- David Goldstein -
Domain names can be big business. In June it was announced ass.com sold for over $6 million. Earlier in the year christmas.com sold for $3.150m and there are 4 other domains, all .com domains, that have sold for over a million dollars according to Domain Name Journal as of early July. And these are just the publicly reported sales. There are many others that go unreported. So it’s no surprise that domain name ownership occasionally hits the courts.
sex.com is probably the most famous, even being made the subject of a book. And this year the England and Wales High Court decided on a long running dispute over the ownership of blackjack.com. Sex and gambling are also two of the biggest money-spinners online, and offline too.
In the case of blackjack.com, for the first time the England and Wales High Court ruled a domain name may be a form of “intangible personal property”. The case centred on a dispute between Perlake, a Uruguayan company now in liquidation who had failed to pay a commission derived from the business using blackjack.com. Other issues in the case involved the legitimacy of a loan agreement and business dealings with those involved.
Originally registered in 1996, the domain name blackjack.com was purchased by Cary Pinowski for $465,000 in 1999 or 2000, with Hangar Holdings registered as a business in the Cayman Islands in 2000. An agreement was entered between Pinowski and some investors who then controlled Hangar Holdings. Then in 2003 an agreement with a third party, with experience in online gambling, was entered into that included payments of $250,000, which was made in instalments 2005, and a percentage of revenue.
One of the terms of the 2003 Agreement provided that Hangar Holdings was entitled to terminate the agreement if Perlake committed a material breach with a proviso that if the breach was capable of remedy, Hangar Holdings was obliged to give written notice specifying the breach and requiring it to be remedied; if Perlake failed to effect a remedy within 30 days of the notice the 2003 Agreement would terminate. Thereupon Hangar Holdings would be entitled to all rights in the domain name and trademark.
Which brings us to the decision relating to trademarks and the domain name, as it was the ownership of these that was a key issue. The claimant in the case “submitted that the position in relation to a domain name is analogous to that in relation to a registered trademark: a valid agreement by which a party is entitled to require the assignment of a trademark upon the occurrence of a specified event will create an equitable interest in the trademark on the part of the intended assignee when that event occurs.” This was rejected by His Honour Judge Hacon.
The defence claimed that “a domain name is like a telephone number, consisting of alphanumeric characters which, when applied, directs internet communications to a particular website. A domain name, like a phone number, is not an item of property. In consequence, unlike a trademark, no equitable interest in it can be created.” However HHJ Hacon did not accept the defence’s analogy saying “phone numbers are not generally bought and sold. There may be possible exceptions to this depending on the contractual arrangement with the phone company, but there is no doubt that a domain name can be freely traded. The present case is a prime example.”
HHJ Hacon referred to an earlier judgement (in Tucows.com Co v Lojas Renner) where in the Court of Appeal of Ontario Weiler JA set out a detailed review of judicial and academic consideration in several jurisdictions (including England, mentioning [OBG Ltd v Allan]) as to whether a domain name constitutes property. In Weiler JA’s decision “she reached the firm conclusion that it does.” In her decision Weiler JA found the arguments “entirely persuasive” and agreed “that a domain name is intangible personal property.”
This led to HHJ Hacon finding “the analysis of Weiler JA in Tucows.com entirely persuasive”, agreeing “that a domain name is intangible personal property.” While this wasn’t the main issue being discussed in the case, as this revolved around the agreement struck between the parties, it was a key part.
Please feel free to read the full judgement by His Honour Judge Hacon and contact BrandShelter with questions about domain disputes.