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[nc-transfer] "Apparent Authority" Analysis



> Separately, Ross Radar will post the output of a
> small drafting team on other work underway.

Folks,

Pursuant to our last conference call, a small drafting team was convened to
create a baseline document that could act as the "lightning rod" for
comments concerning the scope, definition and role that the concept of
"Apparent Authority" should play in the TF deliberations.

Starting with the original AA document that I posted on behalf of the
Registrar Constituency last year
(http://www.dnso.org/clubpublic/nc-transfer/Arc00/msg00022.html), the
drafting team endeavored to incorporate the substantive commentary and
analysis that has taken place since on the various conference calls,
privately, as well as through the mailing list.

The attached document, which at this point has been well-edited by our Chair
and other drafting team participants, (thanks to those that helped out) is
ready for a second round of criticism and analysis by the larger group.

With the permission of the chair, I would like to propose that commentary on
this document close 5 business days hence, at which a final document will be
prepared taking into consideration any further commentary and analysis put
forth by the larger group.

If there are any questions or comments concerning the document or its
preparation, please do not hesitate to drop me a note via the TF list.

-rwr

nc-transfers-draftingwg-appauth-v0r0d6-051402.doc

Created by rrader on 04/22/2002 15:01

Last Modified by rrader on 5/14/2002 16:22

Names Council Transfers Task Force

Drafting Working Group

Apparent authority

Version 0, Revision 0, Draft 6

April 22, 2002



This document is presented as a preliminary draft to the full TF for their
comments over the next five working days.  This is one part of the TF work
in addressing transfers and deletions of domain names.  This document
explores what is meant by apparent authority in the context of
inter-registrar transfer of domain names. There may be other questions,
which need addressing further, related to ensuring that the experience of
the registrants and registrars are understood and reflected in any revised
or enhanced policies. Further examination and elaboration will also be
undertaken on express authorization to determine whether any policy
recommendations are indicated.

Overview

In a shared registry environment in order for competition to succeed, the
ability of registrants to transfer domain names from one registrar to
another, must be fully supported, be simple to accomplish, easy to
understand and efficient.  However, a registrant's rights in a domain name
must also be safeguarded against unauthorized or accidental transfers. These
processes must be mutually efficient and reliable for registrars, as well.

            This balance between efficient domain name transfer on the one
hand and safeguarding registrants’ rights on the other has been provided for
by including the concepts of express authorization and apparent authority in
the standard gTLD Registry/Registrar contracts. One of the questions before
this TF is whether these concepts are adequate guidance for policy to the
registrars, and what constitutes apparent authority and express
authorization, in order to provide a recommendation on any needed policy
changes, subject to consensus agreement.

Why is apparent authority an important concept?

Exhibit B of the Registry/Registrar agreements specify that "...for each
instance where an Registered Name holder wants to change its Registrar for
an existing domain name, the gaining Registrar shall obtain express
authorization from an individual who has the apparent authority to legally
bind the Registered Name holder."

            All of the gTLD agreements include policy governing
holder-authorized transfers (inter-registrar transfers authorized by the
holder). Exhibit B of these agreements is the relevant section. This policy
requires that the registrar that is proposed to "gain" the registration,
obtain express authorization from an individual who has the apparent
authority to bind the registered name holder. The "gaining" registrar must
document this.

            The concept of express authorization is relatively commonplace.
It is the converse of implied authorization and therefore connotes a
specificity normally only available in a written instruction (ie –
facsimile, email or other non-oral affirmative agreements – in other words
“written notice”).

            It would be unworkable for this level of authorization to have
to be obtained from the Registrant directly in every instance.  Many
Registrants do not wish to concern themselves with the day-to-day
maintenance of their domain registrations.  The concept of apparent
authority therefore allows a person authorized by the registrant to
legitimately interpose themselves between the registrant and the other
participants in the transfer process and in doing so, enter into binding
contracts on the registrant's behalf.  Apparent authority is also obviously
necessary where the registrant is a corporate body since it must act through
natural persons who must have authority to bind the corporation.  In order
to request a transfer, the Gaining Registrar must obtain Express
Authorization from an individual with the apparent authority to bind the
Registered Name Holder to the terms of transfer. Further, the form of the
express authorization is at the discretion of the gaining registrar.

            If the Gaining Registrar does not obtain express authorization
from an individual who as the apparent authority to approve the transfer,
the transfer request cannot be deemed as valid and therefore should not be
undertaken. The importance of apparent authority is therefore both practical
and conceptual. From a conceptual standpoint, all involved must understand
what apparent authority is, how it is obtained and revoked, how it is
identified and when it is not reasonable to assume that someone does not
have apparent authority to approve the transfer. From a practical
standpoint, without these understandings, it is impossible to develop
processes that allow transfers to occur efficiently and in accordance with
the wishes of registrants.

What is apparent authority?

            Apparent authority is not explicitly defined within any of
ICANN's contracts - registrar, registry, etc. This has caused concern with
some parties because any perceived ambiguity in interpreting this specific
statement can lead to the implementation of inappropriate process by
registrars and registries. The victim of these inappropriate processes will
almost always be the registrant. It is important to note however that the
apparent authority is a concept of agency law and not some creation of ICANN
policy;

            "The elements of apparent authority are: (1) a "holding out" of
the party as an agent; and (2) reasonable reliance by a third party on the
principal's conduct. See Raglin, 230 Ill. App. 3d at 647-650; Gilbert, 156
Ill. 2d at 523. See also Restatement (Second) of Agency, 265, 267 (1957).
The apparent authority theory focuses on "holding out" someone as an agent
and reasonable reliance by a third party on such representations. See
Raglin, 230 Ill. App. 3d at 647-650; Gilbert, 156 Ill. 2d at 525-526. As the
court in Gilbert put it:

            'Apparent authority in an agent is the authority which the
principal knowingly permits the agent to assume, or the authority which the
principal holds the agent out as possessing. It is the authority which a
reasonably prudent person, exercising diligence and discretion, in view of
the principal's conduct, would naturally suppose the agent to possess.'
Gilbert, 156 Ill. 2d at 523.

            Whether a person has notice of an agent's lack of authority is a
question of fact. Gilbert, 156 Ill. 2d at 524."

[For more details, refer to
http://www.state.il.us/court/Opinions/AppellateCourt/1998/1stDistrict/March/
HTML/1953959.txt where this text was originally excerpted from.]

Who possesses apparent authority? Who Does Not?

            The most important concept regarding apparent authority is that
it must be authority that the third party reasonably believes flows from the
Registered Name Holder. It is not enough that someone holds themselves out
to have apparent authority, but rather it is reasonable in the circumstances
for the registrar (and the registry which must then act on/accept the
request) to believe that the person issuing the transfer request has the
authority to issue that transfer instruction and thereby legally sever the
contractual relationship with the losing registrar and form a new contract
with the gaining registrar. .

            The governing agreements are the Registrar-Registry Agreements
between the various registrars and registries. Apparent authority can only
be defined within the context of the relevant rules of law and these
contracts. It is not appropriate for this task force to attempt to re-define
what pre-exists in national law.

            In each registration, there must be a registration agreement
between the registrar and the registrant. This is required in all of the
Registrar and Registry agreements. The supplier of the end-to-end services
already has entered into an agreement with the Registrar, that agreement is
either made in its own name (it is the Registered Name Holder) or it is
entered into with the customer. In order that it is legally correct, the
customer must have bestowed apparent authority as part of that agreement
(the second one described) therefore, they would already have the authority
to enter into the transfer.

            Louis Touton has already clarified in communications to the
Registrar Constituency, "If there was a contractual provision in the ISP
subscription agreement appointing the ISP as an agent/attorney-in-fact for
registrar sponsorship, this would be acceptable as apparent authority.
Simple contractual language absent this agent/attorney-in-fact language
would not be sufficient to convey apparent authority to an ISP.
Notwithstanding, the gaining registrar would still have to provide existence
of this documentation to the losing registrar if requested."

            A simple web hosting agreement that doesn't even have a notion
of apparent authority wouldn't be enough to allow the web hosting company to
act on behalf of the customer. The Admin and Technical contacts are not of
any particular significance. They would only be accorded authority if the
agreements gave the registrar a grant of authority.

            Ordinarily, the losing and gaining registrar must structure
their processes to comply with the contracts. Many registrars provide that
the Administrative Contact has authority, so they generally ask the
Administrative Contact if the transfer request is valid. They are only fit
within the context of the registration agreements. The policy, which is
embodied in the agreement between the Registrar and Registry provide that
the form of authorization shall be at the discretion of the gaining
registrar, but that there must be express authorization from an individual
with apparent authority. This depends on what the registration agreement
between the losing Registrar and Registrant.

Express Authorization: Section to be further developed.

Summary on Apparent Authority

            Some have raised the argument that what constitutes 'apparent
authority' is inappropriately defined within the context of existing policy.
As a result, a small minority of registrars are withholding transfers or
requiring burdensome verification from registrants.  This has led to
complaints from registrants, from gaining and losing registrars, and
resulting in confusion on what processes are needed to effect authorized,
competitive transfers.

The Task Force suggests that, after further examination, that apparent
authority is a well-defined legal concept and the lack of specific
definition within the relevant body of ICANN policy should not be a barrier
to the work of this task force to make policy recommendations.

The discourse concerning the definition of apparent authority has been
productive, as this particular discussion has raised the level of awareness
of a number of related issues including EPP Auth Codes, the form of express
authorization and the roles that losing and gaining registrars play in the
domain name transfer process, as well as identifying confusion which may
result on the part of the registrant in dealing with variant rules and
processes across different registrars.

Additionally, the TF considers the following two recommendations:

            Further, the task force should ensure that the policy
recommendation provides that the form of authorization is available for
inspection by parties to the transfer transaction and that unauthorized
transfers can be expediently reversed with no expense of liability to the
losing registrar or the registrant.

            Lastly, the task force will also seek to identify and make
appropriate recommendations concerning the recourse that a gaining registrar
and/or registrant have at their disposal in instances when the reason for
denying a transfer given by a losing registrar is in dispute.

Further work on Express Authorization will be undertaken and then
incorporated into a final version of this draft document.

The task force recommends further work and discussion is needed on express
authorization, specifically:

The Task Force will seek to better document and understand the experience of
different registrants, and will ask registrars for summary illustrations of
their experiences with denied or failed transfer requests to support this
aspect of activity of the TF.

It also remains to be identified whether adequate safeguards are in place,
and whether policy guidelines are needed to ensure that the Gaining
Registrar has received express authorization from an individual with the
apparent authority to undertake the transfer.

            The Task Force, as a preliminary comment, notes that examples of
what constitutes express authorization and the manner in which an individual
with apparent authority can provide it to a registrar, keeping in mind the
roles that intermediate suppliers play in transfer transactions would be
helpful to identify in the agreements provided between registrant and
intermediary, or registrant and registrar.







nc-transfers-draftingwg-appauth-v0r0d6-051402.doc



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