Kentucky Uphold Domain Seizure, Part 2: Our Take: Who is At Risk: What To Do Now

Thursday afternoon Judge Thomas Wingate issued a ruling that he would not dismiss the case brought against domain owners which included seizure of their names. A forfeiture hearing has been scheduled for November 17th.

A copy of the decision can be seen here

have read the decision in full.

The court found it had jurisdiction over the 141 domains seized by the commonwealth.

The court found that Domains names by virtue of of “its scarcity and desirability, domain names have economic value.

Domain names are “property” subject the the courts jurisdiction and subject to civil forfeiture.

However, and here is the important part, the court made the distinction between domains that were “parked” and domains that were used to operate a gambling site.

“”””The court recognizes that as to any of the 141 defendants domain names that identify websites as informational only, the seizure order must be rescinded.””

However the court found that “Internet gambling operators and their domain names are present in Kentucky.”

So if you have a parking page the Commonwealth has no jurisdiction but if your operating a site, then your doing business in the state and your subject to its jurisdiction.

The court then found a domain name to be a gambling device included in the language of Kentucky Statue because “domain names are designed to attract players”.  “”Internet domain names…create and maintain a virtual casino, and contain the vice at which the statute is directed.”

The court went on to say the “domain names have been designed to reach our state” as the operators of the domain could have blocked, filter or deny access based on geographical location, such as the Commonwealth of Kentucky.

The court also dismissed the argument that a domain name’s presence is where it is owned or housed, essentially ruling that Internet domain issues are matters which individual states, even “municipalities” have a right to adjudicate.

Another scary part of this ruling is that domain names are not only subject to in rem jurisdiction, but that control can be seized, without the basic due process of notice and hearing by any municipality.

The courts ruling is basically if you operate a gambling site and block Kentucky then you can keep your domain and if you don’t then you will forfeit the domain.

The court will hold another hearing on November 17th to see if the domain operators have complied with the blocking order.  Those who have will get their domains back.  Those who don’t will forfeit the domains to the state.

Interestingly the Judge’s order said nothing on the question of damages that the state wanted.  Te judge made no ruling on damage, fines or recouping money made by sites operating in Kentucky.

So what does all this mean?

In my opinion the judge made up law to come to the conclusion the Governor of Kentucky wanted him to come to.  The ruling of the judge makes little sense.  He concludes that domains are property although a long line of cases says its not.

The question now becomes will anyone subject to this order appeal the ruling, or will they simply block Kentucky and allow this ruling to stand?

The one savings grace from this opinion is that informational domains cannot be seized.

However sites “doing business” can be.

Who is at risk for a similar action?

In my opinion all Geo Sites and Adult sites top the list.

If a state can regulate the internet so can a county, city, town, or as the judge said any “municipality”.

A municipality can pass a law saying its unlawful to have a domain confusingly similar to the name of the municipality, county, city, state, etc, and then seize domains as being in violation of the law.

Adult sites and are also very vulnerable in our opinion.   For just one example, if it’s against the law of a city or county to sell adult toys and the city finds a site selling adult toys, they can seize the domain.

Any domain that might have run afoul of the “Snowe Bill” might also be subject to seizure by some jurisdiction at some point.  Those would include domains confusingly similar to government agencies or services, on a national or regional basis

You know have to ask yourself what next jurisdiction will act, and what will they do.

What is the cost of defending yourself in one of these proceedings (tens of Thousands of Dollars) even if you get your domains back and the real question becomes, what is the benefit of having a US based registrar?

I cannot answer these questions for you.

I cannot advise you how you should conduct your business.

All I can tell you is what we have done.

Last month we moved all our domains to an “offshore” registrar, NameVault.com

If you look at our whois record for any of our domains you will see they reflect the registrar Namevault.

NameVault.com is a ICANN accredited registrar which is located in the Bahamas.

We believe that this registrar represents the only true “offshore” registrar solution.

We are also pleased to note that Namevault.com is now the 6th fastest growing registrar in the world as ranked by Icann.

If you want to contact them you can at sales@namevault.com

You will have to make your own decision.

We came to the conclusion that there is no advantage of using a US based registrar as it seems the US is the only country seeking to regulate the internet on a daily basis.

The ICA which filed a brief in this case responded to the decision as follows:

“The Internet Commerce Association is extremely disappointed in the decision issued by the Court this afternoon. This is a dangerous decision not just for domain name investors and developers but for all who value commerce and free speech on the Internet. The Court has incorrectly held that domain names are a form of property subject to in rem jurisdiction anywhere on the face of the Earth where their associated websites may be viewed on a computer screen. Even worse, it has endorsed the seizure of domain names absent notice and hearing, violating basic principles of due process. If the logic of this decision was broadly adopted then Internet commerce and speech would be at risk on a global basis. For example, U.S. companies conducting legal business activities in this nation could be subject to seizure orders for their domain names issued by foreign courts for lack of compliance with local law and regulation merely because their websites can be viewed abroad. Even more worrisome, the courts of totalitarian regimes could issue seizures orders against domain names used to spread truth and advocate freedom to their repressed populations. The remedy proposed by the court – geographic blocking so that none of the subject websites can be viewed from within Kentucky – is infeasible for individual domain names which could be subject to different laws and regulation in thousands of jurisdictions worldwide.

“The ICA does appreciate that Judge Wingate has indicated that he will continue to let us participate in this case as friends of the court. Given the high stakes for freedom, commerce, and the rights of domain name owners, the ICA plans to remain actively engaged in this critically important litigation.”

Comments

  1. says

    There can be no question as to how similar Domain names are to real estate. We all have read numerous articles about the future real estate is really a cyber-asset called domain names. Its called association.

    Our opinion is that Geo domains are the most susceptible to states and communities in being subject to invoking an eminent domain argument for seizure.

    The world is often not fair, but the stark reality is that if you own Geo Domains you are going to be more susceptible to seizure. We doubt very seriously that domiciling outside the U.S. will supply any real safety.

  2. Merlin says

    Mike, I generally agree with you that a true offshore registrar is the safest solution; however, what happens in the event that a company with deep pockets buys a judge in the Bahamas? Is it not possible that other jurisdictions posess the capability to make worse rulings, not to mention, with less options for appeal?

  3. says

    There is a clear distinction being drawn here between this case and geographic domain names. The answer is simple.

    Develop your geographic name and then file a trademark for it with the USPTO under the Supplemental Registry. Filing cost, around $350. Use a lawyer if you are unsure how to file or how to word your application. The best way is to research the USPTO database and see how others have done this. It takes 8-12 months for the full approval process.

    YourGeographicDomain.com ®

    This is the best protection you will ever have. Don’t sit by and wait for someone else or some trade group to do this years down the road while your assets are at risk.

  4. MHB says

    Merlin

    No all court systems are created equal.

    For example in the Kentucky case the governor filed his case, held a hearing in secret, got a judges order to seize, what he has now defined as property, without any notice or hearing to the property owners.

    Now there’s not much worse you can get than that.

    Is their a difference between buying a judge with cash or with political promises or threats?

    I don’t think so.

    Also to note the whole process including the first hearing took less than 2 weeks.

    Now in the Bahamas it takes on average 5 years for a person accused of murder makes it to trial.

    So you can file what you want down there but its going to be a looooong time until your matter is heard

  5. Merlin says

    Mike,

    5 years to go to trial might actually be worse.

    I’d assume that the person accused of murder is typically unable to leave the Bahamas, being considered as a flight risk – would it not be the same situation for a domain name which is pending judgment?

    Sure, 5 years may be better than losing a domain to a flawed US judicial system; however, I bet (no pun intended) one could manipulate the legal system in the Bahamas to issue a registrar-hold on a domain name held at a local registrar, on the basis of a frivolous charge.

  6. says

    “Is their a difference between buying a judge with cash or with political promises or threats?

    I don’t think so.” MHB

    – What!!?? That is an unbelievably bold inference coming from a lawyer and an ICA member.

    “Now in the Bahamas it takes on average 5 years for a person accused of murder makes it to trial.

    So you can file what you want down there but its going to be a looooong time until your matter is heard.” MHB

    – Yes, this makes me want to jump ship right now and transfer all my domains to the Bahamas. Are you kidding?

  7. MHB says

    David

    The case your citing on domainnamenews.com is one of trademarks infringement.

    We have yet to see if such an order will make it to the registry in a non-trademark case, such the one in Kentucky.

  8. MHB says

    Merlin

    “””I bet (no pun intended) one could manipulate the legal system in the Bahamas to issue a registrar-hold on a domain name held at a local registrar, on the basis of a frivolous charge”””

    Well this happened in the US, but it took only 2 weeks.

    Down there is going to take years to get the first order to get the domains on hold, if at all.

  9. MHB says

    Ken

    First of all Registrars are governed by ICANN and have to follow their rules or risk losing their accreditation and since registerfly no one has lost a domain after accreditation problems.

    Icann simply locks all the domains at the registry and then takes bids from other registrars to acquire the management of the domains.

    Icann can take these actions without court action.

    So its not like a registrar can just “take” your domains.

    And yes I see no more protection dealing with a court motivate by and making ruling based on politics in the state the court resides and a judge taking cash for his ruling.

    In both situations the case gets decided not by the facts and the law, but on improper outside factors

  10. jp says

    With this inherent flaw of the .com registry being located in the US, perhaps this will increase the value of all these potential new extensions coming out next year under new ICANN policy. It may make alot of sense for someone to start a new extension off-shore in a country that could use the money and sell the extension under the premise that it is safe from US law. Perhaps there will be extensions created regarded as “Safe Extensions”.

  11. MHB says

    JP

    Very interesting point.

    There is no need for a registry to be located in the US.

    I’m sure many of the applicants will be non-US based companies but actually promoting a site to be outside of US governance, well that may have broad appeal.

    Can you say .bet

  12. says

    We have yet to see if such an order will make it to the registry in a non-trademark case, such the one in Kentucky.

    Heh, that’s why I added it remains to be seen. Strange things have happened, after all, but keep this up so folks can stay updated on this issue.

    What JP said…sounds like someone can use that as a good marketing pitch. Could work. :D

  13. says

    @Merlin

    As someone who knows how things work in the Bahamas …

    I can tell you that the chance of any internet related case coming to court in the Bahamas is virtually NIL – unless you are involved in trademark or copyright infringement, drug dealing or money laundering.

  14. Merlin says

    @Too Many Secrets:

    I hear you, however, the Kentucky case is basically an instance of a state claiming infringement on their exclusive traderights to the gambling industry within their state.

    The Bahamas are big on gambling, and I’m sure a number of online gambling operators are based/hosting out of there. However, one of those operators could see a domain being held at an offshore registrar as an opportunity to exploit a local legal system which they are familiar with.

    Before I’d moved any of my domains I’d like to know who is behind the wheel of NameVault – who is the management?

    Are they reputable?
    Can I trust them?

    Mike, are you the owner? You’re certainly a biased promoter.

  15. offshoreplease says

    Michael,
    “Gambling is not illegal in Kentucky. It has a rich gambing history, think Kentucky Derby. The state government does not like out of state competition for its in state regulated and TAXED gambling operations.”

    If that’s the case then the governor and his lackies ARE extreme parasites. lowlife scum!
    All relevant registries and domain management systems need to be removed from the US asap. people need to vote and fix this nightmare called the Bush Administration. and throw them in jail! they just bankrupted the country. domains are important investments, but they will just be a casualty of your current governments anti rights agenda. if they want it they will take it. if it has value, they will take it.
    please fix America, Vote. hopefully the dem’s would be a bit better.
    cheers.
    looking from the outside in. :) and worried.

  16. MHB says

    Owen

    In this case the registrars were ordered to act, so their presence in the US is the important factor.

    If they have presence in the US, an office, employees, maintain a bank account in the US, make payments from the US, it will be hard for them to claim no US contact, which is why if your going to go in the direction of a offshore registrar, you should make sure they are truly offshore.

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