The organization countersued VeriSign in California, and at the same time sought to shift the dispute over the two domain contracts to arbitration at the International Chamber of Commerce for a potentially speedier decision.

ICANN claimed that VeriSign violated the .com and .net contracts when it tried to introduce services such as Site Finder and Waiting List Service, on the basis that the company should have sought ICANN approval first.

If the California court were to agree with ICANN, then ICANN could gain the power to revoke VeriSign’s presumption of renewal when the highly lucrative .com registry contract comes up for renewal in 2007.

If the decisions go in VeriSign’s favor, then it would be free to implement revenue-generating services that leverage its control of two of the top three internet domains. Site Finder, for example, replaced DNS errors with advertising.

The moves are the latest in a lawsuit initiated by VeriSign in February. The company claims the opposite of ICANN the contracts do not forbid it from offering new services and that ICANN is in breach for stalling offerings such as Site Finder.

VeriSign filed the suit originally in US federal court based on debatable antitrust claims, but the judge threw it out with prejudice. VeriSign immediately re-filed in California state court, losing the antitrust claims but keeping the core contract claims.

Now ICANN is looking to a third way of getting the suit resolved a three-person panel of ICC arbitrators. ICANN is also asking the California court to stay the VeriSign state suit while the ICC does its work, but VeriSign reportedly intends to challenge that stay.

The case hinges on the contracts’ rather vague definition of registry services. According to ICANN general counsel John Jeffrey, an ICC arbitration process could resolve the issue in 90 to 120 days.

They could settle the matter more expediently, more efficiently and at less cost to the internet community which finances ICANN, Jeffrey said. For years, much of ICANN’s budget has been eaten up in legal fees.

At the end of the day, VeriSign would be benefited by arbitration too, Jeffrey said, pointing out that VeriSign’s goal is to ultimately bring new services to market. They’ve got shareholders, they’ve got a business to run.

The ICC request for arbitration is specific to the .net contract. While the two contracts are similar in many respects, VeriSign’s California suit is specific to the .com contract. This may be because the .com contract does not allow one party to initiate arbitration alone.

Most courts, when there’s an arbitration case on the contract, will defer to the arbitration judgment, Jeffrey said. Issues like Site Finder and other registry services they launch are fundamental to both .net and .com.

Any decision on .net may turn out to be essentially meaningless except in how it relates to .com. VeriSign’s .net registry contract expires in the middle of next year and officially opens for rebid a couple of weeks from now.

VeriSign can and will bid to run .net for another five years. But its .com contract, which expires in 2007, has a built-in presumption of renewal that, unless the court finds a contract breach, would mean an almost automatical renewal.

According to the .net request for proposals, even if VeriSign does win the bidding contest it will have to negotiate a new contract. That contract would undoubtedly have a clearer definition of registry services built into it.

For now, ICANN says it is taking pains to avoid the lawsuit causing bias or a perception of bias in the .net selection process. ICANN will use independent technical and financial experts to score the candidates, and the ICANN board will then pick the highest scorer.

But the winner will then have to negotiate a contract with ICANN in two weeks. If that negotiation proves unsuccessful, the ICANN board will be able to pick the second-highest scoring applicant. That’s a powerful negotiating position.