Volume II

Issue : 9: April 29, 2004

• The Use of Video Surveillance by Employer Violates PIPEDA
• U.S. Court Upholds Prison Term in Online Pharmacy Case
• U.S. Appeals Court Finds Registered Trade Mark Generic for Purposes of ACPA
• FCC VoIP Ruling Could Cost AT&T Billions
• Canadian Phone Companies Protest CRTC's VoIP Opinion
• Sex.com Dispute Finally Settles
• German Open Source Proponent Obtains Order Enforcing GNU General Public License
• U.S. Court of Appeals Overturns Decision on Disgruntled Homebuyer's Website
• Court Upholds Enforceability of Clickwrap Agreement that Was Accepted Under Protest
• Criminal Charges Filed for First Time under U.S. Spam Legislation

Home > Volume II > Issue 9: April 29, 2004 > Sex.com Dispute Finally Settles

Sex.com Dispute Finally Settles

On April 20, Gary Kremen, owner of the sex.com domain, and the domain name registrar VeriSign announced the settlement of their long-running legal battle over the wrongful transfer of the sex.com domain name.

Kremen registered sex.com in 1994. In 1995, Stephen Cohen (having just finished a prison sentence for impersonating a bankruptcy lawyer) forged a letter from Kremen's company to Network Solutions (now owned by VeriSign) purportedly authorizing the transfer of the domain name to Cohen. Network Solutions transferred the domain name without verifying the letter's authenticity. Cohen ran the domain for the next several years, raking in an impressive amount of money in the process.

Kremen proceeded to sue both Cohen and Network Solutions. The initial decision went against Kremen in that the domain name was returned to him, but the court held that Network Solutions was not liable for its error in transferring the name. The court did find Cohen liable for $65 million, which Kremen has been unable to collect because Cohen fled the U.S.

Kremen was more successful on appeal. The Ninth Circ2uit Court of Appeals held that Network Solutions could be liable for giving away Kremen's domain name without proper authority. The Court stated that holding Network Solutions liable for giving away a registrant's domain name on the basis of a forged letter is no different from holding a corporation liable for giving away someone's shares under the same circumstances, and held Network Solutions liable for conversion. The case was sent back to the federal district court to assess the damages owed to Kremen; however, the parties announced their settlement before that hearing commenced. Terms of the settlement are confidential, but it is reported to be in the realm of $15 million. Kremen is still seeking to collect his damages from Cohen.

Dramatic storyline aside, this case is significant because the Ninth Circuit decision treated domain names similar to tangible property, the mistreatment of which is compensable in damages. This finding clearly applies to domain name disputes, and domain name registrars should pay careful attention to it.

For more information, visit:
http://news.com.com/2100-1038_3-5195669.html
http://www.wired.com/news/business/0,1367,63142,00.html