to create a new antitrust exemption where none exists.

Nor is NSF’s position on First Amendment restraints correct. NSF is wrong because standing exists based on third-party speech, just as billboard owners can sue for First Amendment restrictions on what advertisements they can sell. The NSF "directive" is clearly not a time-place-manner restriction, but rather compelled speech and a complete preclusion of all other TLD speech. And whether or not TLDs constitute "commercial speech," Internet speech still merits the highest level of constitutional scrutiny.

As to its stay request, NSF reports that this case may "soon" be moot. That is not so, because under the Commerce Department policy statement the "new corporation" that the government wants to take over DNS management is not formed, may not be fully operational until October 1, 2000, and may or may not decide to add any of pgMedia’s TLDs to the Internet’s root server system. Since the government has already "frozen" pgMedia’s TLDs under the NSF directive for nearly 18 months, inflicting irreparable injury on plaintiff, no further delay is warranted or appropriate in disposing of this litigation.

The Pretrial Order directs the parties to brief three specific and narrow legal questions. Two of these -- the authority of NSF to restrict addition of new TLDs to the Internet’s root, and whether any such authority provides antitrust immunity for NSI -- are predicates to a grant of summary judgment in favor of defendant NSI.5/ The third question -- whether NSF’s June 1997 "directive" violates the First Amendment -- is a predicate to the grant of summary judgment against defendant NSF. Unfortunately, on close examination neither NSF’s nor NSI’s memoranda actually address these central issues, but rather rely in large part on vague generalities that are inconsistent with the undisputed facts of record and with the well-settled law governing antitrust immunity and First Amendment restraints.

In order to rule against pgMedia on its Section 2 "essential facilities" claim, the Court must find both that NSF had authority to issue the directive and that the directive operates to immunize NSI from the scope of the antitrust laws.6/ Under the undisputed facts, neither conclusion is permissible. First, NSF’s general statutory power to "foster and support" scientific research under the National Science Foundation Act, 42 U.S.C. § 1861 et seq. (the "NSF Act"), does not authorize regulation or control of the Internet’s DNS system. Second, the Cooperative Agreement, which never mentions either DNS or the Internet root server, provides no contractual basis for NSF to assume control of NSI’s root server administration. Third, the law is settled that antitrust immunity must stem from Congress, not the unilateral decisions of a government agency; thus, the absence of any power for NSF either to immunize awardees under the Federal Grant and Cooperative Agreement Act, 31 U.S.C. § 6301 et seq. (the "Grant Act"), or to immunize other private parties operating the Internet’s infrastructure, is fatal to any claim of immunity.

Finally, NSI’s claim that the so-called "federal instrumentality doctrine" provides immunity against pgMedia’s antitrust suit is meritless. The doctrine only prevents antitrust attack of the Cooperative Agreement itself. But here, pgMedia does not challenge the Cooperative Agreement and does not claim that NSI’s monopoly over ".com" registrations under that contract is unlawful. No court has extended this narrow antitrust rule to cases, like this one, that challenge a contractee’s conduct against competitors, i.e., its use of monopoly power, rather than the legality in the first instance of a government-granted contract monopoly. The "doctrine" asserted by NSI, even if valid in this Circuit, is therefore completely irrelevant. Since NSI can point to neither express nor implied immunity, it is fully subject to the federal antitrust laws prohibiting unlawful abuse of monopoly power.

NSF argues that because it had the power to enter into the Cooperative Agreement with NSI, this authority by definition extends to control of DNS and the Internet root server system, and thus to issue the directive to NSI that no new TLDs can be added to the DNS. Citing its general powers under the National Science Foundation Act to "foster and support" scientific research and academic computer networks, 42 U.S.C. § 1862(g), NSF contends that it therefore has the authority to "translate its statutory mandate into action" by controlling the addition of new TLDs to the root. NSF Opp. at 13. Indeed, NSF appears to maintain that any NSF activity that is broadly "in pursuit of its statutory objectives" is by definition lawful. Id. at 15, citing Thomas v. Network Solution, Inc, and National Science Foundation, 97 CV 02412 (TFH), 1998 WL 1191205 (D.D.C. Apr. 6, 1998).

The flaw in this argument is that a statutory grant of authority to "foster and support" scientific research and access to computer networks does not on its face translate into any specific power to regulate, control or restrict the activities funded by the government. And it certainly does not directly or indirectly authorize NSF to control or regulate the Internet in a manner inconsistent with the requirements of the antitrust laws ensuring open and competitive markets. The NSF Act does not charge NSF with managing, administering, controlling or regulating any aspect of the Internet or any facet of the Internet’s DNS and root server systems. The assumption that Congress has vested NSF with "the responsibility for . . . supervision over the Internet" is just that, an assumption. NSI Opp. at 26. Nothing in the Act’s language provides this responsibility, and neither defendant points to anything in the legislative history suggesting a congressional intent to confer such powers. Indeed, it is uncontested that NSF "is under no mandate to support domain name registration" on the Internet. NSF Mitchell Dec. ¶ 8 (Manishin Dec. Exh. 4)(emphasis supplied).7/ Thus, whether or not "NSF has acted in accordance with all governing statutes" in entering into the Cooperative Agreement, NSF Opp. at 14, is immaterial, because the initial issue is whether Congress delegated to NSF the power and responsibility to oversee and control the Internet’s domain name system.

No evidence of such a delegation of congressional power has been advanced by defendants.8/ The only thing NSF can really argue is that it has been acting in a general capacity to "administer" the Internet for several years. Yet, historical tradition says nothing about whether NSF enjoys any congressionally delegated powers specifically to regulate expansion of the DNS root server system. In its SEC filings–where accurate disclosure of material facts to investors is required–NSI has explained this quite elegantly. "[T]he Internet was historically administered by entities which were involved in sponsoring research rather than by any of the traditional federal or state regulatory agencies," but "the role of these entities has become less clear as private parties have begun to assume a larger role in the enhancement and maintenance of the Internet’s infrastructure." NSI S-1, at 19 (Manishin Dec. Exh. 5)(emphasis added).9/

NSF’s attempt to construct authority to control and restrict expansion of the DNS from its general NSF Act powers is thus an effort to bootstrap history into law. Yet it never even alleges–because it cannot–that prior to June 1997 NSF ever exercised, or asserted, the power to approve or control changes to the Internet’s root server system that NSF now maintains is somehow inherent in its NSF Act grant-making authority. Thus, history fully supports pgMedia’s position that NSF lacked the authority to control expansion of the root server DNS system. Moreover, since NSF expressly disclaims any powers arising from prior government "ownership of the Internet," NSF Opp. at 19, its reliance on NSF’s "historical role in the Internet’s development," id., provides no de facto legal authority.

NSF’s response to plaintiff’s international law argument (see Pl. Mem. at 23; Perritt Dec. ¶¶ 12-48) is confused.10/ NSF contends that it has not "violated any international treaty" by asserting control over DNS expansion. NSF Opp. at 19. Yet in the absence of any territorial (i.e., ownership) basis for the United States to exercise regulatory jurisdiction, the only ground for unilateral action that would impair the sovereignty of other nations is through a multilateral international agreement. Perritt Dec. ¶ 42. No international treaty cedes regulatory jurisdiction over the Internet or the DNS system to the United States. NSF therefore has it backwards, since it is the very absence of an international treaty to legitimize its conduct that renders its "directive" inconsistent with international law.

NSF pointedly suggests that if this Court grants antitrust relief, "that itself would constitute an exercise of United States jurisdiction" over the Internet. NSF Opp. at 20. The government has failed to recognize the clear distinction between governmental regulation of the Internet itself and the imposition of domestic legal rules on companies, like NSI, conducting commercial activities on the Internet. See Pl. Mem. at 23. The United States has no unilateral right to dictate to the world that TLDs can be added to the global Internet only if the U.S. government affirmatively approves. Conversely, the United States can certainly enforce its existing laws (including consumer protection, trademark, privacy and other laws in addition to antitrust laws) against U.S. companies whether or not their activities involve the Internet. Doing so is entirely permissible under, and in fact consistent with, international law. Perritt Dec. ¶¶ 46-48. Indeed, if the Court rules in favor of pgMedia, the requested relief cannot interfere with the rights of other nations under international law because relief would increase the availability of TLDs usable by citizens of every nation. On the other hand, a decision by this Court to sanction NSF’s authority–in other words, a judgment for defendants–would conflict with international law by providing the color of judicial authority to the unilateral restraint by the United States on the ability of other nations to use TLDs other than those on which NSI holds a monopoly. Thus, international law is no barrier to, and indeed directly supports, the market-opening relief plaintiff seeks in this litigation.

NSF argues that it acted "in accordance with the Cooperative Agreement" because the contract "contemplates . . . a role for NSF" in overseeing DNS. NSF Opp. at 15. Like the government’s statutory claims, however, this contract argument relies on general provisions that say nothing about TLDs or DNS. Moreover, the uncontested facts demonstrate that the Cooperative Agreement requires NSI to follow not NSF or other governmental directions with respect to TLDs, but rather those of IANA, which admittedly is not a government agency. The new NSF assertion that the Cooperative Agreement somehow grants it the unilateral right to step in because IANA in 1997 disclaimed legal authority over root server administration is a pure bootstrap, supported by no precedent or contract language whatever.

Although shrouded in arcane contractual language, the NSF position is actually quite simple. NSF argues that it has "broad leeway" under the Cooperative Agreement because it has "general responsibility" for domain name registrations and because the so-called "General Grant Conditions" require written NSF approval for a "significant" program change. NSF Opp. at 15-16. Neither of these provides any authority over DNS, because they do not expressly include, or even by implication embrace, management of TLDs.11/ To the contrary, as pgMedia explained in its motion papers, the Cooperative Agreement says absolutely nothing about DNS, and is quite clear that if "NSF does not reserve specific responsibility," all power is vested in NSI as the "awardee." Cooperative Agmt. Art. VI(A)(emphasis supplied); see Pl. Mem. at 20-21. Since the contract does not specifically reserve any DNS or TLD authority for NSF, therefore, the plain terms of the agreement leave control in the hands of NSI. NSF’s claim that the "general conditions" constitute a "specific" reservation of DNS responsibility is an oxymoron, NSF Opp. at 18, since by definition a "general" condition cannot be a "specific" reservation of responsibility.12/

A close examination of NSF’s memorandum and supporting papers reveals that its argument for Cooperative Agreement authority is like the proverbial Emperor’s new clothes -- smply not there. As pgMedia explained its initial brief, it is not disputed that the agreement cross-references certain Internet Requests for Comments ("RFCs"), and through this mechanism requires NSI to "follow the policy guidance of a non-governmental body, the Internet Engineering Task Force (‘IETF’) . . . in consultation with the Internet Assigned Numbers Authority (‘IANA’), another non-governmental entity." NSF Mitchell Dec. ¶ 5; Pl. Mem. at 7. In its own papers, NSF thus concedes, as it must, that RFC 1591 requires that applications for new TLDs are "handled by" NSI "with consultation with" IANA. NSF Opp. at 17; Strawn Dec. ¶ 38. What the Cooperative Agreement does is cede power to NSI to manage DNS, without any responsibility for NSF, so long as NSI "consults" with IANA. Thus, as NSF explains, it was IANA that is empowered to approve "substantive changes to the DNS." Strawn Dec. ¶ 38.

It is undisputed that IANA is not a government agency,13/ Pl. Rule 56.1 Statement ¶ 24, and that NSF has no contract or funding relationship with IANA. It is also undisputed that NSI "consulted" with IANA in March 1997, and that IANA disavowed any authority to direct NSI whether or not to add new TLDs to the root server. Pl. Rule 56.1 Statement ¶ 35; Manishin Dec. Exh. 11. Thus, the uncontested facts make three legal conclusions beyond question: (a) that the only entity with any power over DNS reserved in the Cooperative Agreement is a private entity, IANA; (b) that NSI is required only to "consult" with IANA, but is not required to comply with any IANA "directives" on TLD expansion; and (c) that NSF has no role to play in DNS issues under the express terms (including the incorporated RFCs) of the Cooperative Agreement.

These facts destroy any legitimate claim by NSF that it has "specifically reserved" DNS authority for itself in the contract. NSF is therefore forced to invent an entirely new claim, namely that if IANA does not "participate" in decisions on DNS changes, NSF is empowered to step into IANA’s shoes under the Cooperative Agreement structure. NSF Opp. at 17. Of course, there is nothing in the agreement that permits NSF to take over responsibility from IANA, and nothing that requires "participation" (as opposed to "consultation") by IANA in decisions on DNS expansion. NSF’s argument that this is a "significant program change" requiring its approval, id., is make-weight. Adding TLDs to the root file is a simple textual edit that can be performed in minutes without any disruption to the DNS. Garrin Dec. ¶ 14. Indeed, adjusting the root file is a technical issue -- a type of scientific judgment -- that the general conditions specifically allow NSI to undertake unilaterally.14/ Furthermore, with several hundred "country code" TLDs having been added to the DNS already, the addition of more "generic" TLDs can hardly be considered a "substantial" change in the scope of TLDs available.

Finally, NSF seeks to cloak its unsubstantiated assertion of authority in the public interest mantle of Internet "consensus," arguing that without IANA’s "participation," NSF was required to step in to assure that this so-called "consensus" continued to rule. NSF Opp. at 17. "It was not the mere proposed addition of TLDs that caused NSF to act. Rather, it was the proposed addition of TLDs without the participation of IANA." NSF Opp. at 18 (emphasis in original). But NSF has consensus backwards. Internet "consensus" is not an end in itself, and is certainly not something IANA is charged either with producing or enforcing. To the contrary, as IANA told NSI in April 1997, "the restriction in expansion of gTLDs has thus far been due to consensus which [NSI] has chosen to accept in refusing requests from potential registrars of new gTLDs." Manishin Dec. Exh. 11 (emphasis added). The existence or non-existence of "consensus" in the so-called Internet community is, accordingly, merely a convenient cover story for the unilateral maintenance by NSI of its domain name registration monopoly.

The NSF directive is unequivocal. NSI shall to "take NO action to create additional TLDs or to add any other new TLDs to the Internet root zone file." NSF June 25, 1997 Letter, at 1 (Manishin Dec. Exh. 13)(capitalization in original). Defendants do not contest that NSF has not rescinded or modified this directive since it was issued. Pl. Rule 56.1 Statement ¶ 51.

As pgMedia set forth in detail in its initial papers (see Pl. Mem. at 12-13; Garrin Dec. ¶14; Manishin Dec. Exh. 18), the facts are that NSI has "create[d] additional TLDs" and "add[ed] . . . new TLDs to the Internet root zone file" since 1997. Pl. Rule 56.1 Statement ¶¶ 50,52. Neither defendant denies this. NSF now contends, however, that the addition of these "country code" TLDs does not violate the June 1997 directive because the new TLDs "have been added with IANA’s approval." NSF Opp. at 18. According to NSF, the directive was "mutually understood" to apply only to "generic TLDs," and "was never intended . . . to preclude the addition of country code TLDs." Strawn Dec. ¶ 55; NSF Opp. at 18. NSI contends that its DNS expansion was permissible because the TLDs were "added by NSI at the instruction of IANA, and with the acquiescence of the NSF." NSI Response to Plaintiff’s Rule 56.1 Statement, ¶ I.15/

These attempts to rewrite the June 1997 directive in order to provide ex post facto justification for NSI’s conduct are unsubstantiated, inconsistent and revealing. First, it was only after pgMedia demonstrated in its May 1998 motion papers that NSI was adding new TLDs to the root, despite the NSF directive, that defendants first even contended the directive means something other than what it says. Second, defendants cannot agree among themselves on the scope of the directive, as NSF indicates that IANA alone controls the addition of new country code TLDs, while NSI contends that NSF also must "acquiesce" in IANA’s decisions. Graves Dec. ¶ 42. Third, defendants never contest pgMedia’s uncontradicted evidence that NSI and its commercial "preferred" partners are engaged in a joint venture to market these new country code TLDs–added to the root while plaintiff’s requested TLDs have been frozen out by the directive–as "universally resolvable" generic TLDs that substitute for the ".com" domain names that are in short supply. Garrin Dec. ¶14; Manishin Dec. Exh. 17-18; Pl. Mem. at 12-13; Pl. Rule 56.1 Statement ¶¶ 53-55.

The law is settled that in deciding a summary judgment motion, the trial judge draws all inferences from the undisputed facts in favor of the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970). Here, this means that the plain language of the June 1997 directive and the absence of any modification to that document, coupled with NSI’s resulting marketplace activities, are well more than a sufficient basis on which to infer that the "mutual understanding" now proffered by defendants is false. Furthermore, as NSF itself explains, in opposing summary judgment a party is not entitled to rely on evidence that "is merely colorable, conclusory, speculative and not significantly probative." NSF Opp. at 12, citing Reyes v. Koehler, 815 F. Supp. 109, 112 (S.D.N.Y. 1993). But speculation and conclusory declarations are all defendants offer. Had the "approval" of IANA or the "acquiesce" of NSF for new TLDs actually occurred since June 1997, at least some documentary proof of such decisions would exist. In the absence of any such evidence, which has not been supplied either by NSF or by NSI, the only reasonable conclusion a jury could reach from the undisputed facts is that NSI has violated the June 1997 directive. Pl. Rule 56.1 Statement ¶ 51.16/ Consequently, defendants’ new rationalizations for why the June 1997 directive does not mean what it says, and why NSI was permitted to add new TLDs to the root while pgMedia’s new TLDs have remained "frozen" for nearly 18 months, are so contrary to the record evidence, and so lacking in probative significance, that the Court must disregard them in ruling on plaintiff’s partial summary judgment motion.

Getting to the heart of who actually has authority over the DNS and the root server continues to be a shell game, with NSI, NSF and IANA shuffling the mantle of authority from one to another as circumstances demand. When the audience was potential investors, NSI stressed in its SEC filing that the Internet is "loosely administered" and without "formal authority." Manishin Dec. Exh. 5 at 19. When the audience was pgMedia, NSI initially responded that IANA was in control. Manishin Dec. Exh. 8. In another court, NSI testified flatly that it is responsible for the "addition of all new top level domains (TLDs) on the Internet worldwide." NSI Battitsta Dec. ¶ 7 (Manishin Dec. Exh. 2). Now that the audience is this Court, NSI contradicts itself and contends that it "does not control the root zone file and does not make the decision about the inclusion or exclusion of the TLDs in that file." NSI Opp. at 3, 6.

Indeed, in congressional hearings (again when this Court was not directly involved), the government testified that in order to ensure the Internet transition it outlined in the Commerce Department’s recent "policy statement," it would "seek agreement that NSI will . . . [t]urn over control of the ‘A’ root server." Written Statement of Ira C. Magaziner before the Subcommittee on Basic Research, House Science Committee (March 31, 1998) (emphasis supplied); Manishin Dec. Exh. 3. Plainly, there would be no need for the United States government to seek NSI’s "agreement" to "turn over control" of the root server if, as the facts of this case refute so convincingly, NSI was merely the "custodian" of the root. This demonstrates unequivocally that the government does not in fact enjoy the legal power to compel NSI’s actions with respect to the root server, and thus to issue the June 1997 directive, that NSF claims in this litigation.

Paragraph 3(c) of the Pretrial Order inquires "whether NSI is immune from or otherwise not subject to" civil antitrust liability under the Sherman Act.17/ NSI’s narrow treatment of antitrust immunity ignores settled antitrust precedent requiring a clear, express and strong showing of congressional intent for an agency to bestow immunity. Moreover, the few "federal instrumentality" decisions on which NSI relies do not extend to essential facility cases such as this and stand only for the unremarkable proposition that an otherwise lawful contract with the federal government cannot be collaterally attacked as an illegal monopoly. Since pgMedia does not challenge not NSI ".com" monopoly, but rather its use of monopoly power over the DNS root sever to exclude competition, this case is entirely consistent with the "federal instrumentality doctrine."

Settled and binding antitrust jurisprudence makes clear that implied immunity from Sherman Act liability, which is precisely what NSI claims in this case, is strongly disfavored by the federal courts. "[R]epeals of the antitrust laws by implication . . . are strongly disfavored." United States v. Philadelphia Nat’l Bank, 374 U.S. 321 at 350-51. A federal agency’s power to bestow antitrust immunity on a private party therefore depends on whether congress has expressly delegated this power to the agency. Pl. Mem. at 19. Neither NSF nor NSI claim any such immunization power, because none exists.

NSI contends merely that because it acted pursuant to "its Cooperative Agreement with NSF," NSI Opp. at 23, it is perforce shielded from judicial antitrust scrutiny. That is simply not the case. First, even if this were correct as a factual matter, nothing in the NSF Act or any other statute governing NSF’s powers grants the agency any authority to immunize private parties, including funding recipients or contractees, from antitrust liability. Pl. Mem. at 19-23. Second, although both NSF and NSI rely on the purported "public purpose" of domain registrations–language taken directly from the Federal Grant and Cooperative Agreement Act–congressional authorization of "cooperative" agreements contains nothing overriding operation of the antitrust laws. See 31 U.S.C. § 5301 et seq. There are numerous statutes that provide immunities or exemptions from the antitrust laws. For instance, the Bank Merger Act of 1966, 12 U.S.C. § 1828(c)(5)(B), expressly permits federal banking agencies to "approve" bank mergers that would otherwise violate the antitrust laws if they make certain public interest findings, and the Sports Broadcasting Act of 1971, 15 U.S.C. § 1291, authorized the NFL and AFL to merge without antitrust restraint.18/ Had Congress similarly intended cooperative agreements under the Grant Act, such as the NSF-NSI contract, to have any antitrust immunity consequences, it would (and needs to) have said so expressly.

Third, NSI never deals with the Second Circuit’s long line of cases, affirmed on the merits by the Supreme Court, in which private entities, like the New York Stock Exchange, have been accorded limited implied immunity by courts, without express congressional authorization. As pgMedia explained (Pl. Mem. at 20-21), only where there is a comprehensive regulatory regime that is "plainly repugnant" to the antitrust laws is implied immunity appropriate. Gordon v. New York Stock Exchange, 422 U.S. 659 (1975); Silver v. New York Stock Exchange, 373 U.S. 341 (1963). Under this Second Circuit-originated rule, implied antitrust immunity is found only where there is a "pervasive regulatory scheme," where an antitrust exemption is "necessary to make the [statute] work," and "even then only to the minimum extent necessary." Strobl v. New York Mercantile Exchange, 768 F.2d 22, 26 (2d Cir.), cert. denied, 474 U.S. 1006 (1985). This predicate for a claim of implied immunity is clearly absent because, as both NSF and NSI admit, "NSF does not regulate NSI." NSF Mitchell Dec. ¶ 3; NSI S-1 at 12 (NSI not subject to regulation); Pl. Rule 56.1 Statement ¶ 18.19/

Recognizing that it cannot possibly meet the Strobl test for implied immunity, NSI therefore is forced to argue, without any authority, that Strobl "deal[s] with an entirely different kind of antitrust immunity." NSI Opp. at 25. But under this approach, private entities would be automatically immune from antitrust liability merely because they had contracted with the federal government (or a federal "instrumentality"), without meeting the high burden imposed by Strobl for judicial extension of implied immunity. Government contractors would receive blanket antitrust immunity merely as a result of the contracting process, without any requirement for "pervasive" governmental regulation. The enormous legal consequences of this radical development, completely ignored by NSI, are that private parties operating under federal contract would receive greater antitrust immunity than sovereign states and their political subdivisions. It is no answer, as NSI asserts, that the Cooperative Agreement carries out a public purpose, NSI Opp. at 24, 26, because the "public purpose" provisions of the Grant Act (31 U.S.C. § 6305) and the NSF Act (42 U.S.C. § 1862(g)) do not convey any power to extend antitrust immunity.

Indeed, federal government contracts have never had such a preclusive effect. As pgMedia demonstrated, Pl. Mem. at 21, the seminal "essential facilities" case holds squarely that "government contracting officers do not have the power to grant immunity from the Sherman Act." Otter Tail Power Co. v. United States, 410 U.S. 366, 378-79 (1973); United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 225-27 (1940)("Though employees of the government may have known of these programs and winked at them or tacitly approved them, no immunity would thereby have been obtained."). NSI’s attempt to fashion a new line of implied immunity based on contracts with the federal government is unavailing, because it would effectively overrule Otter Tail, as well as Silver, Socony-Vacuum and Strobl.

NSI’s answer to Otter Tail is, once again, that the purported "public purpose" of Internet domain registrations is "the source of NSI’s antitrust immunity." NSI Opp. at 28. That is simply wrong. There is no more public purpose in Internet communications than there was in the provision of electricity in Otter Tail. Furthermore, all of the regulated industries (securities, telecommunications, banking, etc.) governed by the Strobl tests of "pervasive regulation" and "plain repugnancy" also perform public purposes, and are often regulated by "public service" commissions–yet the antitrust laws can and do apply. Finally, in Otter Tail the defendant utility in fact operated under a federal government contract, issued by the Bureau of Reclamation, that required certain "wheeling" of electric services. 410 U.S. at 410-11. Had such a contract been sufficient to shield the utility from antitrust liability, the Supreme Court would never had reached the merits of the antitrust claims in Otter Tail to find that the utility’s refusal to "wheel" with other competitors was a violation of Section 2 of the Sherman Act.

NSI’s claim that its root server functions are immune under what it terms the "federal instrumentality doctrine" is an improper extension of cases, not binding in this Circuit, that actually stand for a quite unremarkable proposition. Only seven cases (one decided after plaintiff’s motion was filed) appear ever relied on this so-called doctrine, and all of these reflect a common situation that is not present in this litigation.20/ In each of these cases, a federal agency or federally-created entity (e.g., a federal territory or public corporation) contracted with a third-party private entity to exclusively perform a service (such as public telephone service), and a resulting antitrust challenge to the contract as an unlawful agreement or conspiracy to monopolize was rejected.

For instance, in IT&E Overseas, Inc. v. RCA Global Communications, Inc., 747 F. Supp. 6, 11 14 (D.D.C. 1990), a federal entity (Guam Telephone Authority) granted an exclusive telephone franchise to RCA Global Communications. The court held that because the federal instrumentality was immune from antitrust suit, the contract granting a monopoly was equally immune. In Sea Air Shuttle Corp. v. Virgin Islands Port Auth., 782 F. Supp. 1070 (D.V.I. 1991), another federal entity entered into a monopoly contract to manage and operate sea plane ramps, which the court held to be immune from antitrust challenge. And in Thomas, plaintiffs alleged that the Cooperative Agreement between NSI and NSF was an unlawful conspiracy to monopolize. The court concluded, correctly, that a private antitrust plaintiff cannot challenge a governmental contract as an unlawful Section 1 agreement.

Each of the other "federal instrumentality" cases is in accord.21/ The Seventh Circuit has explained that "[i]f a particular purchase is exempt from liability under the antitrust laws, both the seller and the purchaser in the transaction are exempt." Champaign-Urbana, 632 F.2d at 693 (exclusive contract to provide books and magazines to Army and Air Force Exchange Services). This is entirely consistent with the Supreme Court’s decision, in City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 382 (1991), that there is no exception to governmental immunity "when government officials conspire with a private party to employ government action as a means of stifling competition."

What is unusual in this case is that NSI seeks to extend this simple principle beyond the government monopoly contract itself to immunize a defendant’s anticompetitive use of the monopoly power granted by the government. None of the decided cases immunizes the use of a government-granted monopoly franchise against competitors in a manner that would otherwise violate Section 2 of the Sherman Act.22/ Thus, to the extent any "federal instrumentality doctrine" exists,23/ it does not provide blanket antitrust immunity to a party entering into a government contract. The law is settled that a monopoly, however lawfully acquired, may not be maintained or used in an anticompetitive manner. United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966); Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). Just as the NFL can be subject to liability for monopolization despite statutory immunity for the formation of its monopoly, United States Football League v. NFL, 842 F.2d 1335 (2d Cir. 1988), and just as AT&T was not immune from Section 2 liability for refusing to allow competitors to deal with its lawful local telephone monopolies, United States v. AT&T, 524 F, Supp. 1356 (D.D.C. 1981)(denying motion to dismiss after close of government’s case-in-chief), so too can NSI be liable for exclusionary use of its government-sanctioned monopoly to refuse to deal with competitors. As pgMedia has made clear from the outset of this litigation, "[p]aintiff challenges only NSI’s use of its market power to refuse to deal with competitors, not the legality of NSI’s monopoly in the first instance." Pl. Mem. at 2.

In short, unlike the plaintiffs in Thomas and in Beverly, pgMedia is not challenging the lawfulness of the Cooperative Agreement. See Beverly, slip op. at 8 ("Beverly also contends that . . . the Cooperative Agreement creates a monopoly.") NSI was granted the exclusive right to register ".com" domains under that contract, and the antitrust claims in this case do not relate to NSI’s ".com" monopoly. Rather, as a result of the Cooperative Agreement, NSI also has control of the Internet root zone server, and has refused to deal with pgMedia for TLD access to that essential facility. Under the settled principles discussed above, if NSI acts to "maintain" or "use" its lawful monopoly power in an exclusionary manner, for instance by refusing to deal with competitors, there is not and can be no antitrust immunity.

Even if it were inclined to accept NSI’s unprecedented extension of these federal instrumentality cases, this Court must still address the fact that Strobl is the law of this Circuit. If NSI is correct that the federal instrumentality doctrine is a completely separate line of authority from the "pervasive regulation" immunity cases, then it is clear that the Second Circuit has not yet adopted that view. Under Strobl, implied immunity cannot be found unless a "plain repugnancy" between regulation and antitrust exists. If a court in this jurisdiction is to adopt, and extend, the cases proffered by NSI–and thus create a new form of implied antitrust immunity in the Second Circuit–such a decision should properly come from the court of appeals.

NSI contends that pgMedia has suffered no antitrust injury because "[i]t was NSF–not NSI–that made the decision to add no new gTLDs to the root zone file; and it was the NSF that directed NSI to comply with that direction." NSI Opp. at 28. According to NSI, because pgMedia’s injury was caused by NSF, and not as a "direct result of any business decision by NSI to ‘refuse to deal,’ " pgMedia has not suffered an "antitrust injury" as required under Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).

This argument is defective for two reasons. First, the Pretrial Order sought briefing only on whether NSI was "immune from or otherwise not subject to antitrust liability," not on whether pgMedia has standing. Standing is not a question either of the scope of or immunity from antitrust, but rather a plaintiff’s ability to bring a claim. If NSI has any legitimate issues as to pgMedia’s standing, therefore, they cannot be decided in the context of the present cross-motion, since all motions were confined to the three specific issues set forth in the Pretrial Order.

Second, NSI’s antitrust injury argument is simply a recast of its antitrust immunity argument. Both are based on the (assumed) power of NSF to direct and control the Internet root server. Both are inconsistent with the uncontested facts that NSI has added new TLDs despite NSF’s directive "to take NO action to create additional TLDs or to add any other new TLDs to the Internet root zone file." Both assume, improperly on summary judgment, that the Court must accept NSI’s factual assertions in the face of the evidence (and inferences) relied on by pgMedia for proof that NSI has a substantial degree of commercial discretion, unconstrained by NSF, in deciding whether and when to add new TLDs to the root server. Therefore, as a matter of both fact and law, summary judgment for NSI on antitrust standing grounds is inappropriate.

NSI’s standing theory is also nonsensical. Because "antitrust injury" is a standing issue, courts are required to address it before engaging in substantive antitrust analysis on the merits, including the question of antitrust immunity. Had NSI’s theory been applied to the "federal instrumentality" cases, therefore, none of them would have reached the question of immunity, as they would have been dismissed procedurally on standing grounds. Likewise, in Socony-Vacuum and Otter Tail, the Supreme Court reached the merits despite defendants’ claims that they were acting in compliance with some government purpose or edict. 310 U.S. 150; 410 U.S. 366. Thus, if pgMedia lacks standing, so too did the plaintiffs in Thomas, which means that under NSI’s view of standing, the very merits decisions NSI relies on should never have been issued.

Assuming that NSI is immune from antitrust liability, the Court is required to decide the final claim in Count VI, namely whether NSF’s directive not to add new Internet TLDs, as governmental action, violates the First Amendment as a prior restraint of protected expression. The Supreme Court has squarely held that Internet speech is entitled to heightened First Amendment scrutiny. Reno v. ACLU, 117 S. Ct. 2329 (1976). Nonetheless, NSF inexplicably fails to discuss Reno in its opposition, instead contending that that its TLD ban is merely a content-neutral "time, place and manner" restriction, NSF Opp. at 32, and that domain names are unprotected commercial speech, id. at 22-23. Neither of these arguments is correct.

NSF argues that pgMedia lacks standing to challenge the TLD ban because plaintiff is asserting third-party First Amendment rights and because no "overbreadth" challenge is permissible for purportedly "commercial" speech. NSF Opp. at 21-23. NSF is incorrect because: (1) pgMedia’s own TLDs have been banned by NSF; (2) pgMedia as an editor of Internet content is asserting its own right to free speech, not that of third parties; and (3) even commercial speakers have standing to make overbreadth First Amendment challenges to governmental restraints.

Although NSF is correct that pgMedia is asserting the rights of its customers to use second-level domains that do not end in ".com," ".net" or ".org," plaintiff is also asserting its own First Amendment rights. Plaintiff is currently using more than 20 different TLDs for its own services and Web sites, including "name.space" (its business trademark), "pgmedia.inc," "trusted.host," "free.zone" and others. Because NSF has refused to permit these TLDs to be universally resolvable by addition to the root server system, pgMedia is presently forced to use the URL "namespace.pgmedia.net" in lieu of these domain names. Indeed, NSF recognizes expressly that "name.space" is one of the domain names pgMedia is trying to use on the Internet today. NSF Opp. at 24.

These facts are more than sufficient to show that pgMedia is asserting its own First Amendment rights, as well as those of its customers. NSF’s belief that the difference between ".com" and other TLDs "does not appreciably limit" pgMedia’s speech, NSF Opp. at 25, is constitutionally immaterial. Forcing plaintiff to use "namespace.pgmedia.net" instead of "name.space" is governmentally compelled speech. That is to say, the domain name that pgMedia is required to use includes information that is properly a private matter and that it would otherwise not include. Compelled speech is just as violative of the First Amendment as suppressed speech. Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241, 258 (1974).

Furthermore, despite NSF’s claims to the contrary, there is no real dispute that plaintiff acts in an editorial fashion in publishing domain names for itself and its customers. Nowhere has pgMedia "conceded" (NSF Opp. at 21) that it serves no editorial function in its registration of domain names; rather, pgMedia is asserting the same publishing rights that NSI invokes every day.24/ Indeed, the Supreme Court characterizes the Internet as a newspaper compiled by "publishers" of Internet content.25/ These publishers, including pgMedia, warrant the same First Amendment protection as any other. See Reno, 117 S. Ct. at 2346. This protection was granted in Bigelow v. Virginia, 421 U.S. 811, 815 (1975), where the Supreme Court gave standing to newspapers editors to challenge a statute prohibiting publications that may encourage abortion, "the injury of which appellant complain[ed] is one to him as an editor and publisher of a newspaper; he [was] not seeking to raise the hypothetical rights of others." As a publisher in a medium that the Court has directly analogized to newspapers, plaintiff therefore has standing in its own right to seek redress for NSF’s suppression of speech.

Finally, NSF’s intimations notwithstanding, NSF Opp. at 22-23, the commercial element of domain names does not eliminate pgMedia’s standing to assert a First Amendment overbreadth claim. As the Court explained in Metromedia v. City of San Diego, 453 U.S. 490 (1981), it has "never held that one with a ‘commercial interest’ in speech also cannot challenge the facial validity of a statute on grounds of its substantial infringement of the First Amendment of others." 453 U.S . at 504 n.11. The fact that the Internet has a "commercial tilt," NSF Opp. at 23, does not serve to diminish the importance of the content it transmits.26/ In Metromedia, the Court held that commercial billboard owners retain First Amendment protection in the speech they sell to their customers. 453 U.S. at 515. If a billboard owner can assert third-party First Amendment rights, so too can pgMedia.

NSF claims that forcing pgMedia to add content to its communicative domain names is a permissible "time, place, and manner" restriction. NSF Opp. at 26-28.27/ It argues that because "the NSF directive permits the speech cited by plaintiff to be expressed in any domain space other than the TLD," pgMedia has suffered a "de minimis" burden. NSF Opp. at 25-26. This argument fundamentally mischaracterizes the nature and propriety of time, place and manner restrictions.

Time, place and manner restrictions occur when a government authority seeks to alter the location, time or volume at which speech is communicated. For example, in Ward, the case upon which NSF principally relies (NSF Opp. at 27- 29, 31), the Supreme Court upheld a New York city ordinance requiring that bands performing in Central Park use the city’s own sound equipment in order to decrease noise pollution. The stage "was open, apparently, to all performers," and only their volume was regulated, with no change in the content of the songs performed. 491 U.S. at 790. NSF also relies on Frisby v. Schultz, 487 U.S. 474, 483 (1988), which upheld a municipal ordinance banning "picketing taking place solely in front of a particular residence."

These cases are entirely unrelated to the present claim, for NSF’s ban on pgMedia’s TLDs has excluded it from the public domain name "stage" unless it fundamentally changes its content. pgMedia and its customers are not permitted to speak at all unless they use the precise ".com," ".net" and ".org" formulations permitted by the government. Legitimate time, place and manner restrictions cannot require alteration of the content of communication, but rather only its method, location and timing. By banning all speech using "alternative" TLDs, the government is dictating what Internet speakers can communicate in the DNS "domain space," not merely how and when they can speak. Thus, although it is correct that NSF has not specifically "targeted" plaintiff’s TLDs, NSF Opp. at 27, it is not correct that the NSF ban is content-neutral, because by its very terms it precludes all use of TLDs as communicative messages unless they meet the government’s ad hoc rules for the content of TLDs.

NSF argues that pgMedia has "not met his [sic] burden of demonstrating that domain names constitute protected speech," NSF at 23-24, and incorrectly insists that domain names have only the functionality of phone numbers. Id. Although NSF disagrees, NSF Opp. at 24, plaintiff believes it is clear that domain names can and do constitute protected speech when embodying a communicative message. Planned Parenthood Fed. of Am. v. Bucci, No. 97 Civ. 0629, 1997 LEXIS 3338, *34 (S.D.N.Y. Mar. 19, 1997), aff’d mem., 1998 WL 336163 (2d Cir. Feb. 9, 1998). pgMedia’s domain names, including "for.mayor" and "microsoft.free.zone," undoubtedly evince the "expressive purpose" that the Second Circuit has required of a communicative message. United We Stand America v. United We Stand, America New York, 128 F.3d 86, 92 (2d Cir. 1997); see Pl. Mem. at 24. Thus, pgMedia has amply satisfied its burden of showing that its speech warrants First Amendment protection.

The burden therefore shifts to the government to prove that its prior restraint of pgMedia’s protected speech survives constitutional scrutiny. Clark v. Community for Creative Non-Violence, 468 U.S. 288, 293 n.5 (1984).("it is common to place the burden upon the Government to justify impingements on First Amendment interests"). NSF cannot meet this burden, because its stated concern that the addition of new TLDs to the root file will endanger the "stable transition of the domain name system," NSF Opp. at 28, cannot compare to the rare situations–clear and immediate threats to national security–in which the Court has upheld prior restraints of speech. Pl. Mem. at 24. That is why NSF has sought to shoe-horn its actions into the inapplicable category of "time, place and manner" restrictions, because there is simply no way that these purported governmental interests, even if valid (pgMedia has contested each of them in its initial memoranda and declarations), are sufficiently grave to justify the extreme measure of a prior restraint.

Most significantly, NSF fails to address, perhaps because it cannot distinguish, the Supreme Court’s requirement in Reno that all restrictions of Internet speech be based on a compelling government interest and achieved through narrowly tailored means. Reno, 117 S. Ct. at 2346. NSF’s repeated allusions to the "destabilization" of the Internet, NSF Opp. at 28, and "time-consuming and less efficient" operation of the Internet, NSF Opp. at 31, are characterized by NSF itself as "large" and "significant," NSF Opp. at 28, but the government pointedly refrains from asserting that these interests are "compelling." Indeed, and again without reference to Reno, NSF states affirmatively that it is not required to show such a compelling interest. But it is and it has not done so.28/

NSF urges the Court to "stay this matter in anticipation of its becoming moot," relying on a single district court decision. Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 736 F. Supp. 267, 274 (N.D. Ga. 1990)("a court may stay a proceeding in anticipation that it will shortly become moot."); NSF Opp. at 11. A stay of this proceeding would, however, be a critical error because there is no reasonable basis to conclude that the Government’s recent policy statement concerning the transition of the DNS will redress NSI’s refusal to deal with plaintiff.29/

NSF correctly reports that "the Government has made plain its intent to transfer to a private, not-for-profit entity the management of DNS–including the authority to add any new gTLDs." NSF Opp. at 11. On this basis, NSF asserts that once this private entity has assumed management control of the DNS, "plaintiff’s case may become moot if the private entity decides to add new gTLDs, and in so doing provides plaintiff the relief sought herein." NSF Opp. at 11 (emphasis added).

There are several obvious flaws in this analysis.

• As noted in the Preliminary Statement, supra p. 1, the government’s policy statement is not binding because it "does not itself have the force and effect of law." 63 Fed. at 31,748. Thus, the policy statement provides no mandate that the transfer of management must occur; there is simply no legal requirement that NSI relinquish control of the Internet root server at all, let alone at a date certain in the near future.
  
  
• NSF cites the government’s recent announcement that it "hopes that the private sector can get the new corporation up and running by October 1 of this year." NSF Opp. at 11 (emphasis added). Yet the government projects that the new corporation "will [not] assume full responsibility" for the Internet until "October 1 of the year 2000 at the outside."30/ Therefore, although the Government has targeted the transition to occur on September 30, 1998 when the NSI contract with NSF expires, it recognizes that the transition may not occur for several years, if at all.
  
  
• NSF concedes that if management of the DNS comes under new control, competition will only emerge in the assignment of TLDs if the new corporation decides to add new gTLDs. NSF Opp. at 11 ("plaintiff’s case may become moot if the private entity decides to add new gTLDs") (emphasis added). NSF provides no assurance– because there can be none–that the new corporation will, in fact, decide to add new gTLDs. Absent a judicial decree ordering access to the root zone file, there is simply no guarantee that management under another entity will allow access to the root zone file in any reasonable period of time.

Most significantly, the government has once again used its "policy" process in an effort to delay and derail this Court’s antitrust jurisdiction. As noted above, pgMedia filed this action before any consideration of Internet DNS "policy" had been initiated by the Commerce Department. Now, having at long last concluded that process, and having declined to assert in its "policy statement" the very legal authority NSF argues to this Court, the government wants the Court to defer legal decision because the government itself has been unwilling, or unable, to decide these questions. The one thing that is clear is that the United States government had a unique opportunity to "moot" this case–at least for portions of plaintiff’s requested injunctive relief–if it would have decided to open the DNS to new TLDs, including some or all of pgMedia’s. Instead, the Commerce Department "punted," leaving all issues undecided and shifting responsibility from IANA to yet another non-governmental body.

In its May 15, 1998 motion and at the May 27, 1998 status conference, pgMedia made very clear that it has suffered and continues to suffer irreparable injury from being excluded from the domain name registration market. While we are sympathetic with the procedural safeguards identified in the policy statement for an open, international, representative organization to control DNS and the root server, that does not diminish that fact that, as the first real competitor to NSI at the gTLD level, pgMedia has already been frozen out of the market for nearly 18 months. Since there is no realistic likelihood that the new corporation will be organized, and actually open new TLDs, in any reasonable period of time, NSF’s motion for stay should be denied. Only if this Court is willing to provide a clear, prompt "deadline" for the addition of new TLDs to the Internet root server system should it even consider a temporary stay of its decisions on the antitrust immunity and First Amendment questions presented on the pending cross-motions.

For al the foregoing reasons, the Court should enter partial summary judgment for plaintiff on Count VI of the Second Amended Complaint, deny defendants’ cross-motions for summary judgment, and deny NSF’s motion for stay.

Dated: July 16, 1998

FOOTNOTES

^1/ NSI’s Memorandum in Support of Cross-Motion for Summary Judgement and Opposition to Plaintiff’s Motion for Summary Judgement (July 2, 1998)("NSI Opp."); NSF’s Memorandum of Law in Opposition to Plaintiff’s Partial Summary Judgement Motion and in Support of NSF’s Cross-Motions for a Stay or for Summary Judgement (July 2, 1998)("NSF Opp")

^2/Under the June 1 Pretrial Order, plaintiff’s pending motion for preliminary injunction, as supplemented by Plaintiff’s Rule 56.1 Statement (filed June 2, 1998), "is deemed to be a motion for partial summary judgment pursuant to Fed. R. Civ. P. 56 on Count VI of the Second Amended Complaint." Count VI alleges that NSF lacked the power to issue the June 1997 "directive" to NSI, that the directive is insufficient to immunize defendant NSF from liability under Section 2 of the Sherman Act, and that, if NSF has power to confer such immunity, its actions in restricting new TLDs amount to an unconstitutional restraint on plaintiff’s rights under the First Amendment.

^3/Department of Commerce, Management of Internet Names and Addresses, General Statement of Policy, 63 Fed. Reg. 31,741 (June 10, 1998)("Policy Statement").

^4/"NSI received written instruction from NSF on October 2, 1997 to accept direction only from the NSF under the Cooperative Agreement relative to management of the ‘A’ root server. Some operators of other root servers do not acknowledge the NSF’s authority. NSI recommends that the U.S. government publicly assert its authority over the root zone system in the final version of the Green Paper." NSI 1998 DNS Comments (Manishin Dec. Exh. 7) at 3 (emphasis supplied).

^5/ Moreover, whether or not the facts support entry of partial summary judgment for pgMedia, they clearly do not support grant of summary judgment for defendants on the antitrust claim. For instance, NSF asserts that the Cooperative Agreement permits it to assert control over the Internet root because IANA refused to "consult" with NSI. NSF Opp. at 17; Strawn Dec. ¶ 46-47. Yet as discussed below, there is no language in the Cooperative Agreement providing such power to NSF, and the contract itself provides that all powers are vested in NSI unless "specifically reserved" by NSF. See infra at pp. 11-14. Accordingly, because a court on summary judgment must draw all inferences from the evidence in favor of the non-moving party and must deny summary judgment if a reasonable jury could find in favor of the non-moving party, Anderson v. Liberty Lobby, Inc., 277 U.S. 242 (1986), on the predicate issue of NSF’s authority, the Court is not permitted on this record to rule in favor of defendants.

^6/ Although the questions related to NSF’s legal authority are obviously related, neither defendant addresses both issues. NSI briefs only the issue of antitrust immunity, assuming without discussion that NSF has authority to control addition of new TLDs to the root; indeed NSI maintains that NSF’s authority to issue the June 1997 directive does not "relate[] to the antitrust claims" asserted against NSI. NSI Rule 56.1 Statement at 1. Conversely, while NSF asserts that it has authority to issue the directive, NSF Opp. At 12-21, the government does not even argue that the directive provides any immunity or other legal defense to NSI. Id.

^7/ This concession is fatal to NSF’s argument that the NSF Act’s "necessary and proper" clause provides statutory authority for its directives in this case. NSF Opp. at 13. Since it is uncontested that NSF has no "mandate" to support DNS, Pl. Mem. at 6, control of DNS is not necessary for NSF to "translate its statutory mandate into action." NSF Opp. at 13. While 47 U.S.C. § 1870(c) certainly permits the issuance of contracts, if NSF is not required to support domain name registrations, it is impossible to conclude that DNS regulation is a "necessary" activity for the agency. But in any event, the broad language of this implementing provision cannot be interpreted to provide the specific regulatory power NSF now asserts, or else the grant by Congress of agency power to distribute funds would suddenly be transformed into the power to engage in substantive regulation of economic activity. Had Congress intended to authorize NSF to regulate the Internet’s DNS and root server systems, a more specific indication than a catch-all "necessary and proper" clause is required.

^8/ The fact that the Cooperative Agreement contemplates "substantial involvement" by the government is not relevant, NSF Opp. at 14, because the Grant Act’s language does nothing to confer any substantive regulatory powers on the government agency entering into such a contract. The High Performance Computing Act of 1991, 15 U.S.C. § 5501 et seq., is also immaterial. NSF Opp. at 13. This statute authorizes NSF to "provide . . . infrastructure support" for "all science and engineering disciplines," and to "support basic research . . . in all aspects of high-performance computing and advanced high-speed computer networking." 15 U.S.C. § 5521(a)(1). In addition, the Act charges NSF with assisting colleges, universities and libraries as a primary source of information about access to computer networking. Id. § 5521 (a)(2)-(3). These general mandates plainly do not imply any power to regulate, control or restrict DNS.

^9/ Under Fed. R. Evid. 801(d)(2), these NSI SEC filings are admissions by a party opponent that are admissible on the merits, and therefore must be treated as uncontested facts for purposes of summary judgment under Fed. R. Civ. P. 56. See Pl. Rule 56.1 Statement, ¶¶ 2-4

^10/ NSF first states that in ordering no new TLDs to be added to the root server, it is not exercising "prescriptive jurisdiction" over these global resources, but rather only "enter[ing] into an agreement with a corporation." NSF Opp. at 19-20. Yet it cannot be denied that TLDs are used worldwide and are not subject to the exclusive jurisdiction of any one nation. See Perritt Dec. ¶¶ 20-22. Thus, NSF is plainly asserting the power to "prescribe" rules for addition of new TLDs that impact international resources.

Second, NSF acknowledges that it has not sanctioned a monopoly over TLDs, NSF Opp. at 21, citing in support the government’s "policy" decision to permit, at some time in the future, a new private organization to decide issues related to possible TLD expansion. NSF Opp. at 21. Of course, the fact that the United States government may, months or years from now, eliminate the monopoly does not detract from the undisputed fact that, since June 1997, NSF’s directive has had the purpose and effect of preventing pgMedia (and any others) from competing with NSI for domain name registrations. Whether the monopoly may some day be eliminated obviously does detract from the fact that the monopoly is operational today and is being aggressively maintained and expanded by NSI.

^11/ NSF relies on Article VI(B)(1) of the Cooperative Agreement, which grants NSF the responsibility for "support, support planning, oversight, monitoring and evaluation," and approving NSI’s annual report, program plan and budget. NSF Opp. at 15. What NSF fails to mention however, is that the immediately preceding paragraph of Article VI provides that "[a]wardee [NSI] has primary responsibility for ensuring the quality, timeliness and effective management of the registration services provided under this agreement." Coop. Agmt. Art. VI(B); Strawn Dec., Exh 4 (emphasis added).

^12/ NSI asserts that the Cooperative Agreement requires mere "custodial administration" of the root zone file. NSI Opp. at 12. Yet NSI cites no provision of the contract in support of this assertion, and the language from the NSI proposal, incorporated by reference into the Cooperative Agreement, does not provide that "NSI’s role as Internet Registry is only that of day-to-day administrator." Id. at 13. In any event, pgMedia has introduced documentary and affidavit evidence attesting to NSI’s exclusive control of the root zone server Garrin Dec. ¶14; Pl. Rule 56.1 Statement ¶16. NSI’s conclusory assertion to the contrary is insufficient to withstand summary judgment under Rule 56. Reyes v. Koehler, 815 F. Supp. 109, 112 (S.D.N.Y. 1993).

^13/ Pl. Mem. at 7 & n.7 "[A]s all Internet insiders know, IANA is a small group of people [at USC],. . . [and] IANA policy is essentially defined by Jon Postel, one of the Internet’s great pioneers." R. Shaw, "Internet Domain Names: Whose Domain Is This?," in Coordinating the Internet 107, 116 (B. Kahin. & J. Keller eds. 1997).

^14/ "Although the grantee is encouraged to seek the advice and opinion of the Foundation on special problems that may arise, such advice does not diminish the grantee’s responsibility for making sound scientific and administrative judgments and should not imply that the responsibility for operating decisions has shifted to the Foundation." General Grant Conditions, NSI Exh. 5, at 1a.

^15/ NSI claims that the NSF’s June 25, 1997 letter instructs NSI to "’take NO action’ to create or add new TLDs unless instructed by the NSF." NSI Rule 56.1 Statement ¶ 15; NSI Opp. at 4 (emphasis added). But the directive itself (quoted in full in the text) contains no such caveat. Furthermore, NSI itself is internally inconsistent, as it elsewhere contends this DNS expansion was permissible because the TLDs were "added by NSI at the instruction of IANA, and with the acquiescence of the NSF." NSI Response to Plaintiff’s Rule 56.1 Statement, ¶ I. Except for the conclusory assertions of the NSI Grave Declaration, which provides no documentation of any IANA "instruction" or NSF "acquiescence," NSI offers no proof of this purported fact. Plaintiff believes that the language of the June 1997 directive is plain and indisputable, and cannot be contradicted by unsubstantiated testimony. However, under the settled Rule 56 requirement that all evidence (and inferences) is to be construed in the light most favorable to the non-moving party, the most that NSI’s assertions do is create a triable issue of fact, thus precluding grant of its cross-motion for summary judgment. In contrast, pgMedia need not prevail on the issue of NSF’s authority in order to be entitled to partial summary judgment on its motion, because even if the NSF directive only applies to the TLDs plaintiff has requested, NSI still enjoys no antitrust immunity regardless of NSF’s "directions."

^16/ Under Rule 56, evidence relied on by a party in support of or in opposition to summary judgment must satisfy admissibility requirements. FRCP 56(e): see also Adickes, 398 U.S. at 159 n.19. The NSI Graves Declaration contends that NSI has added new country code TLDs only with the "approval" of IANA. Graves Dec. ¶ 33. The only way such "approval" can have been transmitted is through the statements (oral or written) of IANA. Since IANA is not before the Court, these out-of-court statements cannot be offered to prove their truth without violating the basic evidentiary rule prohibition on hearsay. Fed. R. Evid. 801. Accordingly, as an evidentiary matter the June 1996 directive is uncontradicted, NSI’s opposition to Plaintiff’s Rule 56.1 Statement is based on incompetent evidence, and the Court must grant partial summary judgment for pgMedia on the issue of NSF’s authority to issue the directive.

^17/ This Court does not need to reach the immunity question in light of the terms of the Cooperative Agreement, which at most require NSF to accede to the instructions of IANA as to TLD expansion. Supra at pp. 11-13 Because there is no dispute that IANA is a "non-governmental entity," Pl. Rule 56.1 Statement ¶ 23, any "directions" or "consultations" received from IANA are private conduct, which obviously can provide no antitrust shield for NSI. To the extent NSF claims power to "take over" for IANA, it therefore acts not as the government, but rather steps into the shoes of IANA for purposes of the Cooperative Agreement.

^18/ 2 Antitrust Law Developments (Fourth) at 1234, 1316 (1997). Of course, courts "have expressly held that abuse of monopoly power acquired as a result of the [football merger] legislation is not exempt," id. at 1317, such that the NFL has been sued, successfully, for monopolization. United States Football League v, NFL, 842 F.2d 1335 (2d Cir. 1988). Other examples of express antitrust immunity abound, for instance the labor and agriculture exemption in the Clayton Act ("Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of . . . labor, agricultural, or horticultural . . . organizations, instituted for the purpose of mutual help, . . . nor shall such organizations be construed to be illegal combinations or conspiracies in restraint of trade . . ."), 15 U.S.C. § 17; the physician and medical facilities professional peer review exemption in the Health Care Quality Improvements Act of 1986 (professional review body and members "shall not be liable in damages under any law of the United States . . . with respect to the action."), 42 U.S.C. § 11,111; and the export associations exemption in the Webb-Pomerene Act ("Nothing in the Sherman Act shall be construed as declaring illegal an association entered into for the sole purpose of engaging in export trade . . ."), 15 U.S.C. § 62.

^19/ Accord, NSI Opp. at 26 ("The NSF administers no regulatory scheme over the Internet or over NSI"); but see, id. at 16 ("The U.S. Government has continued to exercise direct control over the administration of the root zone file and the designation of the root server,");

^20/ Sakamoto v. Duty Free Shoppers, Ltd., 764 F.2d 1285 (9^th Cir. 1985), cert. denied, 475 U.S. 1081 (1986); Champaign-Urbana News Agency, Inc. v. J.L. Cummins News Co., 632 F.2d 680 (7^th Cir. 1980); Jackson v. West Indian Co. Ltd., 944 F. Supp. 423 (D.V.I. 1996); Sea Air Shuttle Corp. v. Virgin Islands Port Auth., 782 F. Supp. 1070 (D.V.I. 1991); IT&E Overseas, Inc. v. RCA Global Communications, Inc., 747 F. Supp. 6, 11 14 (D.D.C. 1990); Thomas, 1998 WL 1191205 (Manishin Dec. Exh. 19); Beverly v. Network Solutions, Inc., C-98-0337-VRW, slip opinion at 8-9 (N.D. Cal. June 12, 1998) (NSI Exh. 12).

^21/ Champaign-Urbana, 632 F.2d 680, 681 (plaintiff challenged defendant’s exclusive contract to provide books and magazines to Army and Air Force Exchange Services); Sakamoto, 764 F.2d 1285, 1286 (plaintiffs challenged legality of exclusive concession agreement between defendant and Guam Airport Terminal).

^22/ See, e.g., IT&E, 474 F. Supp 6, 14 (granting immunity as a matter of law on Section 1 and Section 2 conspiracy counts, but allowing Section 2 unlawful monopolization and unlawful attempt to monopolize counts); Thomas, 1998 WL *31 (conspiracy to monopolize, unlawful monopoly); Sea Air, 782 F. Supp 1070, 1071 (plaintiff brings only Section 1 claim).

^23/ Plaintiff’s opening memorandum explained how the Thomas court mistakenly applied the "clearly articulated" and "actively supervised" tests of the "state action" doctrine to federal agencies. Pl. Mem. at 22. NSI, to its credit, does not claim that this aspect of the Thomas decision was correct. However, NSI still suggests that these tests apply to federal agencies. NSI Opp. At 22 & n.29. That is wrong. Since federal agencies only have the power to immunize as granted by Congress, whether or not an agency "clearly articulates" a policy is irrelevant. That is why "there is no federal analog to the state action doctrine." Compare Pl. Mem. at 22 with NSI Opp. At 24-25.

^24/ NSI includes in its literature to subscribers that "Network Solutions has a right found in the First Amendment to the U.S. Constitution to refuse to register, and thereby publish, on the Internet registry of domain names words that it deems to be inappropriate." Mueller Dec. ¶ 10.

^25/ Justice Stevens, writing for the majority in Reno v. ACLU, refers to the Internet as a "vast library including millions of readily available an indexed publications" that allows "vast amounts of information" to disseminate around the globe. 117 S. Ct. 2329, 2334, 2335 (1997).

^26/ Even if this Court finds that domain names constitute commercial speech, pgMedia has demonstrated that NSF cannot survive the scrutiny applied to restrictions of commercial speech set forth in Central Hudson Gas & Elec. v. Public Serv. Comm’n of New York, 447 U.S. 557 (1980). See PI Mem. at 24 n.28.

^27/ Time, place and manner restrictions are generally discussed in the context of First Amendment "forum analysis," which NSF concedes is improper in this case. NSF Opp. at 32. See Ward v. Rock Against Racism, 491 U.S. 781, 790-91 (1989)("Our cases make clear, however, that even in a public forum the government may impose reasonable restrictions on the time, place and manner of protected speech."); see also Perry Education Ass’n v. Perry Local Educators’ Ass’n, 460 U.S. 37, 44 (1983)("In these quintessential public for[a], the government may not prohibit all communicative activity. . . [but] may enforce regulations of the time, place and manner of expression.") pgMedia addresses this argument only because time, place, and manner restriction analysis applies only to public forum, which is certainly the class of forum to which the Internet belongs. See Reno, 117 S. Ct. 2329 at 2324 ("The Internet is ‘a unique and wholly new medium of worldwide human communication.’"). NSF’s argument that the Internet is a nonpublic forum, NSF Opp. at 34, stands in the face of all precedent defining that term. See Perry ,460 U.S. at 47 (internal mailboxes in a public school are a nonpublic forum); Adderly v. Florida, 385 U.S. 39, 47 (1966)(jail houses are nonpublic forum).

^28/ Further, NSF’s wholesale ban on pgMedia’s TLDs patently fails the requirement that restrictions of speech be narrowly tailored. Reno, 117 S. Ct. at 2346. Although NSF asserts that its restriction is narrowly tailored because it affords pgMedia alternative means of expression, NSF Opp. at 31-32, in fact the need for "universal resolvability" effectively shuts pgMedia out of the Internet except through use of government-approved domain name content. It is uncontested that plaintiff is unable to use either its own, or any of its customers second-level domains, as a medium of expression. NSF cites a zoning case, City of Renton v. Playtime Theaters, Inc., 475 U.S. 41 (1986), for its holding that being restricted to "five percent of the available land within the city" afforded an adequate alternative site for adult theatres. NSF Opp. at 32. That five percent of available land, however, was "ample, accessible real estate . . . in all stages of development from raw land to developed, industrial, warehouse, office, and shopping space that is criss-crossed by freeways, highways, and roads." 475 U.S. at 53. Here, in contrast, pgMedia has been evicted from the Internet because its TLDs are excluded by government fiat from every portion of the "Information Superhighway" worldwide.

^29/ NSF further argues that any decision to stay this matter is supported, in part, by the "familiar prudential rule of our jurisprudence that courts will not decide difficult constitutional questions if other bases of decision are available." NSF Opp. at 11 (quoting Federal Election Comm’n v. Survival Education Fund Inc., 65 F.3d 285, 290 n.2 (2d Cir. 1995)). Plaintiff agrees, but this prudential rule only counsels that the Court need not reach the First Amendment question if it decides the antitrust issues in favor of pgMedia. There is no other non-constitutional claim that can be adjudicated first in order to avoid the necessity to decide this case on constitutional grounds.

^30/ Testimony of J. Beckwith Burr, Associate Administrator of the National Telecommunications and Information Government for International Affairs, before the House Committee on Commerce, on the Future of the Domain Name System (June 10, 1998). See Haber Dec., Exh. E, at 6.