California’s highest court will finally hear the high-profile case of who owns the rights to the Sex.com domain.
The Ninth U.S. Circuit of Appeals in San Francisco Wednesday asked the state Supreme Court to intervene and decide whether a domain name is property that can be converted as well as guidance to assess damages estimated at $100 million.
The six-year battle over one of the Internet’s most highly desired domain names involves founder and CEO of Sex.Com Gary Kremen, VeriSign , formerly Network Solutions (NSI), and Stephen Michael Cohen.
But more than simple case of dot-com claim jumping, if the California Supreme Court rules in favor of Kremen, the verdict could result in numerous lawsuits against domain registries, and, ultimately have the strongest impact on VeriSign, who could face a multimillion-dollar damage claim from Kremen.
Representatives with VeriSign said the company would not comment on pending litigation.
Attorneys for Kremen said the order, which recognizes domain names as a type of property, was a step toward victory in the case.
“To my knowledge this is the first time a federal appellate court has ruled that an Internet domain name is property, which means that in divorce cases it can be split. We’re confident the state Supreme Court will find that Networks Solutions has really screwed this up,” Kremen’s lawyer, Jim Wagstaffe told internetnews.com.
Kremen registered sex.com in 1994 through Network Solutions. At the time, Kremen was doing business as Online Classifieds, Inc.
After a period of a year while sex.com sat dormant, Cohen, who previously served time in federal prison for bankruptcy fraud and impersonating an attorney, decided to commandeer the potentially lucrative domain name and forged a letter written on Online Classified letterhead to Network Solutions requesting transference of ownership.
For a fee of $1,000, Networks Solutions processed the domain name conversion and sex.com officially became Cohen’s property.
According to reports, Cohen then launched an Internet pornography business based on the sex.com domain name, but by the time Kremen was aware of the theft, Network Solutions refused to change the registration back without a court order.
Kremen went to legal battle against Cohen and his numerous business entities, with an added appeal that Network Solutions should be responsible for negligence due to the fact that the registrar did not even attempt to verify the forged letter that served as the basis for the domain name conversion.
In September 2002, the U.S. Court of Appeals for the 9th Circuit approved a $65 million award in Kremen v. Cohen, setting the wheels in motion for Kremen to regain control of sex.com and collect a substantial judgment from Cohen, including $25 million in punitive damages.
But by that time Cohen had skipped off to Tijuana, Mexico and would not comply with the judgment’s orders.
During the same ruling, the claim against Network Solutions was rejected based on the fact that a private company which is the sole domain name registry for domain names is immune from civil suit in cases where it negligently handled a domain name.
Kremen then appealed to the Ninth Circuit Court of Appeals.
The appeals court majority Wednesday noted that the state Supreme Court had ruled as far back as 1880 that intangible property – represented, in that seminal case, by a stock certificate – could be converted. Judge Kosinski said in his written opinion that it is clear from the 1880 case and many lower-court rulings since then that a domain name is property that can be converted and thus NSI has liability.
Judge Kozinski wrote that the Ninth Circuit should have granted Kremen a victory in the case, based on this legal analysis of domain names and property law. He wondered how VeriSign’s DNS database of domain names was any different from a stock certificate, which he said connects an owner with some property.
Calling the issue “a new and substantial issue of state law in an arena that will have broad application,” the three-judge panel deferred the question to the seven justices of the California Supreme Court.
“Domain names, like corporate stock, are clear and discrete property rights. One who alters title to a registered domain name is fairly on notice that he may be affecting someone else’s property,” Kozinski wrote.
The state’s Supreme Court could hear the case as early as next month.
