An Internet porn operator has discovered a harsh truth: One day you can have sex.com, the next day you don't.
In an unexpectedly swift ruling, a San Jose federal judge Monday stripped ownership of the choice Web address from its previous operator, Stephen Cohen, concluding that he most likely stole the rights to the domain name from San Francisco entrepreneur Gary Kremen. Kremen and Cohen have been locked in a legal war for two years over the rights to sex.com, currently a popular portal to scores of X-rated Web sites.
U.S. District Judge James Ware sided with Kremen's version of events, determining that Cohen secured the domain name five years ago through fraud, enabling him to make tens of millions of dollars in sex.com-related profits. Apparently worried about records showing that most of Cohen's corporateprofits have been shifted into offshore bank accounts, the judge issued an order requiring him to place $25 million into a federal court account until the litigation is completed and a final determination of damages -- if any -- is made.
Cohen has ''engaged in activities designed to conceal money. . . . made from the operation of the sex.com Web site, and to have transferred substantial assets to entities for the purpose of avoiding ultimate financial responsibility at the conclusion of this litigation,'' Ware wrote in a six-page order. ''These wrongful activities have accelerated in recent weeks.''
Attempts Monday to reach Cohen at his Tijuana-based company, Sandman International, were unsuccessful. Last week, Cohen declined to discuss the case, other than to repeat his contention that he is rightful owner of sex.com. He was not present for Monday's court hearing in the case.
Kremen, meanwhile, was jubilant at the new developments in his legal battle with Cohen. Under Ware's order, Network Solutions, which registers domain names, must immediately take steps to transfer ownership of sex.com to Kremen. Kremen will then attempt to remake sex.com, which has been a lucrative and lurid window into cyberporn.
''I'm going to try to do something different with it, but it will take a little time,'' Kremen said outside court.
San Francisco attorney James Wagstaffe, one of Kremen's lawyers, called Ware's ruling ''courageous,'' but predicted that Cohen would attempt to appeal the findings. Despite the order to set up the $25 million account, Wagstaffe said Kremen must still make a specific case for his damages and also expressed concern about whether Cohen would comply with the order.
Nevertheless, Ware's rulings Monday were a significant victory for Kremen in one of the most widely watched domain-name disputes in cyberspace. In fact, until now, Kremen had lost a number of key rulings in the case, suggesting he may have problems wresting sex.com from Cohen, a convicted felon who got hold of the Web site in 1995.
Based on court papers filed by both sides, the origins of the dispute date back to 1994, when Kremen apparently first registered sex.com with Network Solutions. Kremen, who was dabbling in a number of Internet ventures, did nothing specific to launch a Web site, and sex.com remained dormant until Cohen got it clicking.
Kremen alleged that Cohen forged a document and delivered it to Network Solutions to get the sex.com domain name. For his part, Cohen maintained in court papers that he believed he cut a legitimate deal to buy the domain name for $1,000, and that in fact he had trademark rights to sex.com arising from an online bulletin board system he ran from 1979 to 1995 called The French Connection.
During Monday's hearing, Ware made it clear that he now believes Cohen committed fraud to obtain the domain name. In court papers, Cohen has acknowledged earning millions of dollars a year in his various roles with the offshore companies associated with sex.com, and those earnings prompted Ware's decision to freeze his assets.
In depositions taken in recent months, Cohen repeatedly asserted his Fifth Amendment rights when questioned by Kremen's lawyers about his finances.