Though attorneys who originally challenged the domain name registration fee have vowed to appeal Wednesday's decision dismissing the suit, the NSF may soon be able to start spending the money on projects such as improvements to the vBNS network that forms the backbone of Internet2, the high-speed university network, said agency spokeswoman Beth Gaston. "Our lawyers are discussing what to do next" in light of the expected appeal by the Washington law firm Bode & Beckman LLP, which sued on behalf of nine plaintiffs who claimed the fees were unconstitutional, Gaston said. "The path is not clear yet."
But assuming the appeal is unsuccessful, the NSF will divide the money in the so-called Internet Infrastructure Fund between vBNS improvements and research into cutting-edge networking technologies, she said. The agency launched vBNS in 1995 along with MCI, and its continued development will aid the ongoing Internet2 project, Gaston said.
Starting in 1995, those registering Internet addresses, or domain names, were charged a $50 fee by the NSF and Network Solutions Inc. (Nasdaq:NSOL), which shared responsibility for allocating the domains. About $15 of the fee went into the Internet Infrastructure Fund, earmarked for technical improvements to the networks that form the Internet.
But none of the money has yet been spent, pending the resolution of the lawsuit by plaintiffs who hope at least part of it will eventually be refunded to domain name registrants.
In April, U.S. District Court Judge Thomas Hogan ruled that the fee was an illegal tax. But several weeks later, Congress approved a retroactive tax on domain name registrations, partly as a means to fund the Clinton Administration's Next Generation Internet initiative (out of which came Internet2).
In Wednesday's ruling, Hogan dismissed the suit by the domain name registrants, saying it is now a moot point.
"The tax is now legally imposed, and there are no grounds to enjoin either its collection or use by NSF," Hogan wrote in the ruling.
But as the domain name registration system moves closer to privatization, many other issues also need to be resolved, according to one observer.
"This lawsuit is just a small piece of the overall puzzle," said John Muller, a partner at the San Francisco law firm Brobeck, Phlager & Harrison and an expert in Internet law.
It's unclear whether any of the money in the fund will ever be refunded to domain name holders, although it is unlikely that either the government or Network Solutions would begin charging the fees again, Muller said. (They stopped collecting the fees in April in preparation for the switch to a privately-controlled system.)
The NSF and Network Solutions are struggling to ensure that nothing goes awry in the changing of the guard, with a nonprofit entity set to be running the registration system by year's end, he said.
"The transition is going as smoothly as it could possibly go, given all the parties with an interest in the system," Muller added.