The January 5 issue of BNA’s Bankruptcy Law Reporter (24 BBLR 32) contains a remarkable article by the attorneys for the American Registry for Internet Numbers (ARIN). It poses as a neutral, informative article about how trustees for firms entering bankruptcy court can “obtain the highest value” for their Internet Protocol address blocks when they are put up for sale. But one should be cautious of free legal advice to third parties when it is offered by lawyers hired by ARIN and keenly attuned to its organizational self-interest. The advice will not help IP sellers maximize their value; it is designed, instead to help ARIN preserve its monopoly on brokering the transfer market.
The article attempts to persuade sellers and buyers into attaching legal conditions onto the sale, conditions that only serve ARIN’s interests. In particular, it tells them not to use language asserting ownership of their assets into the contracts, and urges them to subject the buying party to ARIN’s approval for both initial acquisition of the addresses and any subsequent sale of them. Both of those conditions are certain to reduce the market value of the asset; yet ARIN’s lawyers assert that they are helping sellers obtain maximum value.
The (imaginary) carrots are matched with (vague) sticks. ARIN’s lawyers assert that “Disputed or unreliable IP Numbers are unappealing to sophisticated buyers who operate lawfully,” thus implying that if you don’t do what ARIN wants, the IP addresses won’t work. But that is not true. If legacy address blocks are involved, ARIN has no authority to dispute or interfere with the use of the blocks.
The most important distinction facing buyers and sellers of address blocks via bankruptcy proceedings is whether the seller’s address block is a legacy block or not. “Legacy” address blocks are not under a Registration Services Agreement (RSA) contract with ARIN. Incredibly, the article glosses over and seeks to obscure that basic fact. If the address block is under an RSA, then there was no need to write this article, because the seller is already contractually committed to ARIN’s transfer policies and all the associated legal commitments and denial of property rights that go with it. Ergo, this article must be aimed at legacy holders. But legacy holders have no need to make all the legal commitments ARIN’s lawyers want them to make. They can indeed claim that the addresses are their property; they do not need to seek ARIN’s approval in the selection of a buyer; the buyer need not (but may choose to) sign a contract with ARIN.
The only mention this important distinction (legacy vs. non-legacy) warrants in the article is a short statement, buried near the end, that “ARIN believes transfers of legacy numbers remain subject to key ARIN policies…” No support for this claim is provided, no cases cited, and court documents from the two bankruptcy proceedings that have valued IP address block assets have used language that suggests otherwise.
The very existence of this strategically placed propaganda piece is an open admission that ARIN is worried that many transfers of legacy address blocks will proceed through bankruptcy court, without them being notified and without the parties genuflecting before ARIN’s religious insistence that the exclusive right to use or transfer a block of IP addresses is not a property right. If these transfers do take place, the parties will be able to bypass ARIN’s restrictive and pointless “needs assessment” process and ARIN will lose much of its gatekeeper control over IPv4 address allocation. But, so what? As long as ARIN maintains appropriate registry records indicating who has what address block, the Internet will work just fine. There is no public interest in preserving a mid-1990s, pre-free pool exhaustion approach to address transfers. ARIN’s attempt to go beyond that serves no one’s interest – except perhaps, that of its staff and lawyers.