United States: You May Not Necessarily Be The Master Of Your Domain

The ability to associate goods and services with a specific domain name can make or break a business, so much so that companies are still willing to fork over millions to purchase domain names.  And although you may consider yourself lucky to have registered a catchy domain name that drives plenty of traffic to your website, query whether the domain name is actually your property; not only do companies that provide domain name registration services frequently take the position that domain names are not property, but at least one recent case law suggests this as well.

The concept that domain names can be "owned" as intangible personal property seems reasonable on its face, particularly given the close relationship between domain names and trademarks, the latter of which historically have been considered property.  Domain names frequently contain a registrant's trade name or trademark associated with the registrant's goods or services.  Moreover, the Anticybersquatting Consumer Protection Act of 1999 (15 U.S. Code § 1125) permits a trademark owner to pursue an in rem action against a domain name that violates the mark owner's rights, and the availability of an in rem action implies that the Act treats domain names as property.

On the other hand, domain names and trademarks are distinguishable.  For example, certain prerequisites for federal trademark registration, such as proof of the mark being used in interstate commerce to identify a specific type of good or service, do not apply to domain name registrations (which instead are registrable on a first-come, first-served basis).  And although similar marks used by different companies can potentially co-exist depending on territorial and other factors, each registered domain name is unique, at least with respect to the applicable top-level domain.  (Given that uniqueness, and the ability of domain names to "point" Internet users to information sources, domain names have been likened to toll-free "vanity" telephone numbers; like domain names, vanity telephone numbers that include a company's name or mark are, in a sense, tools that can help drive traffic to the company's offerings.)

On November 7, 2013, in Alexandria Surveys, LLC v. Alexandria Consulting Group, the U.S. District Court for the Eastern District of Virginia held that under Virginia law, domain names, like telephone numbers, are not property.  In Alexandria, two competitors, Alexandria Surveys LLC ("ASL") and Alexandria Consulting Group ("ACG"), each sought the rights to the domain name ALEXANDRIASURVEY.COM, which previously had been registered by Alexandria Surveys International ("ASI"), a debtor in bankruptcy.  ASL had purchased from Cox Communications ASI's former telephone number and domain name, which had not been scheduled by the trustee in ASI's bankruptcy proceeding.  ASI's estate was later reopened, and among other assets, the trustee auctioned off that same telephone number and domain name to ACG.  The bankruptcy court ordered ASL to hand over the disputed assets to ACG, and ASL appealed.

The District Court, noting the absence of any on-point Fourth Circuit precedent, relied on the 2000 decision in Network Solutions Inc. v. Umbro International, Inc. et al., in which the Virginia Supreme Court held that domain names are contractual rights rather than property rights subject to garnishment, that is, that they are merely "the product of a contract for services between the registrar and registrant," because they cannot exist without the provider performing services under the applicable domain name registration services agreement.  Although the court in Alexandria acknowledged a split in authority concerning the proprietary nature of telephone numbers, the court ultimately agreed with the Virginia Supreme Court's conclusion that "Virginia does not recognize an ownership interest in . . . web addresses[,]" and held that ASI's domain names were nottransferred as part of the estate.  Although the court in Alexandria acknowledged that a domain name can be valuable, the court reasoned that such value is subjective and therefore in itself insufficient to support an argument that domain names constitute property.

The view that domain names are not personal property can be viewed as contrary to the Ninth Circuit's well-known 2003 ruling in Gary Kremen v. Stephen Michael Cohen, et al., concerning the wrongful transfer of the highly lucrative domain name SEX.COM.  In Kremen, Gary Kremen, the original registrant of SEX.COM, sought to recover against Network Solutions ("NSI") under theories of breach of contract and conversion after NSI transferred the domain name to Stephen Cohen without his authorization.  Although Kremen's breach of contract claim failed for want of consideration—Kremen had registered SEX.COM in the mid-1990s, when NSI was issuing domain name registrations to companies and individuals free of charge—the Ninth Circuit ruled that a registrant does have a property right in a registered domain name and that the unauthorized transfer of that domain name serves as a basis for a claim of conversion. In support of this conclusion, the Ninth Circuit pointed out that domain names represent an interest that is well-defined; that domain names are subject to exclusive possession or control; and that registrants can have a legitimate claim to exclusivity over domain names.

Meanwhile, some domain name registration service providers go to great lengths to inform their customers that domain names are not property.  Namecheap's registration agreement states: "You further agree that domain name registration is a service, that domain name registrations do not exist independently from services provided pursuant to this or a similar registration agreement with a registrar, and that domain name registration services do not create a property interest."  And GoDaddy's registration agreement requires customers to "acknowledge and agree that by registering a domain name, you are not acquiring any property rights in that domain name."

Also keep in mind that treating domain names as property is not without potential problems.  For example, as the Virginia Supreme Court pointed out in Network Solutions, treating domain names as property and thereby subjecting them to garnishment could open the door to garnishment of other business indicia, such as corporate names, "by serving a garnishment summons on the State Corporation Commission since the Commission registers corporate names and, in doing so, does not allow the use of indistinguishable corporate names."  It is unclear how problems like these might be resolved in the future.

For now, the answer to whether domain names constitute personal property is a tough question and may depend on the jurisdiction where a claim is ultimately raised.  And, from a practical standpoint, care should be taken in how domain names are treated in commercial transactions, given that they are frequently among a business's most important features. 

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Gabriel E. Meister
 
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