The Internet has grown and continues to grow exponentially. It seems nearly every company, large or small, is either already on the Web or is scrambling furiously to get there. But with every business endeavor that grows unexpectedly quickly, consequences emerge that could not be predicted, but can be devastating.
For example, take the case of Sex.com, formerly maintained by Gary Kremen, who had built up monthly sales in the millions. Kremen was shocked and irate when an ex-convict by the name of Stephen Cohen re-registered the site to himself. Cohen falsified papers to gain registration of the site from Network Solutions, the domain-name registration company that licensed "sex.com." Not surprisingly, Kremen sued Cohen and Network Solutions.
What was surprising, at least to Kremen, is that his case was dismissed by a U.S. District Court judge, who said that domain names are not property and therefore can't be stolen. Kremen is free to sue Cohen for fraud, but not for theft, because technically there was no property to steal.
"We are in the wild, wild West stages of Internet law," says Maury Ringel, an attorney from Needham, Massachusetts, who specializes in buying, selling, and protecting domain names for his clients. "Keep in mind that we have many Federal Circuit Courts in the U.S., and one Circuit can rule completely differently than any other." That's probably not much consolation to a Web site proprietor who believes that his site has been taken out from under him. But Ringel thinks that eventually there will be more uniformity: "The body of law will develop, and we may end up with a uniform set of rules." But for now, he points out that the way domain names are perceived does preclude ownership. "It's like a lease arrangement, at least in the colloquial sense," he says. "You're not really purchasing or selling a domain name. You're paying an ongoing fee for the right to use that name, but if you stop paying, your right to that name stops also." He wonders if that might not change in the future. "With Network Solutions, you can now register for one year or up to ten years," he says. "If they went to a one-time registration fee, that would be more like a sale, with ownership going to the person who paid the fee."
Jonathan Barsade is a lawyer specializing in Internet law who works full-time for GreatDomains.com, which buys, sells, and resells domain names. He agrees with Ringel on the vastly changeable nature of this kind of ruling. "The case law is in extremely early stages," he says. "I'm not at all sure this is going to be the final word. There are really legitimate arguments going both ways, and it will take a few years to sort itself out."
Businesses are likely to lobby for legislation that will view domain names as intellectual property, especially since many companies already view them that way. "People do have rights to these names just like any other property," says Jeffrey Tinsley, chief executive officer of GreatDomains.com. "These names are just like land. People are building valuable property on those names."
But while the courts are sorting that out -- a process which could take years -- a more immediate concern for Internet business owners is simply how to protect their names. Believing that a domain name is property is not enough to protect it from being appropriated. In addition, "there's no way to 100 percent guarantee against fraud of any kind," says Ringel. "But I always advise my clients to tighten internal procedures and security."
Barsade also points out the value of monitoring the marketplace. "People should police the market, prevent others from using similar names," he says. "And they should protect themselves contractually. Write strong contracts, then enforce them."
Tinsley adds that he strongly recommends against using e-mail authentication programs for domain registration. Through such programs, companies like Network Solutions can implement changes in registration if the authorization for those changes comes in an e-mail from one of the contacts for the domain. In the case of the Web site maintained by Kremen, the authorization came in a fraudulent e-mail disguised as one from Kremen's company.
But the most important way to protect one's domain name is to take name registration a step further and seek trademark protection. This may come as a surprise to many Internet site proprietors, who sometimes believe that domain registration accomplishes the same thing. "Mere registration of domain name doesn't constitute trademark use," says Barsade. He, Ringel, and Tinsley all agree that this is the strongest form of protection currently available.
"A Federally registered trademark is considered property -- intellectual property, not tangible," says Ringel. "The trademark would impact on someone else's ability to use that domain name." The downside of applying for a trademark is the 18 to 24-month time frame it takes to get a final answer from the U.S. Patent and Trademark Office, an almost inconceivable length of time compared to lightning-fast "Internet time." But as Ringel points out, the trademark, if approved, allows for retroactive protection.
The fact that trademark infringement is a serious Federal crime will help deter those who are considering a takeover such as the one experienced by Gary Kremen. Tinsley notes that GreatDomain.com won't touch names with trademarks attached unless a rigorous screening process proves the domain name can legally be sold. "They must prove they have the right to sell the name," he says. It's a policy that's helped his company avoid problems, without a single problematic transaction in its history.
Ringel thinks trademark protection is a must for the domain-name user. "I advise all my clients, and all my clients' clients, to seek trademark protection along with domain name registration. The two together are very powerful. Instead of a questionable property question, you have trademark infringement. They should get at least state, but preferably Federal, trademark approval."
What lies in the future of this new frontier of Internet law? Ringel points out that international applications haven't even been considered. "Who has jurisdiction in cyberspace? Where did the fraud occur?" Trademark registration will cover problems within the United States, but it offers no protection in any other country. "Other countries have their own legitimate version of the Patent and Trademark Office," says Ringel. "Before the Internet, different countries could trademark the same things, and it wasn't much of a problem, because the trademarked items were contained within each country. Now you trademark a domain name, put it on the Internet, and there it is -- on the World Wide Web."
At least one e-commerce spokesperson, Alexis Gutzman, has published articles suggesting that registering domain names outside of the United States is the answer. Gutzman, who was unavailable for comment for this article, believes that other countries do view domain names as property, and therefore would be more willing to support litigation. But whether registering a site outside of the United States would prove to be a practical move depends on the nature of the site and the financial issues involved; international contacts and legal help can be expensive.
Until the legal world has grappled more extensively with domain-name rights, it's clear that site maintainers must use caution when applying for registration. Researching the security and authorization policies of the company that's selling the name is critical. Applying for trademark is a necessary next step, at least until the courts decide uniformly on the property issue of domain names.
The hassle and cost involved in taking these measures are minimal compared to the hassle and cost involved if a name is fraudulently taken from you. Let's face it: those who best survived those early days in the wild, wild West probably were the ones who were best prepared for the worst.