Demanda contra NSI por prácticas anticompetitivas

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA


_________________________________________


WILLIAM THOMAS;                                         )

MYHOUSE COMMUNICATIONS,                      )

RUSSELL BRAEN, MANAGING PARTNER;      )

THOMAS J. HOWELL;                                    )

LITIGATION COMMUNICATIONS INC.;              )

SARTORI ASSOCIATES; AND                         )

DELTA MICRO SYSTEMS, INC, ET AL.            )

FOR THEMSELVES AND AS                           )

REPRESENTATIVES OF ALL                           )

COMMERCIAL REGISTRANTS                         )

ON THE INTERNET,     )

)

Plaintiffs, )


) 97 Civ.2412

v. )

) JURY TRIAL DEMANDED

NETWORK SOLUTIONS, INC. AND ) CLASS ACTION

NATIONAL SCIENCE FOUNDATION, )

Defendants. )

________________________________________ )




COMPLAINT


Plaintiffs, by their undersigned attorneys, for their Complaint allege that Network Solutions, Inc. (hereinafter "NSI"), and the National Science Foundation (hereinafter "NSF") without statutory authority have assessed Domain Name Registrants on the Internet Registration and Renewal Fees in excess of $100 million. Plaintiffs further allege that the same Defendants assessed and collected a tax, totaling over $30 million, as part of the Registration Fee, for the "preservation and enhancement" of the Internet in violation of the Fifth Amendment and Article 1, Section 8, of the U.S. Constitution. Plaintiffs further allege that NSF violated the Competition in Contracting Act when in September of 1995 the NSF fundamentally amended the original "cost-plus fee" contract with NSI to authorize NSI to collect a $100 Registration Fee and $50 annual Renewal Fee without invoking the requirements for competitive bids. Had NSF followed the requirements of the Competition in Contracting Act, other parties would have bid to perform the Internet Domain Name Registration service for a fraction of the costs extracted from Domain Name Registrants by NSI. Finally, Plaintiffs allege that NSI and NSF, individually and with others, have violated the antitrust laws of the United States, and conspired with others to violate the antitrust laws of the United States, by, inter alia, administering the Domain Name Registration process to eliminate new entry and maintain a monopoly over the Domain Name Registration market. This was done by denying potential competitors offering other Top Level Domain name registration services access to an Essential Facility required for such registration. By way of remedies for these violations of law, Plaintiffs request, inter alia, that the improperly imposed Registration and Renewal Fees be returned to every Domain Name Registrant; that the unconstitutional tax be returned to every Domain Name Registrant; that NSI pay antitrust damages, trebled, plus costs and attorney fees; that the Court declare the Defendants' conduct unlawful; that the Defendants be enjoined from the future collection of Registration and Renewal Fees; and that NSI be enjoined from denying access to potential competitors the Essential Facility which it exclusively controls.


JURISDICTION AND VENUE


1. This Court has subject matter jurisdiction in this action pursuant to (a) Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2); (b) Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26); (c) the Competition in Contracting Act (41 U.S.C. § 253, et seq ); the Little Tucker Act (28 U.S.C. § 1346 (a) (2)); the Administrative Procedure Act (5 U.S.C. § 702); Federal Question jurisdiction ( 28 U.S.C. §§ 1331 and 1367); Diversity jurisdiction ( 28 U.S.C. § 1332 (a)), and the principles of pendant and/or ancillary jurisdiction. The amount in controversy, exclusive of interest and costs, exceeds $75,000.

2. The Court has personal jurisdiction over Defendant NSF, insofar as NSF is an agency of the Executive Branch of the United States Government. The Court has personal jurisdiction over Defendant NSI insofar as (a) NSI is an agent of NSF, an agency of the Executive Branch of the United States Government; (b) NSI has entered into contracts or agreements with NSF (or others) in this jurisdiction; (c) NSI has otherwise transacted business in this jurisdiction; and/or (d) NSI has committed acts or omissions giving rise to Plaintiffs' claims in this jurisdiction.

3. Venue in this action properly lies in the United States District Court for the District of Columbia pursuant to 28 U.S.C. § 1391, insofar as (a) Defendant National Science Foundation is an agency of the Executive Branch of the United States; (b) Defendant NSI is an agent of NSF; (c) contracts or agreements between NSF and NSI (or others) giving rise to Plaintiffs' claims were entered in the District of Columbia; and/or (d) the acts or omissions of NSI and NSF giving rise to Plaintiffs' claims took place in the District of Columbia.



CLASS ACTION ALLEGATIONS


4. This action is brought as a class action, pursuant to Fed.R.Civ.P. 23(b)(1), (2) and (3), and Rule 203 of the Local Rules of the United States District Court for the District of Columbia, on behalf of all past or current Domain Name Registrants on the Internet (the "Registrants") from September 1995 through the present. This is a class action properly maintainable under Fed.R.Civ.P. 23 and Local Rule 203.

5. Upon information and belief, the size of the class is in excess of 1 million persons or entities (as of June 30, 1997), and joinder of all members is therefore impracticable.

6. The named Plaintiffs' claims are typical of the claims of the class. Plaintiffs are not antagonistic to the class and will fairly and adequately represent and protect the interests of the class.

7. All class members have an identical interest in seeking damages for the unlawful acts of Defendants resulting in the harm to the Plaintiffs complained of herein. Because of the amounts due each Registrant on an individual basis, it would be impractical or impossible for each Registrant to bring this action individually. The fees charged to Registrants by Defendant NSI for Domain Name Registration Services is $100 per initial Domain Name registration and two years of use, and $50 per year renewal thereafter.

8. Common questions of law and fact predominate over individual questions, and therefore a class action is superior to other available methods for the fair and efficient adjudication of this controversy. The questions of law and fact common to the class of Registrants includes, without limitation, whether (a) NSI violated Sections 1 and 2 of the Sherman Act; (b) whether the National Science Foundation violated the Competition in Contracting Act (41 U.S.C. § 253 et seq.) or the Administrative Procedure Act 5 U.S.C. § 702; (c) whether the National Science Foundation has, without statutory authority, improperly authorized the imposition of charges or taxes on the Registrants in violation of Article I and Amendment V of the United States Constitution; and/or (d) whether Registrants are collectively entitled to equitable relief including (I) an injunction against the future unauthorized imposition of charges and taxes; (ii) a decree declaring that all charges heretofore collected are to be held in constructive trust on behalf of the Plaintiffs and Class Registrants; and (iii) restitution of all wrongfully taxes or charges.

9. No exceptional difficulties are likely to be encountered in the prosecution of this action as a class action.


THE PARTIES


10. Plaintiff William Thomas is a resident of the District of Columbia and is a Domain Name Registrant with the domain name "prop1.org." Mr. Thomas has been required to pay Renewal Fees to NSI to maintain his status as a Domain Name Registrant on the Internet.

11. Plaintiff MyHouse Communications is a Maryland Partnership and a Domain Name Registrant with the domain name "myhouse.com." Plaintiff MyHouse Communications has been required to pay Renewal Fees to NSI to maintain its status as a Domain Name Registrant on the Internet. Plaintiff Russell Braen, a Maryland citizen, is managing partner of MyHouse.

12. Plaintiff Thomas J. Howell is a citizen of the District of Columbia and a Domain Name Registrant who has been required to pay a Registration Fee, charges and taxes to NSI to maintain his status as a Domain Name Registrant on the Internet.

13. Plaintiff Sartori Associates resides in the State of Texas and is a Domain Name Registrant with the domain name "howard.com." Plaintiff Sartori Associates has been required to pay a Registration Fee, charges and taxes to NSI to maintain its status as a Domain Name Registrant on the Internet.

14. Plaintiff Litigation Communications, Inc. resides in the Commonwealth of Virginia and is a Domain Name Registrant with the domain name "pop.dn.net." Plaintiff Litigation Communications, Inc. has been required to pay Registration Fee, charges and taxes to NSI to maintain its status as a Domain Name Registrant on the Internet.

15. Plaintiff Delta Micro Systems resides in the State of Maryland and is a Domain Name Registrant with the domain name "delta-microsystems.com" who has been required to pay a Registration Fee, charges and taxes to NSI to maintain its status as a Domain Name Registrant on the Internet.

16. The remaining Plaintiffs are citizens residing across the United States (hereinafter collectively referenced as "Class Registrants").

17. The Plaintiffs and Class Registrants are Domain Name Registrants who registered for domain name registration both prior to and after September 13, 1995. The Plaintiffs who registered prior to September 13, 1995 were not required to pay a Registration Fee, but are now required to pay an annual Renewal Fee of $50. The Plaintiffs who registered after September 13, 1995, have been required to pay a $100 Registration Fee and are also required to pay a $50 annual Renewal Fee.

18. Upon information and belief, Defendant Network Solutions, Inc. ("NSI"), a wholly-owned subsidiary of Science Applications International Corporation, is a corporation originally organized under the laws of the District of Columbia, and reincorporated in Delaware, with its principal business office at 505 Huntmar Park Drive, Herndon, Virginia 20170. NSI is an Internet domain name registration service provider worldwide. NSI acts as the exclusive registrar for second level domain names within the .com, .org., .net, .edu and .gov. top-level domains ("TLDs").

19. Upon information and belief, Defendant National Science Foundation ("NSF") is an agency of the Executive Branch of the U.S. Government. Plaintiffs and Defendants use the Internet to engage in interstate commerce amongst the several states. The Defendants' conduct complained of herein substantially interferes with interstate commerce.


FACTUAL BACKGROUND


20. The Internet is a network of computers through which businesses and individuals can send nearly instantaneous "E-mail" communications and disseminate information of various kinds through the "World Wide Web."

21. The Internet began as a network created in the 1960's by the Advanced Research Projects Agency ("ARPA"), of the United States Department of Defense ("DOD"). (The network established by ARPA is referred to herein as "ARPANET"). Throughout the 1970's and into the 1980's, numerous additional networks were established at geographically diverse governmental, educational and research facilities.

22. The Internet commenced as a communications network linking various agencies of the United States government, the United States military and educational institutions and was created entirely with public funds, including funds of the Department of Defense and the National Science Foundation.

23. In 1982, the Transmission Control Protocol ("TCP") was implemented by ARPANET and DOD's network, CSNET. This allowed a connection of and intercommunication between CSNET and ARPANET. As other networks implemented the TCP standard, the number of networks interconnected through the Internet grew rapidly. In order to allow the computers ("Hosts") on each network to locate Hosts on other networks, each Host was assigned a numerical address (e.g., 205.160.45.115). Such numerical Host addresses are referred to herein as "IP Addresses."

24. Communications on the Internet are addressed using the form of address such as "jones@company.com." The part of the address after the "@" sign is called the "Domain Name." The Domain Name is a unique identifier which designates a set of computers on the Internet. Registering a domain is essential to any person or business seeking to set up its site on the World Wide Web. The domain serves as a form of ZIP code for the Internet, allowing Users to send electronic mail and find pages on the World Wide Web. For ease of reference and accessibility, each Host's IP Address was then assigned a unique alphanumeric name, the Domain Name. Because of the requirement that each Domain Name be unique, a central group of redundant Root Nameservers was established to house the translation database which allows any individual Host to locate other Hosts by way of the alphanumeric Domain Names. The Domain Name entered by the requesting Host is translated into the appropriate IP Address, and the requesting Host may then communicate directly with the Host at the IP Address corresponding to the Domain Name originally entered.

25. Before the Internet became a commercially driven industry, a Domain Name System ("DNS") was developed in an attempt to imbue each alphanumeric Domain Name with information regarding the Host addressee. The Domain Name was divided into hierarchical fields, separated by periods (e.g., "namespace.doe.net"). The field appearing farthest right in the Domain Name (the "Top Level Domain" or "TLD") was arbitrarily limited to six possible codes (i.e., .COM, .EDU, .GOV, .MIL, .ORG, and .NET), each denoting the type of entity or organization located at the corresponding IP Address.

26. In the Internet's architecture, a total of nine Root Nameservers were established (at taxpayers expense) as the Internet backbone. From 1993 and thereafter, by virtue of its contracts with NSF, NSI has controlled the registry of Domain Names on the Root Nameservers, and has claimed exclusive authority over the Configuration File on each such server. NSI controls the central Configuration File on each of the Root Nameservers, which serve as the central directory of the Root Nameservers, and thereby is able to exercise complete control over the registry of Domain Names.

27. All commerce with a Domain Name on the Internet must necessarily refer to the Configuration file on the NSI Root Nameserver in order to be directed to the appropriate Second Level Domain Names registered under the particular TLD.

28. In or about 1991, the National Science Foundation ("NSF"), an agency of the Executive Branch of the United States Government, performed administration and maintenance with respect to certain aspects of the non-military Internet registration services. These responsibilities included the registration of certain classes of Domain Names.

29. In 1993, NSF awarded to NSI a cost-plus-fixed-fee cooperative agreement (the "Original Contract") to provide non-military Internet registration and administration services. NSF granted to NSI control of the NSI Root Nameservers, and the Configuration File thereon, pursuant to Cooperative Agreement No. NCR-9218742 between the NSF and NSI. On information and belief, the Configuration File is under the exclusive control of NSI and is maintained exclusively by NSI. The Original Contract between NSF and NSI extends at least through 1998. Upon information and belief, NSI has stated that it does not plan to relinquish its exclusive control on the Domain Name registry.

30. The Original Contract between NSF and NSI was awarded on a Cost-Plus-Fixed-Fee basis, whereby NSI received a reimbursement for costs incurred in maintaining the NSI registry plus a fixed fee paid directly by NSF. Under the Original Contract, the Registrants were charged no Registration Fees, Renewal Fees, taxes or charges for registration or access to the Internet.

31. On or about September 13, 1995, NSF fundamentally changed the Original Contract by entering into a purported amendment (hereinafter the "New Contract") which, inter alia, eliminated the cost-plus-fee basis for NSI's compensation. Under the New Contract, NSF purported -- without any statutory authorization -- to permit NSI to own and operate the NSI Registry, as well as the NSI Root Nameservers and Configuration File, for profit and as an unregulated commercial monopoly. As of June 30, 1997, over 1 million domain names were registered with NSI and NSI has charged, taxed or collected in excess of $100 million in fees from the Registrants without any proper authority.

32. Under the New Contract, NSF purported to authorize NSI to charge Registrants fees for Domain Name Registration services of $100 per initial Domain Name registration and two years of use, and $50 per annual renewal thereafter (the "NSI Fee"). The Registration Fee is allocated as follows under the New Contract: $70 to NSI "as consideration for the services provided"; and $30 to be administered by NSI in preserving and enhancing the "Intellectual Infrastructure of the Internet." Net revenue from Internet domain name registration subscriptions accounted for 81% of NSI's net revenue for the six months ended June 30, 1997.

33. On or after September 13, 1995, Plaintiffs and the other Class Registrants applied to NSI for domain name registration(s) and have been required to pay the aforementioned NSI Fees and taxes.

34. The New Contract fundamentally changed the terms of the Original Contract; fundamentally changed the course of performance under the Original Contract; fundamentally changed the contractual relationship between NSF and NSI; and, fundamentally changed and, indeed invented, a contractual obligation for the Registrants vis a vis the imposition of a Registration Fee.

35. The New Contract is no longer on a cost-plus-fixed-fee contract; rather, it is now a for-profit, unregulated commercial boondoggle under which NSI has exacted millions of dollars never authorized or contemplated within the original contract. Now, even Government entities must pay a fee to NSI for the Domain Names it runs and registers under the ".gov" TLD.

36. NSF failed properly to open or submit the New Contract for competitive bidding or to follow other required procedures in derogation and violation of the "full and open competition" requirements of the Competition in Contracting Act, 41 U.S.C. § 253 et seq. NSF's acts and omissions in this regard render the 1995 New Contract illegal and void ab initio.

37. At all times relevant herein, NSF had no power or authorization to impose the aforementioned NSI Fees and taxes on its own behalf and, a fortiori , NSF had no power or authorization to convey such purported powers to NSI.

38. At all times relevant herein, NSF neither sought, nor has Congress granted, the vast new authority to NSF or NSI to charge the NSI Fees and taxes collected from Plaintiffs and Class Registrants who seek registration on the Internet.

39. In exercising its self proclaimed power to assess Registration Fees and Renewal Fees, and to assess taxes, NSI has wrongly collected in excess of $100 million, and will collect additional tens of millions of dollars from Domain Name Registrants.

40. Because NSF lacks any statutory authority to convey such powers to NSI under the New Contract, the New Contract is ultra vires, unauthorized and/or contrary to the Congressional grant of authority to NSF; hence the New Contract is illegal and therefore void. Accordingly, all amounts which NSI has unlawfully taxed, charged or collected from Plaintiffs and Class Registrants pursuant to the New Contract must be returned to the Registrants.

41. Upon information and belief, at the time NSI persuaded NSF to abandon the cost-plus fixed-fee contract and enter the for-profit New Contract, NSI knew that the demand for Domain Name Registration had increased and would continue to increase exponentially, thereby leading to windfall profits for NSI.

42. The disengagement by NSF, the unauthorized, arbitrary, and excessive NSI Fee, NSI's monopoly control of the Configuration File and NSI Root Nameservers, and the artificially limited supply of NSI TLDs, has resulted in the lack of competition in the Domain Name Registration Market, and has led to considerable dissatisfaction within the Internet Registrant community. Because of NSI's control over the Configuration File and Root Nameservers, NSI maintains a monopoly over the Domain Registration Process.

43. Upon information and belief, the U.S. Department of Justice has announced that it is investigating "the possibility of anticompetitive practices in the Internet address registration industry." NSI's prospectus filed with the Securities Exchange Commission on September 27, 1997, contains the following admission:

On June 27, 1997, [NSI's parent company] received a CID from the Department of Justice issued in connection with an investigation to determine whether there is, has been, or may be a violation of antitrust laws under the Sherman Act relating to Internet registration products and services. The CID seeks documents and information from [NSI's parent] and the Company [NSI] relating to their Internet registration business. Neither SAIC nor the Company is aware of the scope or nature of the investigation. The Company cannot reasonably predict whether a civil action will ultimately be filed by the DOJ or by private litigants as a result of the DOJ investigation, or, if filed, what such action would entail.


44. The relevant market for purposes of this Complaint is the market for initial registration and subsequent servicing of commercial non-governmental alphanumeric Domain Names corresponding to IP numbers in accordance with the Domain Name System for use in enabling and facilitating communication between disparate Hosts on the Internet (the "Domain Name Registration Market").

45. Because of NSI's control over the Configuration File and certain Root Nameservers, NSI controls and maintains a monopoly over the Domain Registration Market and exercises monopoly power with respect thereto. No technical requirement or justification exists for the arbitrary limitation of the NSI TDLs in the Domain Registration process.

46. On information and belief, Defendants NSF and NSI individually, and in collusion with others, have agreed, colluded, and/or conspired to protect, maintain, and perpetuate NSI's monopoly over the Domain Name Registration market and to deny access to an Essential Facility to those who would establish competing Domain Name Registration services.

CLAIMS AGAINST DEFENDANTS


COUNT I


RESTITUTION OF ALL FEES AND CHARGES


IMPROPERLY OBTAINED FROM REGISTRANTS


47. Paragraphs 1 through 46 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is pled as an independent and alternative Count thereto.

48. Without any statutory authority, NSF and/or NSI have wrongfully charged, taxed and collected Internet Registration Fees, Renewal Fees, charges and taxes from the Plaintiffs and Class Registrants.

49. As a result of NSF and/or NSI's unauthorized imposition and collection of Registration Fees, Renewal Fees, charges and taxes, from Plaintiffs and Class Registrants for registration on the Internet, the Plaintiffs and Class Registrants are entitled to restitution of all such Registration Fees, Renewal Fees, charges, and taxes which they have heretofore paid.


COUNT II


ALTERNATIVE COUNT FOR PARTIAL RESTITUTION


50. Paragraphs 1 through 49 are hereby incorporated as if fully referenced herein.

51. Without prejudice to any of Plaintiffs' averments or Count(s) in the Complaint, and as an alternative Count thereto, Plaintiffs aver that the Registration Fees and Renewal Fees imposed upon Plaintiffs and the Class Registrants under the New Contract far exceed the actual costs for which NSI was entitled to be compensated under the Original Contract. Plaintiffs estimate that the Registration fees which NSI has charged to the Plaintiffs and the Class Registrants exceed NSI's actual costs by not less than $25 million.

52. Without prejudice to any of Plaintiffs' averments or Counts in the Complaint, and as an alternative Count thereto, Plaintiffs aver that the $30 tax or assessment made part of the Registration Fee, and collected by NSI and NSF for the purported purpose of the "preservation and enhancement" of the Internet, was without statutory or Constitutional authority. Plaintiffs estimate that the impermissible tax collected as part of the Registration Fee and paid by Plaintiffs and the Class Registrants exceeds $30 million.

53. Wherefore, as an alternative to Count I, even if it is found that NSF had authority to shift its contractual obligation to remunerate NSI to the Plaintiffs and the Class Registrants, in no event did NSF have the authority to permit NSI to be paid or to collect more than its actual costs as prescribed in the Original Contract. Further, in no event did NSF have authority to permit NSI to collect as part of a Registration Fee from Plaintiffs and the Class Registrants a tax for the "preservation and enhancement" of the Internet. Hence, as an alternative to the relief requested in Count I for the restitution of all NSI Fees collected, charged and taxed by NSI, Plaintiffs and the Class Registrants are entitled to restitution of (i) all amounts exceeding NSI's actual costs; and, (ii) all amounts taxed, imposed or charged for the "preservation and enhancement" of the Internet.

54. By reason of defendants' wrongful conduct, plaintiffs have suffered substantial damages, in an amount that is not fully ascertainable, but which is believed to exceed $55 million.



COUNT III


CLAIM AGAINST NSF FOR VIOLATION OF THE COMPETITION IN CONTRACTING ACT, 41 U.S.C. § 253 et seq.


55. Paragraphs 1 through 54 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is pled as an independent and alternative Count thereto.

56. NSF failed to open or submit the New Contract for competitive bidding or other competitive procedures, and thereby failed, inter alia, to comply with the "full and open competition" requirements under the Competition in Contracting Act, 41 U.S.C. § 253 et seq.

57. Plaintiffs and the Class Registrants have been injured by reason of the non-competitive procedures used by NSF in granting the New Contract to Network Solutions, Inc., in that they were within the zone of interests protected by the Competition in Contracting Act.

58. Wherefore, the Plaintiffs and Class Registrants request the following relief: (a) an award of compensatory damages from NSF under 28 U.S.C. § 1346(a)(2) (the "Little Tucker" Act); and/or (b) equitable relief under 5 U.S.C. § 702 (the "Administrative Procedure Act") declaring the New Contract void, enjoining the future collection of unauthorized fees and awarding restitution of all fees heretofore collected by NSF and/or NSI from the Plaintiffs and Class Registrants.

COUNT IV


CLAIM AGAINST NSI UNDER SHERMAN ACT § 1


FOR MONEY DAMAGES AND INJUNCTION


59. Paragraphs 1 through 58 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is pled as an independent and alternative Count thereto.

60. Defendants NSI and NSF, individually and with others, have engaged in a conspiracy to maintain and perpetuate NSI's exclusive dominion and control over the Domain Name Registration market in violation of Section 1 of the Sherman Antitrust Act.

61. By virtue of Defendants' violation of the Sherman Antitrust Act, NSI's exclusive dominion and control over registry in the Internet has precluded competition and has created a monopoly by NSI over the Domain Name Registration market, the process of assigning the Internet's addresses. NSI's monopoly has directly and proximately injured, and continues to injure, the Plaintiffs and Class Registrants by forcing Registrants to pay excessive registration and other fees, by denying them access to more accessible and convenient Internet addresses, and by providing poor service. The sole intent and effect of Defendants' actions has been to erect barriers to entry, enforced by NSI, and to protect and perpetuate NSI's monopoly power and its position of control in the Domain Name Registration Market. By its control of this essential facility, NSI has the power to eliminate, and has in fact eliminated, competition in the Domain Name Registration market. Defendants' actions constitute an unlawful combination in restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, which have had and continue to have an effect on Interstate Commerce.

62. Upon information and belief, the U.S. Department of Justice has announced that it is investigating "the possibility of anticompetitive practices in the Internet address registration industry." NSI's prospectus filed with the Securities Exchange Commission on September 27, 1997, admits that NSI has already received a CID from the Department of Justice in connection with a Justice Department antitrust investigation.

63. The relevant market for purposes of this Complaint is the market for initial registration and subsequent servicing of commercial non-governmental alphanumeric Domain Names corresponding to IP numbers in accordance with the Domain Name System for use in enabling and facilitating communication between disparate Hosts on the Internet ( the "Domain Name Registration Market"). NSI holds a monopoly in the Domain Name Registration Market and exercises monopoly power with respect thereto.

64. Because of Defendants' unlawful restraint of trade, Plaintiffs and the Class Registrants should be awarded compensatory damages which they have sustained and continue to sustain as a direct and proximate result of Defendants' unlawful restraint of trade in an amount to be determined at trial, but not less than $30,000,000, plus the trebling of such damages. Further, pursuant to 15 U.S.C. § 15, Defendants should be ordered to pay Plaintiffs' reasonable attorneys' fees and costs in seeking the relief herein sought.


COUNT V

CLAIM AGAINST NSI UNDER SHERMAN ACT § 2


FOR MONEY DAMAGES AND INJUNCTION


65. Paragraphs 1 through 64 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and alternative Count thereto.

66. NSI has engaged in at least the conduct set forth in this Complaint with the intent of maintaining and perpetuating its monopoly power in the Domain Name Registration Market, and maintaining its exclusive control over the Configuration File which is an essential facility to that market, to the exclusion of other competitors who are capable of providing competitive domain name registrations.

67. Upon information and belief, the U.S. Department of Justice has announced that it is investigating "the possibility of anticompetitive practices in the Internet address registration industry." NSI's prospectus filed with the Securities Exchange Commission on September 27, 1997, admits that NSI received a CID from the Department of Justice in connection with a Justice Department antitrust investigation.

68. The relevant market for purposes of this Complaint is the market for initial registration and subsequent servicing of commercial non-governmental alphanumeric Domain Names corresponding to IP numbers in accordance with the Domain Name System for use in enabling and facilitating communication between disparate Hosts on the Internet (the "Domain Name Registration Market").

69. Because of NSI's control over the configuration file and Root Nameservers, NSI maintains and controls a monopoly over the Domain Name Registration process. NSI maintains its monopoly by intentionally and unreasonably excluding potential competitors. No technical requirement or justification exists for the arbitrary limitation of TLD's by NSI in the relevant market.

70. On information and belief, NSI, individually and with others, has agreed, colluded and/or conspired to deny access to the Essential Facilities to those who would establish competing Domain Name Registration Services.

71. NSI exclusively controls and has exercised exclusionary conduct to maintain and perpetuate its monopoly over the Domain Name Registration Market. On information and belief, other entities have unsuccessfully attempted to enter the Domain Name Registration Market only to be excluded by the conduct of NSI in refusing to allow potential competitors to provide competitive Domain Name Registrations. NSI has accomplished this by wilfully refusing to allow potential competitors to introduce additional TLD's and/or Domain Names to the Configuration File, the Essential Facility controlled by NSI. If the potential competitors are allowed to introduce new TLD's and/or Domain Names to the Configuration File, the additional competition and supply of Domain Name Registration services would result in lower prices and better service to consumers, including the Plaintiffs and Class Registrants. Consequently, consumer welfare has been injured by NSI's monopolistic practices which have yielded NSI millions of dollars in supra-competitive gains.

72. As a direct and proximate result of NSI's unlawful conduct described above Plaintiffs and the Class Registrants, are entitled to damages in an amount to be determined at trial (to be trebled), but not less than $30,000,000. In addition, pursuant to 15 U.S.C. § 26, the Court should enjoin and restrain NSI from the collection, or attempts to collect fees, taxes or surcharges from any Domain Registrant of the Internet. Further, pursuant to 15 U.S.C. § 15, plaintiffs should be awarded reasonable attorneys' fees and costs in seeking the relief herein sought.


COUNT VI


DEPRIVATION OF PROPERTY


AND UNLAWFUL TAKING OF PROPERTY


IN VIOLATION OF FIFTH AMENDMENT


73. Paragraphs 1 through 72 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and alternative Count thereto.

74. The Fifth Amendment of the United States Constitution makes unlawful the deprivation of property without due process of law, and outlaws the taking of private property for public use without just compensation.

75. NSF's contract with NSI purporting to empower NSI to impose and collect Domain Name Registration and Internet "preservation and enhancement" fees, charges and taxes from Registrants, without any statutory authority, resulted in the taking of the Plaintiffs' and Class Registrants' property, i.e., their respective registration fees, without due process and/or without just compensation in violation of the Fifth Amendment of the United States Constitution.

76. By reason of NSF's unconstitutional action, Plaintiffs and Class Registrants have suffered substantial damages, in an amount that is not fully ascertainable, but which is believed to exceed $30,000,000.


COUNT VII


CLAIM FOR RESTITUTION OF UNLAWFUL TAX COLLECTED IN


VIOLATION OF ARTICLE I, SECTION VIII OF THE CONSTITUTION


77. Paragraphs 1 through 76 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and alternative Count thereto.

78. Under Article I, Section 8 of the United States Constitution, only the Congress has the power to lay and collect taxes.

79. Congress has neither authorized nor delegated to NSF or to NSI the power to collect taxes from the public for either (a) the funds required for maintenance and administration of Internet registration; or (b) fees for the purported "preservation and enhancement" of the Internet.

80. Only Congress (not NSF or NSI) has the power to collect taxes from the public for administration or purported "preservation and enhancement" of the Internet.

81. Without limitation of the foregoing, the allocation of 30% of the initial registration fees taxed upon Registrants for the purported "preservation and enhancement" of the Internet was not authorized by Congress and is therefore unconstitutional.

82. The assessment and collection of taxes from the Plaintiffs and Class Registrants under the auspices of the New Contract constitutes an unconstitutional taxation of revenues.

83. As relief for the foregoing unconstitutional action, the Court should enter judgment awarding restitution of all such improperly assessed taxes to the Plaintiffs and Class Registrants with interest thereon and attorneys' fees and should enter an injunction against such further unconstitutional action.


COUNT VIII


CLAIM FOR UNJUST ENRICHMENT FOR ARBITRARY AND CAPRICIOUS FEES


CHARGED BY NSI TO THE PLAINTIFF CLASS


84. Paragraphs 1 through 83 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and alternative Count thereto.

85. NSF/ NSI's fees, taxes and surcharges charged to the Plaintiffs and Class Registrants are arbitrary and capricious and have no reasonable relationship to administration of the Internet or to NSI's actual costs.

86 Even if Congress had authorized NSF or NSI to collect fees and charges from Registrants on the Internet -- which it has not -- the fees and charges imposed by NSI are for its commercial profit and are not reasonably related to the purported public purposes of administering the Internet. NSI's prospectus filed September 27, 1997 with the Securities and Exchange Commission, boasts that it is the "exclusive registrar for second level domain names within the .com, .org, .net, .edu and .gov top-level domains." NSI further states that net revenue from Internet Domain Name Registration subscriptions account for 81% of its net revenues as of June 30, 1997. NSI also states that net registrations within the TLDs maintained by NSI increased by 206% from 340,000 domain names registered at June 30, 1997 to approximately 1,040,000 domain names registered at June 30, 1997.

87. Accordingly, the Court should order restitution of all fees charged by NSI to the plaintiff class which exceed reasonable costs actually incurred by NSI.


COUNT VIII


DECLARATORY JUDGMENT


88. Paragraphs 1 through 87 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and alternative Count thereto.

89. Pursuant to 28 U.S.C. § 2201, Plaintiffs and the Class Registrants request Declaratory Judgment as follows:

(a) NSF's actions in purporting to grant NSI the right to exact, tax or otherwise impose a surcharge or fee upon Registrants on the Internet for any fees, including but not limited to, fees for the "preservation and enhancement" of the Internet were unlawful, unauthorized, ultra vires, and in derogation of NSF's statutory authority and power. Hence, the imposition of such charges was improper and unlawful;

(b) NSF violated the Competition in Contracting Act, 41 U.S.C. § 253 et seq. , in failing to comply with the "full and open competition" requirements in awarding the New Contract to NSI, and hence the New Contract is unlawful and therefore void;

(c) NSI and NSF, individually or with others, have committed violations of the Sherman Antitrust Act and NSI's monopolistic supra-competitive charges upon Plaintiffs and Class Registrants are unlawful;

(d) The imposition of taxes and charges on Plaintiffs and Class Registrants for Domain Name Registration and/or for the "preservation and enhancement" of the Internet constituted a taking or deprivation of property without due process under U.S. Constitution Amendment V and the unlawful assessment of a tax without Congressional authority under U.S. Constitution, Article I, Section VIII; hence, such taxation, assessment and collection of fees was unlawful, null and void;

(e) the charges imposed upon Plaintiffs and Class Registrants for Domain Name Registration were arbitrary, capricious excessive and NSI has been unjustly enriched thereby; hence, such charges were unlawful.

As additional relief for any or all of the foregoing acts and omissions by Defendants, the Court should order restitution to Plaintiffs and Class Registrants of all unlawfully collected fees and taxes with interest plus costs and attorney's fees.


COUNT IX


CONSTRUCTIVE TRUST


90. Paragraphs 1 through 89 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and alternative Count thereto.

91. All fees and charges which NSI has wrongfully collected from members of the Plaintiffs and Registrant Class rightfully belong to the Plaintiffs and Registrant Class.

92. Accordingly, the Court should declare that all such amounts of fees, taxes and charges obtained by NSI and held by any person or entity shall be held in a constructive trust for the benefit of Plaintiffs and Class Registrants.


COUNT X


INJUNCTIVE RELIEF


93. Paragraphs 1 through 92 of the Complaint are hereby incorporated by reference and realleged as though fully set forth. Without prejudice to any other averment or Count set forth herein, this Count is set forth as an independent and Count thereto.

94. By reason of the unauthorized conduct of NSI and NSF, each should be enjoined preliminarily and permanently from collecting any Registration Fee or Renewal Fee.

95. By reason of the conduct of NSI and NSF in derogation of the U.S. Constitution, each should be enjoined preliminarily and permanently from collecting the $30 tax for the purported improvement of the Internet.

96. By reason of the conduct of NSI and NSF in violation of the Sherman Act, each should be enjoined from denying access to an Essential Facility to potential competitors in the Domain Name Registration market.


RELIEF REQUESTED

WHEREFORE, Plaintiffs respectfully pray for judgment against the Defendants as follows:

(A) For restitution of all NSI Fees collected by NSF and/or NSI from Domain Name Registrants on the Internet;

(B) For restitution of all taxes collected by NSF and/or NSI's from Domain Name Registrants on the Internet;

(C) For an award of damages (to be trebled) against Defendants based upon violations of the Sherman Antitrust Act, plus attorney fees and costs;

(D) For Declaratory relief: (I) declaring the defendants' acts and omissions unlawful; (ii) awarding restitution of NSI Fees unlawfully assessed or charged by Defendants; (iii) awarding restitution of taxes unconstitutionally collected by Defendants; and (iv) other equitable relief the Court deems proper;

(E) For the entry of a Decree declaring that the funds collected by Plaintiffs and Class Registrants are to be held in a Constructive Trust for the benefit of Plaintiffs and Class Registrants by Defendants;

(F) For the entry of a Preliminary Injunction and Permanent Injunction enjoining the Defendants from (I) assessing any Registration Fee and Renewal Fee; collecting any taxes for the purported betterment of the Internet; and (iii) denying access of the Essential Facilities to potential competitors in the Domain Name Registration market.

(G) For an award to the Plaintiffs and Class Registrants of their costs and attorneys' fees in pursuing the above referenced relief ; and,

(H) For all other relief the Court deems just and proper.

JURY TRIAL DEMANDED

Plaintiffs hereby demand trial by jury on all claims and issues so triable.




Respectfully submitted,





___________________________________

William H. Bode (113308)

Daniel E. Cohen (414985)

BODE & BECKMAN, L.L.P.

1150 Connecticut Avenue, N.W.

Ninth Floor

Washington, D.C. 20036

(202) 828-4100

Copyright Xavier Ribas