Monday, July 28, 2003
Ninth Circuit Rules:
Domain Name Registrar May Be Liable for ‘sex.com’ Conversion
By KENNETH OFGANG, Staff Writer/Appellate Courts
The registrar of an Internet domain name can be held liable under California law for its conversion by a party that fraudulently persuaded the registrar to cancel the true owner’s registration, the Ninth U.S. Circuit Court of Appeals ruled Friday.
The court reinstated a suit by Gary Kremen, who has waged a long-running battle with Network Solutions, Inc. over “sex.com.”
Kremen, doing business as Online Classifieds, Inc., registered the name in 1994, but made little use of it in the next 18 months. In October 1995, Stephen Michael Cohen—a convicted felon and a “a man of...boundless resource and bounded integrity,” Judge Alex Kozinski explained, 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, bearing the signature “Sharon Dimmick,” authorizing the cancellation of the original registration and the re-registration of the name to Cohen. Dimmick, purportedly the president of Online Classifieds, was actually Kremen’s housemate.
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, then the exclusive registrar of “.com” domain names, said it would not change the registration back without a court order. Kremen sued Cohen, several Cohen-controlled entities, and Network Solutions for damages and injunctive relief.
Cohen claimed that Dimmick had sold him the name for $1,000. “This story might have worked a little better if Cohen hadn’t misspelled her signature,” Kozinski explained in a footnote.
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.
The Ninth Circuit panel originally asked the California Supreme Court to resolve the conversion issue in response to a certified question. But the state court in February declined to do so, providing a vindication of sorts to Kozinski, who had dissented from the order certifying the question.
Kozinski argued then that there was no need for certification because Kremen’s position was obviously correct, and Friday Judge M. Margaret McKeown and visiting Senior U.S. District Judge James M. Fitzgerald of Alaska joined him in reversing.
California, Kozinski explained, does not strictly follow the Restatement of Torts’ requirement that an intangible property right “be merged with a document or other tangible medium” in order for the tort of conversion to apply.
“On the contrary, courts routinely apply the tort to intangibles without inquiring whether they are merged in a document and, while it’s often possible to dream up some document the intangible is connected to in some fashion, it’s seldom one that represents the owner’s property interest,” Kozinski wrote. He cited cases allowing actions for conversion of music recordings, radio shows, customer lists, regulatory filings, and confidential information, among other types of property.
The judge pointed 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.
“Exposing Network Solutions to liability when it gives away a registrant’s domain name on the basis of a forged letter is no different from holding a corporation liable when it gives away someone’s shares under the same circumstances,” Kozinski wrote.
Kremen’s lawyer, James Wagstaffe, said the decision was “cutting edge,” applying “old time common law” to modern technology. The case, he said, may prove instructive in such areas as liability for identity theft and other misuse of confidential information.
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