Monday, January 6, 2003
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Supreme Court Asked to Decide Domain Name Conversion Issue
Ninth Circuit Panel, Over Kozinski Dissent, Asks State Justices for Guidance in ‘Sex.com’ Case
By KENNETH OFGANG, Staff Writer/Appellate Courts
The Ninth U.S. Circuit Court of Appeals yesterday asked the California Supreme Court for a ruling on whether the registrar of an Internet domain name can be held liable for its conversion by a party that fraudulently persuaded it to cancel the true owner’s registration.
The request is the latest turn in the long legal battle over “sex.com.”
The name was registered in 1994 by Gary Kremen, doing business as Online Classifieds, Inc., but saw little use in the next 18 months. In October 1995, Stephen Michael Cohen asked that the name be re-registered to a Nevada company he controlled.
In support of his request, Cohen supplied a letter on Online Classifieds stationery, purporting to be signed by the president of Online Classifieds, authorizing the cancellation of the original registration and the re-registration of the name to Cohen.
Cohen then used the name to build a multimillion-dollar on-line pornography business. About eight months after the re-registration, Kremen asked for the name back, claiming that the letter was a forgery.
Network Solutions, Inc., then the exclusive registrar of “.com” domain names, said it would not change the registration back without a court order. Kremen then sued Cohen, several Cohen-controlled entities, and Network Solutions for damages and injunctive relief.
Punitive Damages
Kremen eventually obtained control of the name, along with a judgment against Cohen and his companies for $65 million, including $25 million in punitive damages. U.S. District Judge James Ware of the Northern District of California rejected Cohen’s claim that he had legitimately purchased the name from Online Classifieds for $1,000.
But collecting has been difficult, and Kremen claims Cohen has been hiding assets offshore.
Cohen, meanwhile, moved to Mexico, where he has claimed to be under house arrest, and has not complied with orders in aid of the judgment. A warrant was issued for his arrest, and his appeal from the judgment was dismissed under the fugitive disentitlement doctrine.
Ware, however, rejected Kremen’s claims against Network Solutions, leading to the appeal which was the subject of yesterday’s order, by a divided panel of the appeals court.
The majority said the state’s highest court should decide whether California law requires that an intangible property “be merged with a document or other tangible medium” in order for the tort of conversion to apply, as suggested by Restatement (Second) of Torts Sec. 242. If state law does impose such a requirement, the Ninth Circuit judges said, then the state court should also decide whether an Internet domain name satisfies the merger requirement.
‘New and Substantial Issue’
Ninth Circuit Judge M. Margaret McKeown and Senior U.S. District Judge James M. Fitzgerald of Alaska, sitting by designation, said the appeal “raises a new and substantial issue of state law in an arena that will have broad application” and should be decided by the state court.
But Judge Alex Kozinski dissented, arguing that the resolution of the issue would not affect many cases and that California law clearly favors Kremen’s position.
This state’s courts long ago rejected the common law rule that property could only be the subject of conversion if “tangible,” the jurist said, pointing to an 1880 Supreme Court ruling that allowed a suit for conversion of shares in a corporation and rejected the defense argument that the plaintiffs could sue for conversion of the share certificates, but not the shares themselves.
“None of this matters anyhow,” Kozinski went on to say, because Kremen would win even if the “merged in a document test” is applied.
Kremen has “the right to have people who type ‘www.sex.com’ into their web browsers sent to his website,” Kozinski—generally regarded as among the most tech-savvy members of the bench—explained. “It is, in standard Geek, the right to have the second-level .com domain ‘sex’ associated with his [internet protocol] address in [Network Solution’s] .com registry,” the judge elucidated.
‘Too Much to Bear’
Kozinski also attacked Network Solutions’ claim that it had no reason to question the authenticity of Cohen’s letter as “too much to bear,” especially given the explanation that Online Classifieds wasn’t communicating directly because it lacked “a direct connection to the Internet.”
The judge commented in a footnote:
“It’s a bit as if Judge Reinhardt sent a letter to the DMV saying, ‘Judge Kozinski wants you to transfer title to his Lamborghini to meóhe’d write to you himself, but he’s out of stamps.’ ”
Kremen’s lawyer, James Wagstaffe, said that while he was unhappy with the delay that certification will cause, he was “absolutely buoyed” by the fact that there is now a published order which, in combination with the dissent, suggests that “the goliath of this industry—may be accountable.”
The California Supreme Court, he told the MetNews, an excellent court” in which to argue intellectual property issues and a good forum for “21st Centurying the law.”
Network Solutions’ attorney, Kathryn Karcher, said she had been instructed by her client not to comment.
The case is Kremen v. Cohen, 01-15899.
Copyright 2003, Metropolitan News Company