By Robert Romano

Update: The federal district court has sided with the Commerce Department and refused to issue the injunction, paving the way for the transfer of U.S. oversight of the Internet at midnight.

There is one last chance to stop the end of U.S. oversight of the Internet’s domain name system.

Congress has already lost this battle after Republican majorities failed to include language blocking the transfer of the Internet Assigned Numbers Authority (IANA) functions in the continuing resolution funding the federal government.

The transfer had been defunded the past two fiscal years, but no more.

So now, with just hours left before the Commerce Department contract with the Internet Corporation for Assigned Names and Numbers (ICANN) on Oct. 1, four state attorneys general led by Arizona Attorney General Mark Brnovich are now suing the government over the transition in the U.S. District Court in the Southern District of Texas, Galveston division, arguing the transfer is an illegal transfer of government property without a vote of Congress.

Federal District Judge George Hanks, Jr. has ordered a hearing at 1:30 p.m. central time after denying a motion by the plaintiffs to do a hearing via phone.

The case boils down to Article 4, Section 3 of the U.S. Constitution, which states that only “The Congress shall have power to dispose of … property belonging to the United States.” The current October 1, 2012 NTIA contract with ICANN explicitly states that “All deliverables under this contract become the property of the U.S. Government.”

Deliverables under the contract include “technical requirements for each corresponding IANA function,” “performance standards in collaboration with all interested and affected parties … for each of the IANA functions,” and “a fully automated root zone management system … [that] must, at a minimum, include a secure (encrypted) system for customer communications; an automated provisioning protocol allowing customers to manage their interactions with the root zone management system; an online database of change requests and subsequent actions whereby each customer can see a record of their historic requests and maintain visibility into the progress of their current requests; and a test system, which customers can use to meet the technical requirements for a change request; an internal interface for secure communications between the IANA Functions Operator; the Administrator, and the Root Zone Maintainer,” among other items.

Further, ICANN collects annual revenues of more than $100 million a year, making it property of real value.

In addition, the IANA itself reverts to the Commerce Department upon termination of the contract: “the Government may terminate the contract for default.” The contract even provides for the possibility of IANA being performed by another entity: “In the event the Government selects a successor contractor, the Contractor shall have a plan in place for transitioning each of the IANA functions to ensure an orderly transition while maintaining continuity and security of operations.” These provisions further indicate that upon conclusion of the contract on Sept. 30, 2016, the Commerce Department remains in possession of the IANA functions, and nothing which states ICANN does.

It therefore follows that NTIA cannot perform the transfer of the IANA functions to ICANN without a vote in Congress, or some other authorizing statute, for example, 40. U.S.C., Chapter 5, Subchapter III, “Disposing of property.” Under that statute, the disadvantage to NTIA and ICANN would be that the IANA functions would have to come up for competitive bid as provided in 40 U.S.C. 545 (a).

Or if a negotiated sale as provided in 40 U.S.C. 545 (d)(1), it would have to done at “fair market value”: “the sale must be publicized to an extent consistent with the value and nature of the property involved and the price established must reflect the estimated fair market value of the property.” Since this is an entity that does more than $100 million a year of revenue, the fair market value of the IANA functions — we’re talking about a global monopoly for allocation of an unlimited number of IP addresses, domain names, and top-level domain names — it should be worth billions !

Or, if disposal through a contract broker as provided in 40 U.S.C. 545 (c), “wide public notice of the availability of the property for disposal” would be required: “Disposals and contracts for disposal of surplus real and related personal property through contract realty brokers employed by the Administrator shall be made in the manner followed in similar commercial transactions under regulations the Administrator prescribes. The regulations must require that brokers give wide public notice of the availability of the property for disposal.” Yet, no such notice has been given.

The disposal of such property to a private interest would also invoke antitrust. 40 U.S.C. 559 (b)(1) states: “An executive agency shall not dispose of property to a private interest until the agency has received the advice of the Attorney General on whether the disposal to a private interest would tend to create or maintain a situation inconsistent with antitrust law.”

We also now know via Freedom of Information Act requests by Americans for Limited Government that the NTIA has not sought the Attorney General’s advice the disposal of property to a private interest prior to the March 2014 announcement. That is a huge liability for ICANN, and potentially for anyone involved at the agency if the provision of the contract stating “All deliverables under this contract become the property of the U.S. Government” was deliberately ignored. Was this a conspiracy to get around antitrust?

Leaving that aside — antitrust is not cited in the state attorneys general case, but it is likely to come up later by private actors looking to compete with ICANN — there certainly are some outstanding legal questions for the federal courts to feel out.

In addition, the state attorneys general argue that the original contract with ICANN created designated public forum under the First Amendment for the entire Internet, and that in ending the contract and giving that forum to a private entity without strict guidelines for continuing that level of protection a First Amendment violation has occurred. It’s a novel argument.

Did the government contract with ICANN make the Internet into a public forum with First Amendment protections?

Americans for Limited Government has argued in the past that the government contract has meant no changes to the root zone file could be approved by the Department of Commerce if they would result in censorship or otherwise violate the First Amendment. In other words, there are definite limits to any content restrictions imposed by ICANN whilst under government contract. It also therefore follows that the Internet itself becomes a public forum in that range of protection.

Besides that, the attorneys general argue that the transition violates the Administrative Procedures Act, and would result in potential irreparable harm to domains operated by the federal and state governments if ICANN were to suddenly start messing with government top level domains.

For remedy, the states are requesting the federal courts to enjoin the transition and instruct the Commerce Department to renew the current contract.

In the least, a preliminary injunction and temporary extension of the contract would be warranted, Americans for Limited Government President Rick Manning noted in a statement: “The court has to issue a restraining order against the transition, as moving ahead has been deemed to be irreversible, with no way to undo harms done to the plaintiffs and the American people. The First Amendment protections afforded by government the contract must not be cast away so lightly. A private actor like ICANN does not have to honor the freedom of expression the way the federal government does. That should be taken into account.”

We’ll know by midnight if the federal district court in Texas agreed to slow down the Internet surrender enough to hear these issues out. Fingers crossed.

Robert Romano is the senior editor of Americans for Limited Government.