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11 May 2000
Sex.com Saga Still Sizzling
Craig Bicknell, Wired

Few people would dispute that sex.com is a valuable piece of online property.

Stephen Cohen wouldn't: He's the ex-convict who runs sex.com and claims it's the top-grossing porn site on the Web, snaring millions of dollars a month.

Neither would sex.com's original owner, Net entrepreneur Gary Kremen, who sued two years ago to reclaim the domain he says Cohen stole by forging a phony transfer letter to domain registrar Network Solutions.

With millions at stake, Kremen sued both Cohen and Network Solutions.

There are those, however, who would argue that online property, valuable or not, isn't property at all. Unfortunately for Kremen, one of those people is Judge James Ware, who's presiding over Kremen's case against Network Solutions in U.S. District Court in San Jose, California.

Last Friday, Ware granted a summary judgment in favor of NSI, based in part on the ruling that domains are not property, and are therefore not subject to property law.

"The court leaves it to the Legislature to fashion an appropriate statutory scheme to protect dormant domain names unprotected by trademark law," Ware wrote in his ruling.

Kremen is furious.

"It's ridiculous. If you follow the logic here, it's open season for stealing domains. If I go hijack your domain and use it for a year, you have absolutely no recourse."

Kremen plans to appeal. (His separate suit against Stephen Cohen is still pending.)

Kremen's wrath may be justified, but it should be directed at the law, not the judge, several legal experts say.

"The court points out, rightly, that the law has yet to catch up with the Internet, and it would be overreaching if it ruled for the plaintiff," said Sally Abel, a trademark lawyer at Fenwick and West in Palo Alto, California. "The judge is right -- at this time."

At the heart of the property dispute is whether domains are more akin to a plot of land (obviously, property) or to a phone number, which is considered a designation for a service and not property in and of itself.

Network Solutions argues that it's like a phone company, and that domain names are like phone numbers. "A domain name is not property, it's a service," said Phil Sbarbaro, Network Solution's litigation attorney.

"To say people buy and sell domain names is the vernacular, but it's not accurate," he said.

What they're doing is authorizing Network Solutions to transfer the service it provides to a new customer, he said.

Others think that's oversimplifying.

"Domains have many of the attributes of property," said Rob Phillips, an intellectual property lawyer in the Silicon Valley office of Howrey Simon Arnold & White. "People pay a lot of money for them, they create a huge amount of value, and they exist, albeit in computer form. If they're not property, what are they?"

If domains are property, they can be stolen -- "converted" in legalese -- just like a car, and the victim of the theft is entitled to recover monetary damages. If they're not property, they can't be converted, and claims for recompense fall by the wayside.

Kremen hopes to reclaim the millions Cohen has made running sex.com since the alleged theft. That will be much harder to do if Kremen can't legally claim that Cohen has stolen his property.

In his ruling on Network Solutions case, Judge Ware acknowledged the uncertainty of property law as it applies to domains, but emphasized that the job of clarifying the legal standing of domains rests with the Legislature, not the courts.

"The court recognizes that the present action invites abandoning the traditional strictures of conversion to encompass forms of intangible property," he wrote. "However, this court heeds the California Supreme Court's admonitions to exercise restraint in imposing (new tort duties) when to do so would involve complex policy decisions ... the court is reluctant to construct the proverbial slippery slope."

Whether or not the judge made the right call on property law, he was right to rule in favor of Network Solutions for other reasons, experts said. NSI can't be blamed if it was duped by a single piece of forged correspondence among the millions of letters and emails it receives.

"Who are they, the Internet traffic cops in the sky?" Abel said.

Kremen's legitimate legal beef is with Cohen, lawyers said, and he still has a good chance of winning that case, whether or not sex.com is considered property.

"There was still allegedly a fraud perpetrated," Phillips said. "If Kremen can prove that it was a forgery, than he could get a court order declaring the transfer was fraudulent and ordering NSI to transfer it back. Then the jury could award compensatory damages."

Cohen was on vacation in Europe and could not be reached for comment Wednesday. The case is scheduled to go to trial in March 2001.

"Nothing has changed against Cohen," Kremen said.

 

 

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