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5 Apr 2001
Sex site squatter fined $65m
BBC

A US judge has awarded $65m to a man who registered the internet domain name sex.com after an online pornographer was found guilty of hijacking his site.

Lawyers for Gary Kremen said the case would have an important bearing on how domain names are protected in future.

Judge James Ware found fugitive cybersquatter Stephen Cohen liable for fraud and forgery, ordering him to pay $40m in compensation for lost profits and $25m in damages.

Mr Kremen, of San Francisco, registered sex.com in 1994, the dawn of the internet age, for $1,000.

Fraudulent plan

The court heard that Cohen seized control of the sex.com address a year later by presenting forged transfer of ownership documentation to Network Solutions, which oversees the allocation of website addresses.

Using a company registered in the British Virgin Islands, Cohen proceeded to turn sex.com into what Mr Kremen's lawyers called a "multimillion dollar sex empire".

Lawyers say the site gets as many as 25 million hits a day, and could be worth as much as $100m.

Cohen said he obtained the website address lawfully, but Mr Kremen disputed that, saying Cohen forged a letter which purported to support the deal.

San Francisco District Judge Ware agreed, saying it was clear that Cohen had "devised and executed a fraudulent plan to steal the domain name 'sex.com' from Gary Kremen".

Arrest warrant

With other single-word website addresses such as business.com having sold for millions, and studies showing that sex is a major draw for people on the internet, the sex.com site was seen as potentially one of the most valuable on the web.

Cohen, who has previously served a jail sentence for bankruptcy fraud and impersonating an attorney, lives in Tijuana, Mexico, and has shielded his multimillion dollar fortune by stashing it in offshore accounts, lawyers said.

He has failed to make numerous court appearances and the judge issued a warrant for his arrest, to remain in effect until he surrenders all of his property to the court.

Mr Kremen's lawyers admitted that the chances of him seeing any of the money in this case were "slim to none", but said the judge's award nevertheless marked an important step in resolving the issues of internet claim-jumping and the actual value of cyber real estate.

'Important precedent'

Attorney Pamela Urueta told the BBC: "This ruling sends out the clear message that the domain name is a valuable property right and that can and should be protected.

"There has been very little litigation about what exactly a domain name is, and in light of the burgeoning nature of the internet, it is important to explore and in this case bring together two really important notions - common-law protection of a property right and how that intersects with the internet."

Mr Kremen, who was given control over the website last November, has said he intends to cut the amount of outright pornography it offers and "transition the site to more mainstream content".

 

 

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