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11 Mar 2001
Net closes on the thief of sex.com
Nick Paton Walsh, Observer

Everybody wants a piece of the action. Sex.com, the most sought-after address on the world wide web, is at the centre of a remarkable legal dispute involving a fugitive porn baron, betrayed business partners and billions of pounds in potential profits.

Gary Kremen, then a penniless student, bought the rights to the name in 1994, sensing a chance of a big fortune from the burgeoning internet. But as he studied at Stanford University, California, Stephen Cohen, a convicted fraudster, was plotting a coup.

Jailed in 1991 for impersonating a lawyer, Cohen heard other convicts tell of money to be made from the net. Sex, he decided, would make him rich.

After his release in 1995, he discovered sex.com was registered to Kremen. But he convinced Network Solutions, which controls web addresses, that he was an ex-flatmate of the student, who had agreed to hand it over. Cohen paid £650 to be listed as the owner.

Sex.com was quickly transformed into the hub of a porn empire based in Mexico. Subscriptions to the website grew at the speed of the internet itself. Its nine million users and huge advertising revenues gave Cohen an income of more than $400 million a year, salted away in the British Virgin Islands.

This weekend Cohen is on the run from US police after ignoring court orders to return sex.com to Kremen and hand over a large slice of his fortune in damages. The flight of the playboy businessman ended a six-year saga over the rights to the web name.

Kremen, initially too poor to mount a legal challenge, first filed a lawsuit against Cohen in 1998, using wealth amassed through stock market investments. Expensive teams of lawyers battled it out until a judge ruled last year that the name was not 'property' and could not be 'stolen'. This landmark judgment meant that the most valuable asset a company can have on the internet - its address - was a mere marketing tool.

But Kremen persevered. Cohen told a judge he first had the idea for sex.com in 1979, when he advertised 'nudist camps'. Kremen's side reminded the court that dot.coms did not exist then.

Last November Kremen had a breakthrough. Judge James Ware said Cohen should return sex.com to Kremen. He ordered that $25 million sent abroad should be returned to the US for possible damages.

Cohen ignored the order. When he also ignored a subsequent contempt-of-court ruling, a warrant for his arrest was issued. He is now thought to be on the run.

The businessman may have vanished, but his millions have not. Kremen wants them and he will be helped by a ruling last Friday. It says 'that if you steal a product and sell it, you are competing unfairly,' said Kremen's lawyer, Charles Carreon.

Kremen also plans to sue other companies that have registered variants of sex.com, which he now plans to turn into a 'classy' adult entertainment site.

 

 

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