The case that was to have led to everyone who has ever registered a domain name being refunded part or all of their registration fees has been thrown out by the judge, though the decision is being appealed. It was brought by Washington, DC lawyer William Bode against Network Solutions Inc (NSI), which runs the domain name registry, and the federal National Science Foundation (NSF), which granted it the exclusive five year contract to do so. From September 1995 when fees were introduced until March 31 this year, $30 of the $100 fee to register a domain in the .com, .net, .org and name spaces was set aside in a so-called Intellectual Infrastructure Fund, which now contains about $62m. The fund is to be used for special networking projects designated by the government.
In April Judge Thomas Hogan ruled that the fund was illegal because it was an unconstitutional tax because its collection was authorized by the NSF, not by an act of Congress (04/10/98). The ruling froze the fund and the judge was considering whether or not to refund all the monies. About a third of the money has been earmarked for developed of the US government’s Next Generation Internet project.
However, a couple of weeks after the ruling, Congress added a provision to an Emergency Supplemental Appropriations Bill that ratified the charges (05/04/98). The Supreme Court has ruled that Congress can retroactively ratify unconstitutional taxes – provided that the final decision had not been entered by the judge – which it had not. At the time Bode alleged back room collusion between the NSF and Senate staffers and he claimed that Congress can only ratify unconstitutional taxes through general bills, not through appropriation bills.
In light of the apparent ratification, the NSF filed a motion to dismiss the lawsuit. Bode opposed that, disputing the ratification process itself. He says that because the bill, which he says was framed in way to deceive the Senate ways and means and finance committees, among others, refers to a fee, not a tax the court has misapplied the law. A fee is defined as a charge to offset the cost of a specific service, while taxes are for the general public purpose. The declaration of the charge being an unconstitutional tax, still stands and so a ratification of a fee doesn’t apply to the internet’s Intellectual Infrastructure Fund. He says the US Plain Meaning Doctrine says that acts of Congress can do no more than what it states, and that includes extending a law that applies to a fee to a tax.
Bode has also appealed the other part of the case, this time against NSI, which alleged that it had made unreasonable levels of profit from its contract and therefore part of the $70 fee should be refunded. The law states that no federal agency can levy a fee for its services beyond the cost of providing the service. The NSF argued that as NSI actually collected the fee, it is not subject to that law, which Bode says is incorrect and if upheld, would set a dangerous precedent, because any federal agency could then employ a private contractor to do its work and collect fees for it on its behalf, he says.
He has asked for an expedited hearing from the court of appeal and is hoping it will happen some time in the fall, although no date has been set. It should be noted that Bode himself is set to gain from any victory in the case, although he says his fee would be set by the court and he is working on a no win, no fee basis. He had set up an organization called the American Internet Registrants Association, through which he brought the case. Since April 1 NSI has been charging $70 for two year’s registration and the market is due to be opened up to competition from October 1, although the logistics of that will mean that NSI will remain in a dominant position for some time.
