THERE’S GOLD IN THEM THERE IP NUMBER BLOCKS!
So, do you happen to have an unused Internet Protocol number block sitting around? If so, you might unwittingly be sitting on a valuable asset. A battle is brewing to determine whether an IP number block should be recognized as a registration (like a phone number) with no inherent asset value, no right to title, and no right to transfer or whether it is to be considered an asset owned by the assigned organization. An August 2011 ruling in the bankruptcy case of Nortel Networks Corp., in which the court agreed to the sale of over 666,000 IPv4 addresses to Microsoft Corporation for $7.5 million, would seem to indicate that an IP number block should be considered an asset that can be sold freely. But, it’s not quite so simple.
IP number blocks are a range of IP numbers typically issued by a Regional Internet Registry (RIR) (e.g., ARIN, AfriNIC, APNIC, LACNIC, and RIPE NCC) to large organizations such as Internet Service Providers (ISPs), corporations, and universities. RIRs are non-profit organizations that maintain a database of IP number block registrations within their region of the world and distribute these blocks to applicants. IP numbers and number blocks become IP addresses (e.g., 126.96.36.199) when they are assigned to a particular host. The IP address allows others to find an assigned device (e.g., computer, smart phone, or tablet) on the Internet and without it the device does not exist on the Internet. The explosion of mobile devices using IP addresses worldwide has many fearing we are running out of IP number blocks. Even with the roll out of the new IPv6 number blocks, some are still concerned about IP number block depletion. The necessity of an IP address to function on the Internet and the possible scarcity of them in the future is what makes them so valuable.
Due to the way the Internet has evolved, IP number block registrations fall into two camps – those issued pre-1997 by InterNIC and those issued post-1997 by the ARIN or another RIR. The distinction between those two camps with regard to rights to control the ultimate disposition of IP number blocks is huge. Post-1997 IP number blocks are tightly controlled by a Registration Service Agreement (RSA) with ARIN (or another RIR), including prohibition against transfer of IP number blocks to another entity without ARIN’s prior express permission. However, pre-1997 IP blocks were considered “grandfathered” when ARIN took over management of the IP number block database and distribution of IP number blocks for entities in North America. These grandfathered, or legacy, IP number block holders are not subject to the RSA. For the most part, ARIN has never tried to exert control over the pre-1997 camp. Therefore, some argue they are free to do as they please with their IP number blocks within the bounds of accepted Internet practices, including selling them on the open market or through judicial proceedings such as a bankruptcy.
The recent Nortel Networks/Microsoft bankruptcy court-sanctioned sale of pre-1997 IP number blocks has set up a showdown between those who believe IP number blocks are assets that can be bought and sold and those who believe IP number blocks are common Internet identifiers that cannot be owned by anyone except the “Internet community.” Additionally, the sale also highlights the differences between the pre- and post-1997 camps. Given the high value assigned to these IP number blocks in this transaction, it would make sense that the post‑1997 camp eventually will start demanding the same rights as those afforded to the pre-1997 IP number block holders. Many questions remain to be answered regarding future attempts to sell IP number blocks either through judicial proceedings or on the open market. A few are:
- What is an IP number block? Is it a registration of a commodity owned only by the “Internet community”? Is it an asset owned by the assigned organization? Is it something else?
- What rights does a purchaser of an IP number block have?
- What if the next purchaser of pre-1997 IP number blocks chooses not to sign an RSA with ARIN? Will ARIN try to block the sale? Will ARIN refuse to change the official registration information within the IP number block database it manages? Must the purchaser sign the RSA? Must ARIN honor a court-sanctioned sale?
- What happens if a post-1997 holder attempts to sell either through bankruptcy or in a private transaction? Will the courts allow it based on past sales given that the current RSA prohibits transfer without express permission of ARIN? Does the post-1997 IP number block holder need ARIN’s permission? What conditions will ARIN place on permission given and would any conditions be valid or upheld?
- Will the rubric of two distinct classes of IP number block holders with unequal rights continue?
- How will the other RIRs around the world respond?
New tests of these issues are now brewing. Borders Group, Inc. has recently marketed and sold 60,000 pre-1997 IPv4 addresses in its bankruptcy for almost $800,000. And, many more attempts to buy and sell IP number blocks will occur – both within the framework of a judicial proceeding such as bankruptcy and on the open market. As with all things in the law, only time and accumulated precedent will tell how these issues will be resolved. Everyone with a vested interest is well advised to pay close attention.