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Domain Names as Intangible Property Subject to Lien and Attachment

Zuccarini is one of those mythic respondents whose registrations of domain names provided the grist for articulating standards of conduct under the UDRP.  He has also featured as a defendant in disputes arising under the Anticybersquatting Consumer Protection Act.  Most recently, the 9th Circuit affirmed the judgment against him by decision dated February 26, 2010 in Office Depot, Inc. v. Zuccarini involving domain names as property subject to lien and garnishment.  The status of domain names has evolved since they first made their appearance.

Domain names were initially seen as having two lives: providing “addresses for computers that [are] easy to remember … without the need to resort to the underlying IP numeric address” and identifying a business or its products or services [WIPO Final Report at paragraph 10].  However, over time they acquired an additional life beyond the purely functional. Entrepreneurs quickly learned how to create value by monetizing domain names for income and sale which raised their dignity into assets that could be pledged as security for collateralizing loans. Courts have recognized this change of status by analogizing domain names to real estate and corporate bonds. This status also exposes domain name owners to seizure for payment for debt. This is a radical transformation from how domain names were originally viewed.

The evolution from the purely functional to becoming an asset has been progressive.  While recognizing the value of domain names, a pre-ACPA decision in the 4th Circuit rejected the view that they were property. The District Court for the Eastern District of Virginia in Dorer v. Arel, 60 F. Supp.2d 588 (E.D. Va. 1999) sought an answer through analogy with trademarks: “Significantly, trademark law does not suggest that the trademark owner ‘owns’ the words used in the mark, but only that the owner may enjoin others from using the words in commerce so as to avoid confusion or dilution of the value and significance of the mark.” The Court then listed “several reasons to doubt that domain names should be treated as personal property subject to judgment liens.” This reasoning was subsequently followed by the Virginia Supreme Court in Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 770 (Va. 2000), reversing the Circuit Court that held that the “judgment debtor’s Internet domain name registrations are valuable intangible property subject to garnishment.”

In contrast to the 4th Circuit and Virginia Supreme Court the Court in Kreman v. Cohen, 337 F.3d 1024 (9th Cir. 2003), a decision under the ACPA that emphasized the value inherent in domain names, held that they are personal property and defined property broadly as including “every intangible benefit and prerogative susceptible of possession or disposition…” The Court held that “[l]ike a share of corporate stock or a plot of land, a domain name is a well-defined interest. Someone who registers a domain name decides where on the Internet those who invoke that particular name — whether by typing it into their web browsers, by following a hyperlink, or by other means — are sent. Ownership is exclusive in that the registrant alone makes that decision.”

The most recent discussion on this subject is the 9th Circuit’s decision affirming the judgment in Office Depot.  The Court held that “[g]iven the persuasive but not controlling language of the ACPA, and the practicalities involved in bringing suit to execute judgments against owners of domain names, we conclude under California law that domain names are located where the registry is located for the purpose of asserting quasi in rem jurisdiction. Although the question is not directly before us, we add that we see no reason why for that purpose domain names are not also located where the relevant registrar is located.”

Functionality and value have been completely separated. Domain names remain like telephone numbers but are assets valuable in themselves subject to lien and attachment.

Levine Samuel, LLP. <researchtheworld.com>
Gerald M. Levine <udrpcommentaries.com>
E-Mail gmlevine@researchtheworld.com

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