[EP5.2] [Social] Determine ENS Labs’ next steps in eth.link litigation

DAO-Wide Draft Proposal
1
Status Active
Votes Snapshot

Abstract

Since 2017, ENS Labs has been operating eth.link as a public gateway for the Ethereum community, providing access to ENS+IPFS sites. Eth.link has been used by some of the largest projects in the space, including Uniswap.

Eth.link was kindly delegated to ENS Labs for this purpose by its owner, Virgil Griffith. In August 2022, a dispute arose between ENS Labs, Dynadot, GoDaddy, and Manifold Finance about ownership of eth.link after the transfer and auction of the domain without ENS’ consent. The highest bidder for eth.link at the auction was Manifold Finance, who expressed their intention to operate the service themselves. A full recitation of the facts surrounding the dispute can be found within the complaint that ENS Labs filed in September 2022.

Before the domain could be transferred, ENS Labs and Virgil successfully obtained a preliminary injunction from a federal district court judge in Phoenix, Arizona. The Court ordered that Dynadot had to immediately return eth.link to ENS Labs. Since then, this litigation has been proceeding slowly through the courts. ENS Labs had to enforce the preliminary injunction as to Dynadot and Manifold Finance exited the lawsuit on jurisdictional grounds. Settlement discussions between the parties indicated that Manifold Finance should be included in any global settlement because of its potential claims to eth.link and against Dynadot.

Recently, Manifold Finance has extended a settlement offer. They are demanding $300,000, along with confidentiality and non-disparagement clauses. In return, they are offering an allparties settlement, which would result in the dismissal of the case and ENS Labs retaining the eth.link domain name.

ENS Labs believes that this is the appropriate juncture to solicit the DAO’s input on how to proceed with the litigation. We are thus asking the DAO to instruct ENS Labs on the next steps to take in this case, whether that be agreeing to the settlement, offering a compromise amount, continuing the lawsuit, or dismissing the matter altogether, which would relinquish ENS Labs’ possession of eth.link. Thus far, ENS Labs has been funding this litigation from its own finances. Our expenses so far amount to approximately $750,000. Continuing the case is likely to incur substantial additional costs.

Further, given the criticality of eth.link to the ENS ecosystem, we would like to request reimbursement from the DAO for the legal fees incurred in protecting possession of eth.link.

Specification

This will be an approval vote, with four independent items:

  1. Do you approve the proposed settlement?
  2. Do you approve of offering a compromise amount?
  3. Do you approve of continuing the litigation?
  4. Do you approve reimbursing ENS labs for its legal expenses involved in pursuing this case?

You should vote on each outcome you would be happy with. For example, if you would be happy with either continuation or a compromise settlement, but not the full amount, you would vote for options 2, 3 and 4. If you prefer that the case be dismissed, vote only for option 4, or for no options.

If the reimbursement is not approved, or none of the options receive a majority (50%) of approving votes, ENS Labs will:

  • Promptly post an interstitial on eth.link, warning users of the potential change in ownership and functionality of the domain, and offering alternatives including eth.limo.
  • Dismiss the litigation without delay and without unnecessary further expenditure of funds.

Based on the outcome of the vote, ENS Labs will proceed with the case based on whichever of the courses of action (settlement or continuation) receives the higher proportion of approving votes. Subsequently, ENS Labs will post an executable proposal seeking reimbursement from the DAO for its legal expenses pursuing the case.

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Thank you for sharing this complaint as it brings light to any confusion or misunderstandings. I request that legal matters and documents that are not sensitive and do not compromise any portion of future legal proceedings will continue to be shared with the organization.

That means the requested amount of $75,000 from the injunctive relief is off the table? At a cost of $750,000 fighting for a domain is quite steep given the financial position of ENS right now. This is essentially a high-profile ransom squat.

That would leave ‘eth.link’ valued at over $1,000,000 USD in expenses. Paying the Manifold due to the negligence of GoDaddy teams should not be of ENS Interest. I don’t think it’s worth continuing a lawsuit. This can continue for years which would distract from building a product that would essentially solve issues like this.

What is outlined in the clause?

With a newly formed partnership with GoDaddy, I think it’s in ENS best interest to not tarnish that relationship. Build on the relationship with GoDaddy and continue to foster partnerships and find a way ( if not already ) to use this to invite other ventures and interests to incorporate ENS software. Lets work on building relationships and overcoming this issue that in reality seems to be a consequence of other unrelated legal matters that have since adjourned.

Personally, I am undecided on outcome atm,

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This isn’t immediately clear to me. To clarify, Dynadot and Manifold are no longer part of the lawsuit because of jurisdiction?

But in principle they do have some sort of claim (being auction winners) so want a settlement to stop them pursuing that claim in any way in the future?

I may be missing something here, but I recall (although I cannot find - take this with a pinch of salt) Manifold explicitly claiming on public forums at the time that they were acting in good faith in bidding on the auction…

A Google search brings up posts like this: ENS and eth.link: for your eyes only

Assuming this is in fact a representative of Manifold, their actions do not look to be in good faith.

In my personal opinion (and I stand to be corrected - I may be missing information) Manifold have acted in bad faith - this seems like attempted extortion. Cybersquatting.

Is there any additional information on the costs and potential outcomes associated with continued litigation because as a matter of principle alongside the obvious value of the eth.link service offering I think this could be worth pursuing…

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Dynadot is a party to the lawsuit but Manifold was removed at their request on account of jurisdictional issues. That said, the parties agree that to settle the dispute without any lingering requires a global settlement.

We don’t want to comment on facts or speculate on specific costs. We can direct you to the complaint for any factual issues. With regard to costs, we can say that litigating this dispute to a judgment, however, would be substantially more costly than the proposed settlement.

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Below I have linked a copy of the Court’s Order on:

  1. Defendant Manifold Finance, Inc.’s Motion to Dismiss First Amended Complaint and to Vacate Preliminary Injunction for Lack of Personal Jurisdiction;

  2. Defendants GoDaddy Inc. and GoDaddy.com, LLC’s Motion to Dismiss; and

  3. Plaintiff ENS Labs Ltd.’s Motion to Enforce Preliminary Injunction.

All three were fully briefed and ruled on in chambers without oral argument.

In summary:

  1. Manifold’s Motion was granted for lack of personal jurisdiction, as to Manifold only.

  2. GoDaddy’s Motion was granted in part and denied in part, leaving Counts I, II, and III as to all parties.

  3. Lab’s Motion was granted in part and denied in part with the Court ordering Dynadot to unlock the domain and allowing Lab’s to transfer it to another registrar with limitations including not to transfer the domain to a registrar outside the US.

Order: ENS Labs Ltd. v. GoDaddy Inc., No. CV-22-01494-PHX-JJT | Casetext Search + Citator

You should be able to obtain the entire docket and full procedural posture of the case on PACER (may be paywalled).

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Thanks for posting this. It would be good to have a resolution. I am tending to accept the offer so we get back the domain and don’t incur in more costs.

Wouldn’t posting this as a public discussion be an issue of confidentiality?

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We let Manifold’s counsel know we needed to consult the DAO beforehand, and received no objections.

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is this confidential?

@clowes.eth I agree 100%

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@nick.eth - Thanks for posting this.

Did manifold offer any justification for the $300k? Was there any logical reasoning offered for this specific amount?

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Agree with a majority of the above post - the voting logic is currently unclear to us though:

What would the outcome be if the DAO votes to approve the settlement but not approve ENS labs reimbursement for legal fees?

For example, vote ends in:

  1. 100% yes
  2. 100% no
  3. 100% no
  4. 100% no

If this was the outcome of the vote, would the legal outcome be:

A: Allow the DAO to pay the $300k for settlement and the responsibility of legal fees is subject to further discussion.

B: Dismiss the case due to the DAO’s unwillingness to cover the $750k in legal fees at this time, despite offering to pay the settlement amount, meaning eth.link is relinquished.

Does any outcome other than dismissal and relinquishment of the domain (settlement, rebuttal, or continuance) hinge on the DAO’s willingness to cover the associated legal fees incurred by Labs to date?

This post does not represent FireEyes unwillingness to reimburse ENS Labs, just seeks to clarify the voting dependencies outlined above. As well as highlighting the fact that there are two separate discussions here; one about whether or not to pay the settlement and another about where the responsibility for legal fees should sit.

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I support for 1, 2 and 4 options. Because I believe this is the most efficient way: about 40% more funding (30k/75k) will get the domain name back for ever without wasting the funding that’s been payed.

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Yes. If reimbursement is not approved, ENS labs will act to minimise its further expenses by having the case dismissed.

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If Manifold is interested, I’m willing to offer a domain that is in my control ‘node.directory’ as part of the deal for a reduction in demand amount. Of course, if the DAO and all involved parties are interested.

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FYI, Labs also now owns eth.page, which is currently unused and could be stood up as an eth.link replacement if necessary.

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Okay, the offer is out there. No strings attached.

On another note, after reviewing the nature of Manifolds response that @clowes.eth directed us to “For your eyes only”; I think It is important to take note on the context of which ‘sambcha’ addresses their intent about the use of the domain.

"We wanted the domain name because we had intentions" and then “…could have been held…”
It’s also important to look at the tweet that says

“it was either us or the chinese buyers” - this implicates that there was mere interest in actually obtaining the domain in the first place. It establishes that because the other party at auction was Chinese, was a motivating factor in purchasing the domain. Manifold established their previous tentative intent to use eth.link for the possibility of a legitimate purpose was considered at a prior time, before the auction. This is evident in their context a language using “had” and “could have” and by the use of an example use case that was described with minimal description.

Now we can move forward in this timeline and see that this potential intent; which again is vaguely established, had quickly shifted into willfully and explicitly soliciting eth.link back to ENS within a very short while after the auction taken place without hesitation or serious compromise. If Manifold would have offered the domain back but with clear and obvious hesitation, aggressive demands or supporting their own case and providing more of a reason why their possession of; showing clear intention of implementing their previous infrastructure plans, then maybe a justification exists that supports their demand for damages in the amount of $300,000. Given that those elements were of speculation that they “could have” done or “had” intent to was emphasized without providing a comprehensive and certain plan for infrastructure use, the decision to solicit to ENS immediately stems not from a legitimate use but motivated by monetary gain.
Otherwise, intent for legitimate use would not invoke such an immediate solicitation.
It’s likely they acted in good faith to keep the domain in the community of certain persons but when acquired, the idea to extort this asset for profit seems to be presented without justification of amount demanded.

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Given this, aren’t the first 3 votes are null & void in the event of vote 4 not passing?

It doesn’t feel beneficial to the DAO or ENS as a whole that all of the work towards the $300k settlement is contingent on covering the $750k legal fees without a deeper discussion considering the DAO was not aware of this previous spending.

Are we able to make these two separate proposals? Given that this is the first the DAO is hearing about both the 300k and the legal fees - why don’t we problem solve for eth.link then for the legal fees?

We’d be in favor of structuring the proposal in a way that the DAO can first vote on whether or not to pay the settlement, and then have a further discussion regarding the legal fees. We want to balance ensuring that Labs feels supported for its efforts on behalf of ENS and the DAO, but also that the DAO feels that it has had sufficient opportunity to make this decision in a measured and open way given the lack of previous context.

Very interested to hear any other delegate’s thoughts too :sparkles:

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Thanks for sharing, Nick.

I’m on board with this approach.

There are essentially two decisions here:

  1. What to do about eth.link.
  2. Reimbursing ENS Labs for legal costs.

To ensure fairness in the DAO’s decision-making, I’d be in favor of not tying one decision to the other.

Personally, I support taking care of ENS Labs for their efforts, although it would’ve been better to decide this sooner. I suppose there were necessary reasons for the delay, like confidential information or ongoing negotiations.

As for eth.link: Sure, it’s a valuable domain. But considering ENS Labs already has eth.page and eth.limo is doing well, it raises questions about rewarding questionable behavior from Manifold Finance.

Thanks again for bringing this up.

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eth.link has been functioning very well ever since Manifold started operating it. It was non-existent before. If ENS Labs spends over $1M on it, they should ensure that it stays alive :grimacing:

My bad, I had wrong info

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Yes. If that’s ambiguous in any way I’m open to suggestions on how to reword it.

I don’t think it’s reasonable to open Labs up to a situation where we could be expected to foot the bill for the litigation, while the DAO pays only a settlement amount. The two are not separate; without the litigation, the settlement would not be on the table.

We believe that pursuing the lawsuit was in the interest of the ENS community and the DAO, but if the DAO believes Labs was wrong in pursuing this case, it has the option of refusing to reimburse us. I don’t see a rationale for endorsing the settlement but not the legal case that led to it.

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eth.link is a significant asset used to provide access to ENS+IPFS sites (e.g., vitalik.eth.link). If Labs were to proceed with an interstitial, I imagine it would damage existing relationships and lessen users’ confidence in ENS overall.

On the other hand, alternatives like eth.limo have existed and offer nearly, if not equally, the same benefit.

I agree that it is unfortunate that the expenses incurred by pursuing this litigation were not communicated prior to this proposal. At the same time, I can also sympathize with the sensitive nature of this matter and understand why Labs might have been reticent to communicate.

It helps to frame the legal fees as a sunk cost; it would be churlish not to support Labs in their decision to pursue this case. Therefore, I believe that the DAO should furnish both the settlement and the associated fees. However, I believe that Labs should have better anticipated this outcome and communicated it to their constituency with more notice.

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