Thomas v. Network Solutions, Inc.

• Decision Date: 14 May 1999
• Docket Number: No. 98-5502,98-5502
• Citation: 176 F.3d 500,336 U.S.App.D.C. 74
• Parties: 1999-1 Trade Cases P 72,521 William THOMAS, et al., Appellants, v. NETWORK SOLUTIONS, INC. and National Science Foundation, Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 500

176 F.3d 500

1999-1 Trade Cases P 72,521

William THOMAS, et al., Appellants, v. NETWORK SOLUTIONS, INC. and National Science Foundation, Appellees.

No. 98-5502.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 25, 1999.

Decided May 14, 1999.

Appeal from the United States District Court for the District of Columbia (97cv02412).

William H. Bode argued the cause for appellants. With him on the briefs were James M. Ludwig and Daniel E. Cohen.

Lisa Goldfluss, Assistant U.S. Attorney, argued the cause for appellee National Science Foundation. With her on the brief were Wilma A. Lewis, U.S. Attorney, R. Craig Lawrence, Assistant U.S. Attorney, and Lawrence Rudolph, General Counsel, National Science Foundation.

Michael L. Burack argued the cause for appellee Network Solutions, Inc. With him on the brief were Lloyd N. Cutler, C. Loring Jetton, Jr., Matthew P. Previn, and Philip L. Sbarbaro.

Before: RANDOLPH, ROGERS, and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

This is an appeal from the judgment of the district court dismissing a complaint filed against the National Science Foundation ("NSF") and its private contractor, Network Solutions, Inc. Plaintiffs are individuals and entities who registered Internet domain names through Network Solutions, Inc., paying a one-time registration fee and yearly renewal fees thereafter, a portion of which the company paid over to NSF according to the terms of a government contract. The complaint alleged, among other things, that NSF had imposed and collected an unconstitutional tax, that Network Solutions had violated the antitrust laws, and that the amount of the fees charged pursuant to the contract exceeded a limitation imposed by statute.

I

A

The Internet, "an international network of interconnected computers," Reno v. ACLU, 521 U.S. 844, 117 S.Ct. 2329, 2334, 138 L.Ed.2d 874 (1997), developed from the ARPANET, a network the United States military created in 1969 to link its computers with those of defense contractors and universities. See 63 Fed.Reg. 31,741 (1998). The ARPANET, which no longer exists, served as a model for similar nonmilitary networks. See id.; see also 63 Fed.Reg. 8826 (1998). These networks eventually linked with each other and coalesced into the backbone of the modern Internet, see 63 Fed.Reg. at 8826, enabling tens of millions of people to communicate with one another and to gain access to vast amounts of information from around the world, see ACLU, 117 S.Ct. at 2334.

Internet use has grown dramatically in the past two decades. The number of networked "host" computers--those that store information and relay communications--increased from about 300 in 1981 to approximately 9.4 million in 1996. See id. Roughly 60 percent of these host computers are located in the United States. See id. About 40 million people used the Internet in 1996, a number expected to rise to 200 million this year. See id.

Individuals generally obtain access to the Internet through these host computers, each of which has a numerical address, or Internet Protocol number, such as "98.37.241.30," that allows other host computers to identify and locate it. ¹ See 63 Fed.Reg. at 8826; see also 63 Fed.Reg. at 31,741. When the Internet was in its infancy, Internet Protocol numbers were assigned and maintained by the late Dr. Jon Postel, then a UCLA graduate student working under a contract between the Defense Department and the university. See 63 Fed.Reg. at 31,741. When Dr. Postel moved from UCLA to the Information Sciences Institute at the University of Southern California, he continued to maintain the lists pursuant to contracts with the Defense Department. See id. As the lists grew, Dr. Postel delegated certain aspects of the list maintenance to what eventually became known as the Internet Assigned Numbers Authority. See id.

Because many numerical sequences are difficult to remember, the Internet community created a system allowing an Internet computer to be identified by a "domain name." See 62 Fed.Reg. 35,896 (1997). The domain name system is a hierarchy. See 63 Fed.Reg. at 8826. Top-level domains are divided into second-level domains, and so on. See id. More than 200 national, or country-code, top-level domains--e.g., ".us" for the United States, ".pa" for Panama, ".uk" for the United Kingdom, and so on--are administered by their corresponding governments or by private entities with the government's permission. See 63 Fed.Reg. at 31,742. A small set of generic top-level domains carry no national identifier, but denote the intended function of that portion of the domain space: ".com" for commercial users; ".org" for non-profit organizations; ".net" for network service providers; ".edu" for educational institutions; ".gov" for United States government institutions; ".mil" for United States military institutions; and ".int" for international institutions. See 63 Fed.Reg. at 31,742.

Domain names--e.g., bettyandnicks.com--consist of at least two groups of alphanumeric characters, each known as a string, separated by a period or dot. The last string--the farthest to the right--denotes the top-level domain. The second-to-last string is the second-level domain name and identifies the person's or organization's Internet computer site. See Albert, supra note 1, at 783. Each string may contain up to 63 characters but the overall domain name must be less than 256 characters. See PGMedia, Inc., No. 97 Civ. 1946 RPP, slip op. at 3.

For the domain name system to function, each domain name must be unique and correspond to a unique Internet Protocol number. See 63 Fed.Reg. at 8826; see also Goldfoot, supra note 1, at 913. A new user who wishes to have an Internet site with a domain name address first obtains an Internet Protocol number (e.g., 1.23.456.7). See PGMedia, Inc., No. 97 Civ. 1946 RPP, slip op. at 5. The user then registers a domain name and it becomes linked with that Internet Protocol number. See id. at 5-6.

Before using a domain name to locate an Internet computer site in "cyberspace," a computer must match the domain name to the domain name's Internet Protocol number. ² The match information is stored on various Internet-connected computers around the world known as domain name servers. The computer attempts to find the match information by sending out an address query. ³ The goal of the address query is to find the particular domain name server containing the match information the user seeks. See id. at 4-5.

When ordered to translate an unknown domain name into an Internet Protocol number, a computer will ask its Internet Service Provider's server if it knows the domain name and corresponding Internet Protocol number. See Albert, supra note 1, at 785. If that server lacks the information, it will pass the query to a "root server," also called a "root zone" file, the authoritative and highest level of the domain name system database. ⁴ See 63 Fed.Reg. at 8826. The root zone file directs the query to the proper top-level domain zone file, which contains the domain names in a given domain and their corresponding Internet Protocol numbers. See 63 Fed.Reg. at 8828. In the case of someone searching for the "bettyandnicks.com" home page, the root zone file sends the query to the top-level domain zone file with information about ".com" domain names. The ".com" zone file then refers the query to a second-level domain name file with all the second-level domain names under ".com." This is where the "bettyandnicks.com" query ends: the second-level domain name file has the information matching the domain name to its associated Internet Protocol number. With the Internet Protocol number, the user's computer can connect the user to the requested Internet site. The "bettyandnicks.com" home page will appear, just as if the user had typed in the Internet Protocol number instead of the domain name. See PGMedia, Inc., No. 97 Civ. 1946 RPP, slip op. at 5.

Initially, the Internet Assigned Numbers Authority retained responsibility for both Internet Protocol number allocation and domain name registration. See id. at 7. In 1991 and 1992, NSF, an independent agency of the federal government, assumed responsibility for coordinating and funding the management of the nonmilitary portion of the Internet infrastructure. ⁵

In March 1992, NSF solicited competitive proposals to provide a variety of infrastructure services, including domain name registration services. NSF issued the solicitation pursuant to the National Science Foundation Act of 1950, 42 U.S.C. §§ 1861-1887, as amended, and the Federal Grant and Cooperative Agreement Act, 31 U.S.C. §§ 6301-6308. ⁶ In December 1992, after an independent review of the proposals responsive to the solicitation, NSF selected the bid from, and entered into a cooperative agreement with, Network Solutions, Inc., a private company.

B

The dispute in this case turns partly on the terms of the cooperative agreement, which took effect January 1, 1993, and, as amended, runs through September 30 2000, at the latest. Network Solutions became the exclusive registry and exclusive registrar for the ".com," ".org," ".net," and ".edu" top-level domains. See 63 Fed.Reg. at 8828. As a registry, Network Solutions maintains a top-level domain's zone files, the directory databases listing domain names and their Internet Protocol numbers. See 63 Fed.Reg. at 8828. As registrar, Network Solutions acts as go-between for domain-name holders and the registry, providing various services, including the registration of domain names on a first-come, first-served basis. See 63 Fed.Reg. at 8828. The company also currently maintains the "A" root server, see supra note 4.

The agreement provided that NSF would compensate Network Solutions in accordance with a cost-plus-fixed-fee arrangement. The cost-plus-fixed-fee arrangement ended on September 14, 1995. Pursuant to an amendment to the...