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21 Apr 2004
VeriSign to Settle Lawsuit Over Sex.com
Joseph Menn, LA Times

A decade ago, in the World Wide Web's formative days, Gary Kremen registered "sex.com" with the company that keeps the rolls of the world's commercial domain names. One year later, a con man filched the rights, and Kremen set off on one of the Internet's longest-running legal battles.

Now the lawsuit has been put to bed.

VeriSign Inc. has agreed to settle Kremen's federal suit, the two sides said Tuesday. The Mountain View, Calif., company, which acquired domain-name registrar Network Solutions in 2000 for $16.8 billion, said it made the deal this month. Terms weren't disclosed, but people familiar with the deal said the sum could be about $10 million.

Kremen — an entrepreneur and investor who lives in the con man's confiscated mansion in Rancho Santa Fe, Calif. — called the settlement a victory.

"This shows that the small guy can eventually beat a huge company," he said. "Hopefully, this leads to better care, custody and control over people's intellectual property."

In 1995, Network Solutions turned the sex.com rights over to convicted forger Stephen Michael Cohen, who claimed he had purchased the name from Kremen.

He hadn't. A federal court in 2001 ordered Cohen to pay Kremen $65 million: punitive damages plus the estimated $40 million Cohen raked in running the website, which was once billed as the "world's largest pornographic site."

Cohen skipped the country and the court issued a warrant for his arrest on contempt charges. Kremen then set his sights on VeriSign, which refused to admit its mistake and, he complained, engaged in a years-long cover-up. He was given the go-ahead to pursue the company when a federal appeals court last July declared that domain names were valuable property.

Kremen had won the case against Cohen in part by showing that a letter purportedly transferring his interest in sex.com to Cohen was a forgery. After the fight moved on to VeriSign, evidence suggested that the letter had been drafted after VeriSign transferred ownership and Kremen began complaining.

Last year, VeriSign sold off the part of Network Solutions that handled registrations — for $100 million — though it kept the master database for addresses ending in .com and .net.

The firm is defending itself against about 10 lawsuits over problems with domain-name registrations, according to its most recent annual filing with the Securities and Exchange Commission.

VeriSign spokesman Brian O'Shaughnessy said management of the domain-name registry had been overhauled since the company acquired Network Solutions.

Asked whether Kremen's suit had exposed problems at Network Solutions that VeriSign hadn't bargained for, O'Shaughnessy said: "I would be remiss if I answered that question."

As for Cohen, he is still on the lam.

In an e-mail from Cohen's address Tuesday, a person identified as Linda Davis, "one of Mr. Cohen's secretaries," said the U.S. judgment and warrant for Cohen's arrest couldn't be executed against him because he was now a citizen of Monaco living in Monte Carlo.

According to the e-mail, Cohen owns hotels and casinos and served as a "consultant" to EarthStation 5, a peer-to-peer system for trading digital files that purports to be based in the West Bank.

"Because of Mr. Cohen's current heavy schedule, Mr. Cohen was forced to cease his consulting relationship with EarthStation 5," the e-mail said.

Next month, it added, Cohen will begin building a casino in Macao.

 

 

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