Ontario registrar stopped from selling dot-ca domains

A registrar with close ties to a reseller that the Canadian Internet Registration Authority (CIRA) accuses of sending misleading solicitations to domain owners has lost its licence to sell dot-ca domains.

Markham, Ont.-based Brandon Gray Internet Services lost an injunction request to keep its licence pending an upcoming trial against CIRA featuring a $10 million lawsuit. Brandon Gray counted the Domain Registry of Canada (DROC) among its resellers, a company that CIRA says in court documents recently began sending out “misleading ‘renewal’ notices to dot-ca domain holders.”

The judgment was issued Jan. 27 by Madam Justice Cory Gilmore.

Though the injunction request was dismissed, the judge’s decision sets the stage for future legal face-offs between Brandon Gray and CIRA. Brandon Gray may have met requirements for recertification, Justice Gilmore writes in her decision, and CIRA never gave the registrar the opportunity to address CIRA’s concern with its association with DROC.

“There is a serious issue to be tried in relation to whether or not CIRA breached its agreement with Brandon Gray,” she writes. It could be argued “CIRA does not have unfettered discretion to refuse Brandon Gray’s application.”

Related Story: Registrar challenges dot-ca authority’s right to deny licence renewal

Brandon Gray argued in court that DROC had never solicited its services to anyone other than its customers. It also pointed out that CIRA never asked about its relationship with DROC and was never asked to break off business with the reseller. The firm took the position in court that “the conduct of DROC… has nothing to do with Brandon Gray.”

DROC denies that it has sent out any solicitations to dot-ca domain holders. “That is completely untrue,” says David Burroughs, a senior executive with DROC. DROC will also continue to sell dot-ca domains, partnering with another CIRA-licenced registrar since Brandon Gray lost its licence.

“It is unfortunate as Brandon Gray offered the best service and prices on dot-ca domains,” he says.

Though DROC won’t reveal who their new reseller is, it is “a CIRA-accredited wholesaler with whom we have had a longstanding relationship,” Burroughs says. DROC currently has its own domain hosted by eNom Canada Corp., a large wholesaler.

Brandon Gray is also still advertising dot-ca addresses as available on its Web site. The firm was first certified as a registrar Aug. 24, 2004, but failed to reapply for recertification of its licence with CIRA by July 25, 2010. Registrars must renew their licence with CIRA on an annual basis.

CIRA sent a letter to Brandon Gray Aug. 6, 2010 informing them that it would not accept recertification upon expiry of its current term. Brandon Gray responded with legal action, including the filing of a $10 million lawsuit and a request for an injunction. The registrar was able to maintain its licence until the application was heard in court.

Brandon Gray failed to prove that its business would suffer irreparable harm, Justice Gilmore writes in her ruling.

“CIRA’s primary goal is to protect registrants, not registrars,” she writes. “It is not in the interests of either the parties or the court to continue a hostile commercial relationship that may require ongoing court supervision until trial.”

CIRA presented figures in court showing that in May 2010, Brandon Gray was managing 132,576 domain names that were not dot-ca, and 3,722 dot-ca domains. That puts the dot-ca domain name hosting at just three per cent of the registrar’s total business. Brandon Gray argued that customers forced to move their dot-ca domains would also move their other domains, grouping them under one registrar.

“I’m surprised Brandon Gray was unable to make out a sufficient case for irreparable harm,” says Zak Muscovitch, a domain name lawyer based in Toronto. “I would have thought losing your existing dot-ca client base would cause irreparable harm, because how are you ever going to get those clients back?”

CIRA alleged many connections between Brandon Gray and DROC in evidence presented to the court. The two companies share the same Markham, Ont. address and both have employees at that location, CIRA says. Both use identical universal terms of service and similar legal agreements, and both connect to the Internet from the same access point, according to CIRA.

In a previous e-mail exchange with ITBusiness.ca, the DROC’s Burroughs says that the two companies are separate and have some shared customer service operations.

Whether CIRA’s actions were reasonable is an issue to be considered in trial with the help of live witness testimony, she adds.

“This is what could potentially lead to a substantial payment of damages by CIRA,” Muscovitch says. The trial will likely focus on whether CIRA had the right to terminate the agreement given its long-standing knowledge of the association between Brandon Gray and DROC, but giving no notice of CIRA’s concern.

The trial is expected to begin in May.

Brian Jackson is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and check out the IT Business Facebook Page.

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