Enom 2013 Annual Report Download - page 25

The relevant domain name registry and the ICANN regulatory body impose a charge upon each registrar for the administration of each
domain name registration. If these fees increase, it could have a significant impact upon our operating results.
Each registry typically imposes a fee in association with the registration of each domain name. For example, VeriSign, the registry
for .net, presently charges a $6.18 fee for each .net registration and ICANN currently charges a $0.75 fee for each .net domain name registered in
the gTLDs that fall within its purview. The fee charged by Veri Sign for each .net registration increased from $5.11 to $5.62 in July 2013 and
increased again to $6.18 in February 2014. We have no control over these agencies and cannot predict when they may increase their respective
fees. Per the extended registry agreement between ICANN and VeriSign that was approved by the U.S. Department of Commerce on July 1,
2011, VeriSign will continue as the exclusive registry for the .net gTLD through June 30, 2017. The terms of the extension set a maximum price,
with certain exceptions, for registry services for each calendar year beginning January 1, 2012, which shall not exceed the highest price charged
during the preceding year, multiplied by 1.10. In addition, pricing of new gTLDs is generally not set or controlled by ICANN, which could result
in aggressive price increases on any particularly successful new gTLDs. The increase in these fees with respect to any gTLDs for which we do
not act as the registry either must be included in the prices we charge to our service providers, imposed as a surcharge or absorbed by us. If we
absorb such cost increases or if surcharges act as a deterrent to registration, our profits may be adversely impacted by these third-party fees.
Our failure to register, maintain, secure, transfer or renew the domain names that we process on behalf of our customers or to provide our
other services to our customers without interruption could subject us to additional expenses, claims of loss or negative publicity that have a
material adverse effect on our business.
Clerical errors and system and process failures made by us may result in inaccurate and incomplete information in our database of domain
names and in our failure to properly register or to maintain, secure, transfer or renew the registration of domain names that we process on behalf
of our customers. In addition, any errors of this type might result in the interruption of our other services. Our failure to properly register or to
maintain, secure, transfer or renew the registration of our customers ’
domain names or to provide our other services without interruption, even if
we are not at fault, might result in our incurring significant expenses and might subject us to claims of loss or to negative publicity, which could
harm our business, revenue, financial condition and results of operations.
We could face liability, or our corporate image might be impaired, as a result of the activities of our customers or the content of their
websites.
Our role as a registry and as a registrar of domain names and a provider of website hosting and other value-added services may subject us
to potential liability for illegal activities by domain name registrants on their websites. For example, eNom has been named in lawsuits in which
a customer registered a domain n ame through eNom and published content that was allegedly defamatory to another business whose name is
similar to the domain name. Other allegations of liability have been made based on domain name registrants’ alleged violations of copyrights or
trademarks of third parties. In each of these cases, plaintiffs may argue that we are responsible because we benefited from or participated in the
infringing conduct. In addition, we may be embroiled in complaints and lawsuits which, even if ultimately resolved in our favor, add to our costs
of doing business and may divert management’s time and attention.
We provide an automated service that enables a user to register a domain name and publish its content on a website hosted on that domain
name. Our registars do not monitor or review, nor do our registrar agreements with ICANN require that we monitor or review, the
appropriateness of the domain names registered by domain name registrants or the content of registrant websites, and we have no control over
the activit ies in which our domain name registrants engage. While we have policies in place to terminate domain name registrations or to take
other appropriate action if presented with a court order, governmental injunction or evidence of illegal conduct from law enforcement or a
trusted industry partner, we have in the past been publicly criticized for not being more proactive in certain areas such as policing online
pharmacies acting in violation of U.S. law by consumer watchdogs and we may encounter similar criticism in the future. This criticism could
harm our reputation. Conversely, were we to terminate a domain name registration in the absence of legal compulsion or clear evidence of illegal
conduct from a legitimate source, we could be criticized for prematurely and improperly terminating a domain name registered by a customer. In
addition, despite the policies we have in place to terminate domain name registrations or to take other appropriate actions, customers could
nonetheless engage in prohibited activities.
Finally, existing bodies of law, including the criminal laws of various states, may be deemed to apply or new statutes or regulations may
be adopted in the future, any of which could expose us to further liability and increase our costs of doing business.
We may face liability or become involved in disputes over registration of domain names and control over websites.
As a domain name registrar, we regularly become involved in disputes over registration of domain names and we may become involved in
similar disputes with our registry services business. Most of these disputes arise as a result of a third party registering a domain name that is
identical or similar to another party’s trademark or the name of a living person. These disputes are typically reso lved through the Uniform
Domain-Name Dispute-Resolution Policy (the “UDRP”), ICANN’s administrative process for domain name dispute resolution, or less
frequently through litigation under the ACPA or under general theories of trademark infringement or
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