Upstart Internet domain registry XYZ Inc. has defeated a false advertising lawsuit brought by domain registry giant Verisign Inc.

Verisign, headquartered in Reston, Va., is the exclusive seller of the dot-com domain name and had alleged XYZ was practicing false advertising by claiming it was difficult to find available dot-com domain names. A judge in the Eastern District of Virginia disagreed and granted XYZ a summary judgment.

XYZ has been selling dot-xyz registrations since June of last year and also holds the rights to sell eight other domain names, including dot-rent and dot-college. At auction in 2013 the startup won the dot-xyz domain with an uncontested $185,000 bid. It has been aggressively marketing the top-level domain since.

XYZ’s marketing ran into issues when it began challenging the dominance of Verisign, the only business allowed to sell dot-com domain names. Verisign complained XYZ’s advertisement claims were false and hurting their business. The subsequent lawsuit has cost millions of dollars in legal fees said, XYZ Chief Executive Daniel Negari, who added he was honored to take on Verisign in court.

“Somebody has to take a stand for the small businesses out there getting harassed out of competition by the giant corporations,” said Negari. “I’m proud not just for my company and myself, but the whole (new top-level domain name) industry.”

XYZ is petitioning the court to have Verisign repay its legal fees. Negari said he is also short selling Verisign’s stock, betting its price will fall, as a way to potentially defray his legal expenditures.

“They can’t just go around wasting shareholder money on frivolous lawsuits and get away with it,” he said. “It’s a pretty major position. For every dollar the stock moves up or down I gain or lose $100,000. In my eye, I’m about to make millions of dollars back that I paid in legal fees.”

Technology reporter Garrett Reim can be reached at greim@labusinessjournal.com. Follow him on Twitter @garrettreim for the latest in L.A. tech news.