Internic may be required to return money

[nobody@REPLAY.COM (Anonymous)]

Holy shit.

>
>         Court: Domain fees appear illegal
>         By Brock N. Meeks
>
>         WASHINGTON, Feb. 2 - A federal court Monday issued a
>         temporary injunction barring the federal government from
>         spending some $50 million it has collected from the
>         registration of Internet domain names. That money forms a
>         pool of funds intended to be spent for improving the
>         Internet. On Monday, the court sided with the plaintiffs in a
>         lawsuit that claims those fees constitute an illegal tax. 
>
>         The money is part of a so-called "intellectual infrastructure
>         fund," which is funded by 30 percent of all fees paid to
>         register an Internet domain name. Initial domain names cost
>         $100; renewal of domain names is $50 annually. The
>         remainder of registration fees goes to Network Solutions
>         Inc. (NSOL) to cover its cost of maintaining the registration
>         service. 
>
>         Network Solutions operates as a monopoly, stemming from
>         a National Science Foundation government grant. That
>         grant is supposed to end in March; the White House issued
>         a proposal Jan. 30 that would move domain name
>         registration into the private sector. 
>
>         In October, six domain-name holders filed suit in U.S.
>         District Court alleging that the National Science Foundation
>         had no authority to allow Network Solutions to collect any
>         money in excess of its cost of providing the registration
>         service. Further, the suit charged, the 30 percent
>         set-aside amounts to an unconstitutional tax. 
>
>         Judge Thomas Hogan said Monday that the plaintiffs "have
>         made a significant showing that the (intellectual
>         infrastructure fund) is an illegal tax." 
>
>         Hogan said there is "no litmus paper onto which the Court
>         can drop a regulatory assessment such as this one, hoping
>         to see whether the paper comes up blue for tax or pink for
>         fee." Justice Department lawyers had argued in court that
>         the domain-name registration fee was exactly that, a fee,
>         because it was paid voluntarily and therefore couldn't be
>         considered a tax. 
>
>         But Hogan disagreed, writing that "there is no dispute that
>         the assessment (registration fee) is involuntary - it is
>         automatically charged to every domain registration." 
>
>         In 1995 Network Solution's contract was amended to allow
>         it to begin collecting fees for the registration process,
>         which it had done for free since 1993, when its contract
>         was issued. The registration fees set off a firestorm of
>         criticism in the Internet community. The Intellectual
>         Infrastructure Fund was supposed to be used for the
>         betterment of the Internet for the community as a whole;
>         however, no plan has ever developed on how to spend the
>         money, which is held in escrow. 
>
>         Because no plan had been developed to spend the fund
>         money, Congress rushed into the vacuum late last year
>         and simply appropriated some $23 million. Congress
>         earmarked that money to be spent on the Next Generation
>         Internet project, which President Bill Clinton highlighted in
>         his recent State of the Union speech. 
>
>         "Under federal law, no independent executive agency -
>         such as the National Science Foundation - can collect
>         fees that exceed the cost of providing the service they are
>         administering," said William Bode, attorney for the plaintiffs.
>         "NSI, the agent of NSF, spends less than $5 to register
>         domain names, yet it charges a registration fee of $100 and
>         renewal fees of $50 per year," he said. 
>
>         Network Solutions did not return calls for comment. 
>
>         Bode also argued that only Congress has the authority to
>         tax and that no such authorization has taken place. The
>         Justice Department argued that because Congress
>         appropriated the $23 million from the infrastructure fund, it
>         had essentially ratified the tax. 
>
>         Bode argued that ratification of a tax can't take place in
>         authorization bills. Judge Hogan agreed, noting that
>         ratification is a legislative function and that "it is well known
>         that Congress does not normally legislate through
>         appropriations bills." Hogan added: "Congress may have
>         intended to grant NSF the authority to collect the
>         assessment, but it has not effected a legal ratification." 
>
>         The suit also is seeking antitrust damages, alleging that the
>         NSF violated the competition in contracting act when it
>         allowed Network Solutions to begin collecting the $100 fee.
>         Bode says the competition act requires the NSF to re-bid a
>         new contract, not simply amend it. 
>
>         The temporary injunction "paves the way for our motion,
>         which we'll file in two days, to require NSI to return all
>         registration renewal fees which exceed the cost of
>         providing that service," attorney Bode said. "We think that
>         cost [to NSI for the registration process] is significantly less
>         than $10, probably $2 to $3," he said, "which would mean
>         that there would be a refund of approximately $100 million
>         in our judgment."