Traffic West Wrap-Up & A Chat with Steve Sturgeon
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Monte: Hey folks. It's Monte Cahn with Domain Masters. Just got done with the whirlwind tour in Las Vegas at the T.R.A.F.F.I.C. West show. It was pretty cool. We did a live broadcast last week from T.R.A.F.F.I.C. West in Las Vegas and also tapped into the folks over at the Domain Name Roundtable in Seattle and had some live interviews with some customers and also with Rob Montgomery, who runs our traffic club product and both of which participated, my partner, Eric Harrington, and Rob participated, on panels over there. I was on a panel at T.R.A.F.F.I.C. West regarding domain name security and preventing domain name theft. So, both were very good. We're going to recap that for you a little bit further in the show today; because I was only able to cover the first, I guess the first day of the show last week. So I'll cover the last two days of each of the shows if I have time. I have a really great guest who I heard speak at T.R.A.F.F.I.C. West. He was on the legal panel, called the Four Musketeers, Steve Sturgeon; and I'll have him on in a little bit. Steve does a lot of the regular procedures and litigation stuff that you've heard from John Berryhill and Ari Goldberger, and Steven Lieberman. In addition, Steve has some expertise in domain name financing, creative domain name investing, and structuring contracts for domain name investors who want to get involved in domain names and have investments in them. And, also he has a unique advantage by having an office located right where the registry is and has a pretty considerable advantage over any registrant that he wins a case with, because his practice, his law office, is located where the registry is. He can order the registry to do change of ownership and not have to wait for a domain name registrant to change ownership in a UDRP (Uniform Domain-Name Dispute Resolution Policy) case. So, it's pretty unique. He fights on behalf of the domainer most of the time and has won some very large cases against Microsoft and AT&T, and Johnson & Johnson, and Citibank on behalf of domainers. So it will be great to talk to him, and we're going to have him on the first part of the show. So hang with me for a couple minutes, pay some bills, do some commercials. We'll be right back with Steve Sturgeon.
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Monte: Hey guys, welcome back to the show. Monte Cahn, your host at Domain Masters. I want to introduce my first guest, Steve Sturgeon. Steve's been defending domainers for the past 6 years in both UDRP actions and the federal and state court. During that time he's won more than 67 UDRP victories and a number of federal court cases for his clients. He enjoys fighting for domainers and their battles against large corporations. For example, as I mentioned before, he's won victories over a number of large corporations, including Microsoft, AT&T, Citibank, Motorola, and Johnson & Johnson, just to name a few. In addition to litigation and litigating in federal courts around the country, one of his offices is located in Virginia; where he litigates in the U.S. District Court for the Eastern District of Virginia, which has authority over the Principal Domain Name Registry; so that he can result in victories for his clients irregardless of their geographical location of the plaintiff or the defendant. He has published several articles, and I asked Steve to speak tonight and be on the show because I heard him speak at T.R.A.F.F.I.C. West and was extremely impressed with his unique advantages as a domain name attorney and wanted to have him on the show tonight. Steve, welcome to the show.
Steve: Well, thank you, thank you. It's a pleasure to be with you tonight.
Monte: So I assume you got back safely. Steve and I shared a cab together on our way back from Las Vegas after a pretty concentrated day of business being on panels and stuff. So I guess you made it back okay and then are playing catch-up, just like me, for the last couple days.
Steve: That's right. That's right. It was a wonderful conference. I had a chance to meet a lot of people, a lot of excited domainers, and talk about all the opportunities there are in industry. It was a great time. Very well done.
Monte: Great. Great. And as you know we've had several attorneys, who you happened to be on the panel with in Las Vegas, John Berryhill, Ari Goldberger, and Howard Neu, just to name a few. I've had each one of those guys on, and they've been the domain lawyer shows and legal shows happen to be the most popular because a lot of our clients and a lot of the listeners pick up a few things that they didn't know before about domain name-related law issues, how to set up corporations. And one of the interesting things that I heard you say at the show is, you talked a lot about setting some investment opportunities for outside investors as a showcase and you know a way for domainers and domain investment interests to get involved in the business. How's been your experience in that and how does one getting involved in that industry.
Steve: Well, it's an exciting time. It was an exciting topic, a major topic during the conference, to talk about the opportunities that we have as domainers now that we're starting to see a good steady, mature growth of the value of domain names. Of course, we had the speculative boom a few years ago. The boom and bust of other .coms; but now the domains are showing steady revenue, steady increases. Over the past few months, we've seen some nice price increases; and I think we have an opportunity here to bring financing into the picture. So that, instead of just putting up our own $50,000, we can put up $10,000 and have the rest financed, and leverage our money, and make more, and get more investors bidding up the prices, and help all of us.
Monte: So how would a typical domainer become part of a venture and make money in this type of ah, in this part of the business?
Steve: One is by getting the loans on the domain names. Domain names can now be used as collateral, now that we know more about the legalities, now that the courts have worked the legalities, and a domain name can be collateral. Traditional banks aren't familiar with it of course, but the more aggressive investors are interested in making loans with domains as collateral so that you can get a loan, pay interest, and have a mortgage, it's like a mortgage on your house. But the most exciting is to have more of a joint venture. I think that'll attract more investors. Probably the best way to structure it would be to have a Limited Liability Company. The domainer would put in a domain name, an investor would put in some cash, and there would be a concentrated effort to develop the domain name to get the revenue increase. It could be a fairly raw, undeveloped domain name right now. We could develop it, get more revenue, get a steady stream of revenue, that'll increase the value, and in a couple of years sell off. I think we need some showcase examples to show outside investors. I've been talking to quite a few. They're interested but they're a little bit uncertain. They haven't seen any well-documented successes, and I think we could put together a few showcases, a few examples where we take a raw domain name, develop it, develop it well, increase the revenue and increase the price, and increase the profit for the domainer as well as the investor. And that will attract other investors.
Monte: Right. Now, how, so that becoming part of this venture is one part. The other part is developing that domain name into a business. So, tell me a little bit about how you envision the development being done and who will do the development, etc.
Steve: Well, this will be a project that will help all of us; and I hope that a lot of domainers will want to be involved and want to have a voice in this. I've talked with a lot of domainers already. There's a lot of interest in this because it will help all of us. To develop the domain name, we need to find some good developers. Some of the domainers may have had good experience developing the revenue. They may know of other developers, know how to find other developers, and developers will be started. It's going to be a growing business. So, one way your listening audience and domainers can assist is just by giving us some ideas of good developers; or if you developed some good domain names, let us know. We'll get some investment to you and let you show your stuff and develop these domain names to really profitable assets.
Monte: Okay. So those that own some good valuable domain-related properties, it sounds like you have a channel into people that are interested in investing into the projects and then having everyone share in both the benefit and the reward from it.
Steve: That's right. That's right. It's going to be a win-win situation; and all of us domainers will benefit. As the investors come in, we can leverage our money, we can do more development, and we can all have increases in values of our domain names and have a boom industry here.
Monte: Right. And so are there several people backing this initiative from your side, from your client base, that have a considerable amount of money ready to start building these projects and start loaning people money based off of their domain name values.
Steve: Yes. Yes. Yes. There are investors ready.
Monte: Okay, great.
Steve: There is some uncertainty because this is a new type investment, and the legalities have just been hashed out, and there are risks. There are trademark risks, and property title risks, and all; but now that the industry has matured a little bit, they're starting to feel more comfortable. With a couple of showcases, with a couple of documented successes, I think we're going to see a lot of investment, because there is just a lot of potential here. We've all been reading about the great sales that have been made just off raw domain names. Nice profits. Nice increases. And we know the inside of it. We domainers know the inside and how it works. Get some other investors, educate them, familiarize themselves with it, and we'll have more investors and more people in the industry to help all of us.
Monte: Now are you able to name anybody that's behind this project with you? Anybody that some of the domain community may know about or know of?
Steve: Not right now. We will as we move ahead.
Monte: So everybody wants to stay kind of behind the scenes until there's some projects up underway.
Steve: That's right.
Monte: Well, the good news is is that there are people that are interested and this is a reality. And, of course, hearing Mark speak as the keynote speaker, we were able to hear some of the money that his investment group was throwing into the domain name industry and buying domain names and investing in them as well. So.
Steve: Yes, it's interesting that traditional venture capital companies, you may have noticed at the conference, kept talking about investing in a business. Well, we're asking people to invest in raw land, like a piece of undeveloped real estate. Then we'll develop it, we'll put a shopping center on it, and increase the value. A lot of people have made a lot of money in investing in real estate that well positioned; and here we can invest in the real estate of the future. Now that we're moving to an information age, we'll have a piece of the internet; and as the internet grows, our real estate will grow in value. So, there's tremendous opportunity.
Monte: Right. Well that's great. Now something else that was interesting at the conference where I haven't really heard an advantage before, you happen to have an office in, I guess, Virginia; and you have a considerable advantage when winning not only UDRP cases but any kind of legal suit with domain names involved on behalf of plaintiffs or complainants; and I was real interested in hearing how you've been able to get to use the federal court in Virginia to decide cases and then work directly with the Registry to enforce a decision and not have to rely on a registrant if they're a foreign entity.
Steven: That's right. That's right. It's a remarkable power that the Virginia courts have; and a lot of people in other countries wonder why it is that they have to abide by U.S. law and have a U.S. court determine their ownership of the domain name. But that's the way it is. The Registry is here in Virginia for many of the domain names, the .coms, the .nets, etc., with VeriSign and others.
Monte: Now you can also I guess command .biz, because NeuLevel is based there, correct?
Steve: That's right. Yes.
Monte: And Afilias Limited, although is a foreign, set up as a foreign entity, they have presence in Virginia. Can you also rule over .info?
Steve: No. That's one that's outside of Virginia, the Registry.
Monte: Okay, because I know that they do have an office in Virginia; because they use the backbone of Public Interest Registry (PIR), the .org network, and vice versa, so they do have offices there. But jurisdiction is foreign in that particular case?
Steve: That's right. That's right.
Monte: Okay. Okay. So explain how this process works. So, if you become the winner of a case. Just walk us through the process.
Steve: Sure. It's different from most court cases. Most court cases you have to have jurisdiction over the person. The person has to be in the state, you have to deliver the court papers to them, and have them appear and have jurisdiction over them. This is an in rem jurisdiction over a thing. It's used in real estate property and now it's being used in domain names. But you have jurisdiction over the little data bits that are in the main Registry; and if I can get a judge to issue an order with respect to that thing, that domain name, then it can be transferred from one person to another. The procedure is that a court complaint lawsuit is filed, you need to use some effort, your best efforts, to try to contact the owner, but if its impossible to contact the owner, the court will let you go ahead with the proceeding. A decision can be rendered with respect to that property and ownership can be transferred from one person to another.
Monte: Okay. So there is, so if there is a UDRP case,
Steve: Right.
Monte and there is a failure to comply,
Steve: Right.
Monte: do you wait for compliance before you pull the trigger on the Registry or do you just automatically pull the trigger on the Registry?
Steve: You can do either. You usually wait for compliance first; but the cybersquatting act of a few years ago (Anticybersquatting Consumer Protection Act of 1999), provides that in a UDRP action or other similar types of action, you can get a judgment that will reverse the UDRP decision or reverse the transfer. The wording is that you can require the transfer of a domain name or require it to be transferred back based on the cybersquatting act. So, the UDRP of course is the administrative proceeding, an administrative judge, and the next step if you want to reverse that is to go to federal court and get a judgment with respect to the cybersquatting law and then that can be enforced on the domain name in the Registry or the Registrar's database.
Monte: Right, right. So in UDRP cases, it's probably less common that you would have to pull rank with the Registry because the Registrars are required to comply with the decision.
Steve: Right.
Monte: And assuming that you can be in touch with the Registrar or that the arbitration group can or the UDRP group can, to give that ruling; and within the 10-day period of time make sure that that domain name is transferred to the winner of that case or it remains with the defendant.
Steve: That's right.
Monte: But in where I see a big advantage is the U.S. Trademark cases where a violating loser of a case would be located anywhere else.
Steve: Right.
Monte: And therefore you would have jurisdiction over the Registry and that as long as it's a .com, or .net, or .biz. or .org domain name, since they're all located in Virginia, you would be able to move that domain name quickly as soon as there is a ruling and not have to worry about who the Registrant is.
Steve: That's right. And even overturn the decision that, if my client doesn't like the UDRP decision, we can file an action here in federal court to basically reverse the decision based on federal laws to point out that my client is not a cybersquatter or that the other is a cybersquatter, and get the domain name back to my client just by filing the suit and getting a judge to make the order with respect to the domain name here at the Registry in Virginia.
Monte: Right. Now something else that we discussed when we were in the cab is that, unlike a UDRP case, where there is 3 things that have to be proven. You have to prove that your domain name is confusingly similar to somebody's brand and identify that the domain name registration was malicious in nature and that you don't have a right to own that domain name in terms of your course of business.
Steve: Right.
Monte: But in federal court cases, there are many things that are proven or many more things that you can go on.
Steve: That's right.
Monte: So what are some examples that are in addition to the things that I just mentioned in the UDRP case that are decided in arbitration form.
Steve: Yeah, that's right. But basically, in a UDRP, you have 3 things to prove in order to prove the guy's a cybersquatter and the domain name should be transferred; but under the federal laws, it's harder to prove that somebody is a cybersquatter because there are 8 or 10 different criteria that you look at, and its sort of a weighing of the evidence, weighing of the scales. And just because of the say the law is written, it's harder to prove somebody's a cybersquatter under the federal law than it is under the UDRP. So, UDRP had a lot of influence of the trademark owners as we know, and people think it's a little bit slanted against the domainer in favor of the trademark owners; but once you get to the federal court, it's harder for a trademark owner to take away the domain name. It's harder for them to prove that somebody is a cybersquatter just because the way the law is written.
Monte: Okay, Now, one of the big questions that's popping up in our chat room is, okay let's talk about what the cost of that is. A typical cost for a UDRP case for you to work on behalf of a client, and then what happens with these reversed decisions in terms of cost. What's a domain case like this particularly cost with you, assuming that you would be able to reverse this or file something federally with the Registry?
Steve: Right. We work on an hourly basis. We do a lot of our projects on an fixed fee basis, but court actions we have to use an hourly basis, because it's hard to predict. And we usually ask for a retainer of a few thousand dollars, around $5,000; and we proceed. Usually the case is settled fairly quickly or we get our decision if the other person doesn't appear; and sometimes we end up giving some of the retainer back if we don't use it up. It's really a fairly modest price considering the value of some of these domain names.
Monte: So minimum retainer is $5,000. If there's a no-show or a very quick decision, lots of times there is a portion of that retainer returned. What's been the extent of maybe one of the most expensive cases that you've handled? How deep did it go?
Steve: Well it can go up to $100,000 or so. But that's unusual, because once you sit down in front of a judge and lay out your case, the judge puts a lot of pressure on you early in the proceeding to settle. And you go into another room and you work out a deal. Call up your client and have an agreement. So, if a company is just really an intense fighter, and those never want to give up, and it could go up to $100,000 or so, but you can always quit, you could always settle, you could always make an agreement prior to that, and you could also get financing. I mean if a domainer doesn't have $100,000 to fight, there are of financing it with contingency for the lawyers, investment from investors, there are ways of defending it, even if the corporation is intensely litigious and wants to just fight all the way through. There are ways of doing it, and I encourage people to consider all alternatives and fight for these domain names, because they are getting more and more valuable.
Monte: Yeah, it sounds like that. So it sounds like in general it's a pretty reasonable cost when you value your online asset and your property, and you can defend the case and even reverse a decision that's gone against you, if that's the case.
Steve: Right.
Monte: I'd like to just take a quick commercial and come back to you and then we can talk about some of the creative contracts that you've done for domain name sales and financing domain names, and some of the other things that you're working on. Is that okay?
Steve: Terrific.
Monte: Okay, we'll be back in a couple minutes.
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Monte: Hey folks. Welcome back to the show. Just continuing my interview with my guest, Steve Sturgeon, and we're talking about some really different domain legal issues that Steve's worked on, one being his power in the Virginia Federal Court of obtaining a decision and then enforcing that decision over the Registry. So, we just spoke about that. Hey Steve , while I have you, are you able to name any kind of famous reversal decisions by domain name that have come up from using this power over the Registry?
Steve: Well, I won one heels.com, kind of a generic term. I fought one with Wal-Mart and we had a settlement. Wal-Mart is a touch one to fight against.
Monte: Was the settlement in your favor on behalf of Wal-Mart, I mean were you defending Wal-Mart or a domainer.
Steve: I like to defend the domainers.
Monte: Yeah, yeah, it sounds like it.
Steve: So I was helping a guy who had the domain name SamsClub in England.
Monte: Oh, wow. Did he have SamsClub.com or .com.uk?
Steve: It was .com. SamsClub.com because his daughter was named Samantha and they had a store for a long time. And they had good priority. So we settled that one.
Monte: And the heels, the heels.com decision. What was that? What were some of the details around that decision?
Steve: Yeah. Um there was a company in Germany, based in Germany, that had the trademark on the word “heels”; and my client had the domain name heels, a generic term. And he was from North Carolina where they have the Tarheels.
Monte: Ooh.
Steve: So the German company won the UDRP. Then we appealed at the federal court here and got a very nice settlement for the client. The German client ended up buying it rather than fighting through litigation.
Monte: In these particular examples that you're giving, did the settlement not only cover the legal costs of the domain name but actually put a considerable amount of money in the pocket of the owner of the domain name?
Steve: That's right. That's right.
Monte: Well that's good news. That's worth the fight I guess. Oh, great.
Steve: And I can usually give a good prediction to the client of what it's likely to settle for based on the strength of the case; because you know the big corporations do things logically. They don't want to spend $75,000 when they can buy a domain name for $30,000. So they settle and avoid the legal expense.
Monte: One of the folks on the chat room is asking just give us a rough cost of what the SamsClub case cost the particular domain owner that you were defending.
Steve: Well, you know, I was doing that on a contingency basis; and he didn't have much money and we did it on a shoestring, and he got a payment, and I got a payment, and we were both happy.
Monte: So it was based off of whether you won or not?
Steve: That's right. We can do contingencies.
Monte: Okay. Great, great. Well that answers that question. Well, let's go into another thing that's of great interest to everybody. As the sales environment and the domain values are picking up, obviously there are contracts that are involved for domain name sales. We've been involved with thousands of domain name sales and escrow agreements, or escrow transactions, and sometimes there's contracts needed and sometimes there's not, and sometimes the contracts get quite complicated. What are some of the key points that can be negotiated to make a deal more attractive to the buyer of a domain name in your opinion?
Steve: Early on, as you now, a lot of domainers just had the attitude I want to sell this domain name and I don't ever want to be bothered with it again. So I'm not going to give any warranties, you buy it as it is. You take the risk. But a buyer out there, if he's not very knowledgeable about the industry, wonders what kind of skeletons are in the closet and what kind of lawsuits are going to come after him, or-
Monte: For example, if he's been contacted by a previous trademark owner that could come back at another time and really create a problem and so on and so forth.
Steve: We all know that sometimes when a cease and desist letter comes, the very next day the guy will put it on the market and try to sell it and get rid of it. But there are ways of making it more attractive to the buyer; and when you make it more attractive to the buyer, he going to pay more. If he doesn't know what the risks are and he's just taking it as is, he might give a low price for it. But if the domainer can make a few warranties and guarantees, he's going to feel more comfortable, and he's going to be willing to pay more. So here are some risks. One is the trademark risk. The domainer can make a simple warranty saying that I have not received any cease and desist letters for the entire time I've owned the domain name or the domainer is not aware of any trademark claims or trademark contests with respect to that domain name. It's a simple warranty, but it really puts the buyer at ease. Another is with respect to the title. The owner can warrant and guarantee that he has good title for it, that he hasn't stolen it over the past month, and he's not selling hot merchandise. That's an easy one. With respect to the performance, something new we're starting to see is that sales are based on performance.
Monte: Right. And specifically like, for instance, the Marchex deal that was based on some kind of performance based off of traffic PPC (pay per click) ratings, and so on and so forth. There are a lot of purchase deals going down with those particular metrics in mind.
Steve: That's right. That's right. A sort of an earn out is the term that's often used. The domainer gets a certain amount now; and if it performs like it's supposed to, he'll get another amount. If it performs less than it's supposed to, then he'll get less amount. And there can be all kinds of sharing of the risks there, but that will make a buyer more comfortable if the domainer feels comfortable enough that it's going to produce good revenue, he could make a warranty that'll make it much more attractive to the buyer and share some of the risk.
Monte: Right, right. Alright, so those are some good points. And then, you know, I'm sure you have some standard templates. Do you work a lot for the domain sales transactions that are going down right now? I mean is that a part of your business that you specialize in?
Steve: Yes.
Monte: Okay.
Steve: There are a lot of issues to be negotiated as these are getting to be more complex and more valuable. In addition to just the straight sale, there can be joint ventures, as I mentioned earlier, with joint ownership. Those can be very attractive to a domainer. The domainer can put his domain name into an LLC, he might get $25,000 back in cash and he'll own a percentage of the LLC that'll be developed with outside money and increase earnings and increase the assets. So he'll win on both fronts. He'll get $25,000 in his pocket and he'll get part of the profit as the domain name increases in value and produces revenue.
Monte: Right, right. And that jumps into some of the financing of domain names and obtaining finance money for development to increase revenue and increase the value of a domain name over time.
Steve: Right, right, right. Just lots of ways of structuring it. LLC's are wonderful, but you can structure different percentages of revenues shared between the domainer and the investor, different percentages of the profits. Some will take upside risks. Some will take downside risks. You can have guarantees. You can have options to purchase. You can have an arrangement that, when you find a buyer for $500,000, then the domainer can cash out or he can stay in. Just lots and lots of options here. So, whatever the domainer wants, we can structure it; and it would just need to find an investor who will be willing to make the deal with those terms that the domainer asks for.
Monte: Right. Right. Yeah, and that's in the past I used to recommend to my clients that they not get involved in lease-to-own type transactions or renting of domain names as test periods; because building a brand on a domain name that you don't have a right to becomes quite risky if it's not yours.
Steve: That's right.
Monte: And now, I'm changing my tune because of the way that domain names are being considered as property. Some of the recent decisions are such that they're property and some of the evaluations of property values, and of course their appreciation value. And I totally agree with you that there's all kinds of creative ways now to get involved in this business and to be a part of something that's growing and is as exciting in our business to get into the domain name industry.
Steve: Absolutely. Just fantastic opportunities. There is a window of opportunity here; we're starting to see good steady mature growth. Just wonderful opportunities.
Monte: Right. Right. And just as a side note, I met some folks at the T.R.A.F.F.I.C. West show and they're starting the first domain name pawn shop basically. And even though it's not at a very considerable attractive bank rates, like going and borrowing money from a bank, it is probably one of the first steps in getting a value of cash based off the value of your domain name.
Steve: Uh, huh.
Monte: And if you need money for a short period of time and your domain name is worth a certain amount, you have a safe way to borrow against that domain name, get some cash, and pay it back.
Steve: That's right.
Monte: So, we're going to be involved actually in the appraisal values of those particular transactions and also offering that to our customers. And I think that this is the first step in getting banks to realize that these things can be loaned against and that they are true assets and have appraisal values that are real just like property. As a matter of fact, we've had two transactions over the last couple years where a bank has loaned money based off of evaluations. They were not U.S.-based banks, but foreign banks.
Steve: Right.
Monte: And so I think that things are getting very, very exciting; especially with the, when you go on the aspect of PPC revenue and guaranteed contracts and minimum payouts that are getting received, it's the same as money anyway.
Steve: Yeah. Yeah, I've looked into your appraisal mechanism. You have a really, very sophisticated appraisal mechanism that should work very well for potential investors.
Monte: Yeah. Yeah. So far it's working and we get a lot of data from a number of different places that we consider to be experts in the area, and then put it all together in an appraisal product that's really grown over time. We invented the appraisal model for the entirely basically, back in 1998, 1999. And it's grown quite a bit. It was only based off of 4 or 5 major points back then, and now it's up to 18 major factors, which takes into account what is going on in the industry, including PPC revenues and search relevance and how present are the terms within a domain name across the entire industry and zone files, and all kinds of interesting stuff that really puts more value characteristics on the domain name. And then the most important part is having a comparable sales database that has like names that you are appraising.
Steve: Uh, huh.
Monte: And so you can start using appraisal processes and comparisons based off of house values when you're appraising a house, the same can be held true for domain names.
Steve: That's terrific. Yeah, things like that, as we get more sophisticated in the industry, as we have good appraisals, and the legalities are hashed out in the courts, as we know more about collateral and property ownership rights, and how to properly appraise. Now that we're getting more certainty in the industry with respect to that, that's what's making it more comfortable for investors to come in that will make a nice boom for all of us, it will help all of us in the industry.
Monte: Now I understand you spoke, is it true you spoke at the United Nations Task Force regarding internet governance.
Steve: Yes. I'm on a committee, yes, that's exploring that. There have been outcries around the country for something other than a U.S.-dominated internet. So the U.N. has established a committee task force to examine how it's currently governed and make some recommendations for future governance and future policies. It's a fascinating process because, as you can imagine, people in other countries are very upset about the U.S. domination of industry. There is talk about making some changes and ways of changing things and way s of establishing the policies. A lot of controversy surrounding ICAN, and ICAN's devoting a lot of its resources now to dealing with a lot of the issues that are being raised by people around the world with respect to how things should be governed in the future.
Monte: Right. Now let me get your legal opinion as someone that's really involved in the domain industry. There seems to be a consensus among some registrars that ICAN needs to even get in more control of this industry and put a little bit more regulation on what's going on. I think that stems from all the little tiny registrars that are out there that don't have customer service and don't have people behind the registrar, that they're just fronts for the drop in domain expired market. So they want ICAN to get more involved there. On the other hand, from our aspect, we don't want to be melded into what all the other registrars are doing; so we're letting the market speak and our customers speak on some of the products and services they want to have within a registrar. So, we're the first registrar that is incorporating domain name sales and escrow services in its offering. We always have done that, and domain evaluations, and things that are treating domain names more like assets. To what extent do you think ICAN needs to get more involved in our business and in regulation, and where do they need to lay off and stay away, so that companies like mine, Moniker.com, can differentiate itself from the rest of the pack and offer things that our customers are asking for versus what ICAN says is okay to offer?
Steve: Well, I think that more regulation is inevitable. You see it in every industry. It starts out as a cowboy wild west, and very few rules that are enforced, and everybody just does creative things. It's inevitable that there will be more regulation, and I think that's coming both from the federal government, federal laws, as well as ICAN. ICAN has tended to be reactive more than proactive, that they have so many people complaining, and so many different strident voices yelling for different things, that they have been sort of reactive. And a lot of it's just going to be the political influence of various constituencies. Just like with laws that are enacted in the U.S. Congress, trademark owners, they have a big lobby group, other people have various lobby groups, and they just lobby to try to get their desires felt. I think that there is a great need for one or more lobby groups of registrars. When you get down to it, the registrars have a lot of power that's not really been aggressively uniformly coalesced into a voice that can speak for registrars. So, in answer to your question, it's going to be a matter of politics, like with everything. Various forces will try to put pressure on the federal government, various forces will put pressure on ICAN to change the rules and regulations. We're just going to take it a step at a time. I really don't have any specific predictions about where the regulations going to be and where it's not. It's just inevitable that in industries that there is continuing increasing regulation as time goes by. Exactly what it'll be we'll wait and see.
Monte: On the federal side, do you have any feel for or do you foresee any rulings or any increased involvement in the federal government in the way they are treating domain names or the internet in general that can affect us and our business? Both positive or negative?
Steve: [inaudible] are being discussed right now. As you know, the T.R.A.F.F.I.C. West conference aggregated some money from the cost of the event to hire a lobbyist who will be doing specifically that. Looking at ways that domainers can be represented and domainers can have their voices heard.
Monte: Right. Just by the way, just so I can state this, but we were successful in raising about $50,000 thus far for this lobbyist; and although that doesn't seem like a lot, it was just from one small conference. Well, I shouldn't' say small, small gathering of 200 people who represented some of the top 200 domain name holders in the entire world, but a pretty powerful group put together $50,000 out of their pockets from the donations from the show and at least getting a lobbyist to get involved on behalf of domainers. So, that's a good first step.
Steve: Yeah. And I just want to publicly commend Moniker and applaud Moniker's contribution to that. You were a major player in the conference and financing and sponsoring various things. You're really on our side. I was impressed by the security of your system and your aggressive approach to things.
Monte: Well, I appreciate that; and we actually supported both the T.R.A.F.F.I.C. West conference and the Domain Name Roundtable, and feel it's important for the first time in history to have two conferences going on, and to have them going on at the same time for that matter, but to have them going on representing our industry and having some 400 some odd people or so at two different locations in two different cities at the same time, all on domain-related issues, domain name opportunities, evaluations, PPC opportunities, all the things that are going on in our business and our industry. It was, I think it was pretty exciting.
Steve: It is. It is. It shows the maturity of the industry and the future of the industry. We're growing and we'll continue to grow.
Monte: Right, Right. Well, that's great. Well Steve, how do people get in touch with you and how to they engage in your services. I'm going to be putting up your short profile and your link to your web site up on our domain partner's page which actually has resources for a number of the partners in our industry and the legal resource section at the bottom of that page. But what's the best way people can contact you in case they want to get involved in reversing a UDRP decision or create a financing contract, or getting some of that investment money that you're standing behind to get involved in their project.
Steve: Yeah. Um, give me an email steve@domainnamelawyers.com or call me on my toll-free number 1-800-Sturgeon. It's easy to remember and gets right to me.
Monte: Okay, so that's steve@domainnamelawyers.com?
Steve: Right.
Monte: Alright, I'm going to post it up on the Board and then the 1-800 number again is.
Steve: 1-800-Sturgeon.
Monte: Alright. That's a good name to get.
Steve: Yeah. Easy to remember.
Monte: Yeah, definitely. Alright Steve, well it was a pleasure talking to you. I really appreciate all your time and I will definitely have you back on the show, as I have with the other attorneys, to cover the issues at hand; and really appreciate your support of the industry and your unique approach. It's one that a lot of the attorneys that we have on aren't able to take advantage because they don't have their offices in the Registry jurisdiction. It's a great feather in your cap.
Steve: Well, it's a pleasure. Thank you.
Monte: Okay. Hang on everybody. I'll be back with just a show wrap-up and we'll cover some of the events from the last two conferences from last week and then we'll end the show and talk about next week. I'll be on in a couple minutes.
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Monte: Hello guys. Welcome back to the show. And I want to thank again Steve Sturgeon for his time tonight; and I was, of course, impressed with him when I heard him speak on the legal panel at T.R.A.F.F.I.C. West. I know he'll be a valuable resource to anyone. If anyone needs to get a hold of him, I have posted his address, his email address, and his phone number on the chat room and of course you can email me at Monte@Moniker.com at any time I can help you with any of the resources that have spoken during any of the radio shows that we've put on. And also, of course, everything is going to be archived and has been archived so far, and is available at Moniker.com in the radio archive section right on the front page. I just wanted to briefly recap both conferences last week for those of you that missed the life show last week where we broadcast live from the event and went over the daily activities of the first day of the show, and then went over to Seattle and spoke to the folks over there and listened to what was going on as well. So, at T.R.A.F.F.I.C. West after Wednesday, which included a pretty exciting, the highlight of that particular day was listening to a seminar from a lot of the venture capital groups, including Marchex about domain name acquisitions and kind of the modeling that their doing regarding acquiring domain names. And some of the complexities around evaluating those domain names and some of the creative deals they're trying to structure for purchasing domain names, whether they want the people that are involved in the domain names to come along with the project and with the purchase or don't want them to come along. There was a lot of interesting questions and comments regarding that. The part that I took out, the most important piece that I took from that particular seminar is, first of all seeing 5 or 6 VC companies and also Marchex, who is responsible for the largest domain name purchase transaction in history of $164,000,000, stand up on a panel together to talk about how they're getting into this business in a big way is extremely exciting for our industry. So, those of you that hold domain names and own them, it's very important to note that the industry is getting recognized as PPC rates and online advertising continues to increase. People are finding more value in domain name and domain name-related properties, and as we've always had the position that domain names are truly assets, they are the foundation of the internet, they're your identity, your online brand. We also learned from hearing the keynote speaker at that event, who was Mark Ostrofsky. He's the President of Internet REIT and that's IRET.com. He was the famous person that sold business.com to E-company's business.com group and retained a part ownership in that transaction and also sold it for $7.5 million, part in stock and part in cash. Rumor has it it was a majority in stock and a little bit of cash. It's more like $1.5 million in cash and the rest in stock. And of course, a couple years ago, it looked like to be a South deal, a deal that was going South, but business.com is now one of the largest online portals for business and is a business portal for anyone that wants to get themselves known on the web and as a resource. So, it's turning out to be a very good transaction for him, and he's representing a number of family, you know [inaudible] group of family money, and they have made a commitment of putting in some $250 million to $500 million into this business, into this industry, of acquiring domain names. And one of the key things that I got out of his message was that, it's a good idea to always take some money off the table. It's okay to sell some of your domain names, even though they're valuable, so that you're not leaving all your eggs in one basket. Some domainers have the attitude that they want to hold onto the domain names forever and there's no price at which they will sell; but we all own property, and we all own businesses, and we all own you know things that are of value for sometimes getting paid for that value at some point. So, Mark's main message was, hey it's okay to take some value off the table, it's okay to sell some domain names, put that money back into your investments, diversify yourself; because things can change suddenly in the market. We could have another catastrophe, another 9/11-type incident, and we could hit a lull for a little while before things pick up again. So, stay invested in the domain name industry and also it may be a good idea to sell. On Thursday at T.R.A.F.F.I.C. West, after the breakfast, I participated on a panel with DirectNic.com and Fabulous.com; and we, of course, covered one of the hottest issues in our business, which is this domain hijacking situation. We really went through a lot of the things that our registrars do to protect their customer; and I would like to commend our staff at Moniker.com. I think that we have the very highest in security. I'm not trying to plug us on the air here, but I just want to let everyone know, those of you that were at T.R.A.F.F.I.C. West, I think everybody walked away knowing that we are truly doing the very best in domain protection. We probably were the only one on that panel that has never lost a domain name and have more protection mechanisms in place to protect domain names from being hijacked than anyone else in the industry, and that comes of great value, especially after listening to a seminar from Venture Capital and Domain Investors about how valuable your domain names are. So, I owe it to my company and our processes and our people for protecting everyone's domain names and their assets. And, then we listened to, of course, the lawyers on the reverse hijackings; and of course had Ari Goldberger, John Berryhill, Steve Sturgeon, and Howard Neu on, and covered a number of various issues regarding domain name hijacking, how to get names back, and a few registrars were named as being the ones that are contributing to the problems in our industry. I'm sure everyone knows who some of those people are, but I walked away with a very good feeling about our industry, about the show in general, and very confident in our business and the way that we're serving our customers, and the future of our business. And after speaking to Eric, my partner, and the folks I sent over to Seattle, the same sentiment is true over there. Domain name evaluations came up, and we participated on panels on driving PPC revenue into your pocket and the value of domain names and domain name sales and escrow transactions, and kind of the issue that I covered with Steve how ICAN is probably stuck between a rock and a hard place in terms of its governance and its regulation and where they should really be stepping up and regulating the industry and where they should let things be free market. So, I think ICAN clearly heard a message from that panel that, in some cases there is more regulation needed, but in other cases we all, as registrars, need to be able to differentiate ourselves and offer products and services that meet our customers' needs. So, it should be very interesting. The next large domain show coming up is, of course, T.R.A.F.F.I.C. East, which is at Delray Beach, Florida. People can go to targetedtraffic.com and look at that show. I suggest that any of you that are interested in attending that show sign up right away. They're basically taking a whole entire Marriott Hotel and it's all been reserved. It's going to sell out pretty quickly. I think there's only 250 or 300 people at that show anyway, but those of you that are interested in attending one of these domain-related shows and hearing more about what's going on in our industry from the domainers themselves, the people who have been successful in the industry, the people who are investing in the industry, the Googles and Yahoos of the world who participated on panels at both of these shows, I suggest that you go there. And of course, there's a lot of side shows coming up that we'll be participating in, including the WebmasterWorld Conference, where we'll be speaking on a panel regarding domain names and the DNS propagation and the SCSC 2004 event coming up in San Jose, California, which is the search engine strategy show. So, with that, please let me know if you want to hear any particular topics. Please email me at monte@moniker.com with any ideas you have on the shows, and I'll have a great show lined up for next week as well. I would like to wish everybody a great week and be the master of your domain on Domain Masters. I'll see you here next Wednesday at 7:00 p.m. EST. Bye, bye.
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