Now that the federal government has gone through its second round of domain seizures, the 1st being in June of this year, the question becomes can domain holders lease or finance the purchase of domains anymore?
Over the years we have leased domains, some with an option to purchase and others through a straight lease.
Of course we have a written lease agreement we use that attempts to protect us and our domain.
The agreement provides that the site won’t be used for anything illegal, will comply with all state and federal laws and prohibit spamming and phishing.
In the even of a breach buy a lessee or a buyer under a finance agreements remedies are spelled out including moving the domain back to our servers.
Frankly the seizure of domains were not anticipated.
Until the Commonwealth of Kentucky seized gambling domains, the seizure of domain names was not a remedy used by law enforcement.
But the ball game has changed and domainers must adapt.
So the question must be asked can domainers still lease a domain or finance a domain, taking the added risk of domain seizure?
Up to now its been fairly easy to police lease and financed domains.
If someone is spamming you as the admin contact would get the complaint and/or notice and take the domain down.
If someone was serving up child porn on your domain you would see it and take the site back.
But in the world of domain seizures based on the sale of counterfeit or possibly simply unlicensed goods it going to be practically impossible to police the content of the site.
Beyond governmental action there is now this group RightHaven.com which has filed suit against at least 177 sites using copyrighted material in which as part of the lawsuit they seek the forfeiture of the domain name.
So if your leasing or financing the sale of a domain, not only do you as the domain holder have to worry about clear illegal use of the domain, using the domain for spamming, or phishing, but now you have to be concerned on making sure every product sold on the domain is properly licensed, and that none of the content on site infringes on anyone’s copyright.
Based on all of the above, domainers may not have the option of leasing or financing domains any longer
At the very least agreements are going to have to be carefully and thoroughly drafted. You are going to have to have an agreed on valuation (in case of a straight lease) in the even the domain gets seized
As a domain owner you may practically be restricted to only dealing with companies that are US based, or at least in a jurisdiction where you would have access to a legal system to enforce your rights under the agreement
You may have to assure yourself that the company your dealing with has the funds, to pay the value of the domain, plus your legal fees you’re going to incur to try to get the domain back.
That’s a lot of risk on the domain holders side that simply didn’t exist a year ago.
The added risk of seizure by both the government and RightHaven might have made leasing or financing a domain impractical.
It probably adds a layer of risk, but couldn’t that be contractually accounted for in advance?
If anything, it seems that it just might place an onus on the lessor to ensure he isn’t leasing domains to gray-area interests.
The risk has to be worth the reward and the agreement is only as good as much as its enforceable.
There is a cost of enforcement, which you may or may not get back.
There is a cost of time to file suit and pursue an action.
The numbers are going to have to be a lot bigger for the increased risk
those that pay big bucks are less likely spam, sell counterfeit junk etc. Instead of gooddomain.com they will use gooddomain101.com and the likes so *probably* not much changed. I doubt the feds are after every tiny violation, like missing a privacy page :), but use it for clear cases.
Selling fake coach bags, for example, is illegal and it should be
Big bucks is the key.
Leasing domains for a few thousand a year which used to be a viable option for domains that made little to no PPC is now no longer an option.
“So the question must be asked can domainers still lease a domain or finance a domain, taking the added risk of domain seizure?”
“domain seizure” by a government (especially Uncle Sam) seems to be far LESS LIKELY than the coming Domain Eclipsing by Platform Providers.
Domain Eclipsing by Platform Providers: The practice of “owning” GENERIC ASCII strings used for navigation by users of [The.Platform].
[The.Platform] is deployed a few inches from the Consumer (in their TV?)
How could a Domainer lease a domain and ensure that name is not Eclipsed by [The.Platform] ?
Example: Consumer enters MORTGAGE into their Desk-Top-Box-TV.
Does that resolve to MORTGAGE.????
John Berryhill says
General business insurance.
How do people lease anything with a risk of loss?
Hertz is not sweating bullets over whether their cars are going to be seized for transporting drugs. And those cars can be seized as surely as a domain name.
Anything that can be leased can be seized pursuant to a warrant that it has been used to facilitate a crime. But, somehow, other businesses don’t find it “impractical” to lease things.
Your saying that general business insurance is going stroke you out a $1 Million check on a domain that gets seized by the government due to the lessee selling unlicensed goods on it or because someone lifted an article from the New York Times and placed in on your leased domain?
“now you have to be concerned on making sure every product sold on the domain is properly licensed, and that none of the content on site infringes on anyone’s copyright.”
It gets better and better all the time.
Have you looked at the new (apparently active) BLOG Disclosure laws ?
Apparently, BLOGS (like TheDomains) has to Disclose all of their ad revenue sources. Also, if anyone posts here, the BLOG owner has to issue an “Ed McMahon or Sally Fields” Statement. JOE BLOW was (or was not) PAID for his endorsement of this BLOG.
The U.S. FTC apparently over-sees the BLOG laws ?
By the way, to see how some of the world lives, there are some video interviews with Rupert Murdoch the Australian news-media mogul. When asked about all of the expansion of the Internet, etc. he casually said, “It is not a problem, we pick up the phone, and get web-sites taken down in 24 hours.” It is fascinating to see how Rupert views the Internet as a fad that is whisked away with a phone call to the proper authorities.
the problem is that Hertz and the likes lease a gazillion cars a day and the number of seized cars is predictable so the insurance companies will sit down and talk to them. Leasing a domain here and there isn’t enough for them to even think about it.
John Berryhill says
Yes, Mike, that’s exactly what I’m saying.
More likely, the insurance company is going to pay for a lawyer to get it back, just as surely as I have been paid by insurance companies to defend domain name registrants in the past. It’s my first question when a corporate defendant contacts me – “Have you spoken to your insurer?”
If you solicit a prostitute from a car in Delaware, that car is getting towed to the impound lot. It’s not some kind of magic that Avis, Hertz, and Budget are counting on to deal with seizures of their leased vehicles, when customers do illegal things with them.
It’s as if domainers think every wheel needs to be re-invented. This kind of stuff is normal in any industry.
John Berryhill says
Judge Pallmeyer held that the advertising injury claim in plaintiff Capitol Indemnity’s (“CI”) insurance policy required that it defend defendants the “Elston Grocery” defendants in the underlying trademark infringement, unfair competition and Illinois Deceptive Trade Practices Act (“IDTPA”) claims. In the underlying litigation, Lorillard Tobacco accused Elston Grocery of selling counterfeit Newport cigarettes using Newport cigarette advertisements.
The advertising injury clause covered infringement of “copyright, title, or slogan” and “[m]isappropriation of advertising ideas.” The Court held that “title” does not mean just the title of a work, but also encompasses, among other things, trademarks and names. CI, therefore, had a duty to defend Elston Grocery against Lorillard’s trademark infringement claims. A duty to defend was also created by the trademark infringement claims because they accused Elston Grocery of misappropriating Lorillard’s advertising ideas – its trademarks and advertisements.
Thanks for the link
Interesting to note that this case involved the insured suing its own insurance company for coverage.
“”Finally, the Court declined to rule on indemnity because Lorillard’s claims had not been finally resolved. An indemnity ruling regarding an ongoing case was inappropriate because it would be an advisory opinion.””
Therefore I sounds like the insured had to pay to defend itself in the case against the trademark holder and then had to pay for a lawsuit to sue its own insurance company.
Most of the readers of this blog don’t have that kind of cash to spend on lawyers.
As I said I don’t think getting your insurance company to cover this type of claim is going to be like Hertz’s insurance company paying off on a stolen car.
“Most of the readers of this blog don’t have that kind of cash to spend on lawyers.”
There is a mind-set in some parts of the world that EACH .COM should fit into the SEC Sarbanes-Oxley Cookie-Cutter Pattern or NOT be allowed in The.Registry.
“The Sarbanes–Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002), also known as the ‘Public Company Accounting Reform and Investor Protection Act’ (in the Senate) and ‘Corporate and Auditing Accountability and Responsibility Act’ (in the House) and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which set new or enhanced standards for all U.S. public company boards, management and public accounting firms.”
LS Morgan says
It just seems like a totally trivial risk. For now, anyway.
Not the same thing as leasing the name itself, but I lease typeins from a name for a fixed, monthly fee to a particular merchant. Even with this distant connection, I still keep pretty close tabs on what he’s doing. This helps me make better business decisions and determine of our quarterly arrangement is adequate, if I want to go to a different model (such as an affiliate one), etc.
If someone is in a position that they are leasing out so many names to different operations so as to be impossible to vet the content in question, we can safely assume that person is making *a lot* of money and can probably afford to take someone on to do it for them, at minimal expense.
I guess the only substantive risk for an unwitting party would be if the government gets so aggressive with this that any instance of infringement, no matter how isolated- for example, an otherwise upright seller who gets a lone, bogus product in their retail stream- makes the domain a target for seizure, ala an adult webmaster who has some fragmentary instance of child pornography, or whatever. Right now, they seem to be targeting only the gravest, clear-cut offenders with a big net.
“so many names to different operations so as to be impossible to vet the content in question, we can safely assume that person is making *a lot* of money and can probably afford…”
Some would claim that is how NEW markets and opportunities are driven.
Companies come into existence to serve “those who can pay”.
Example: The new [Platform] providers will be looking at the Mega.Domainers for the Deep.Pockets and the ability to Pay to Play. The Free Rides will end.
Domainers who run around telling people they make $1000 every time they take a breath, may regret doing that. People will be ready to sell them air.
Companies come into existence to serve “those who can pay”.
Governments also take note of “those who can pay”.
If .COM continues to be the only game in town, you can bet small (and large)
countries will start passing laws that require a RE-Registration of your .COM
domains in their municipality.
John Berryhill says
“Interesting to note that this case involved the insured suing its own insurance company for coverage.”
Well, yes, that happens. But there’s no other way for me to find a case where a court interpreted “advertising injury” coverage (Google it), to cover infringement claims. Obviously, that’s only going to happen in this context.
In those situations where a client of mine’s insurer covered the defense, I obviously can’t disclose it.
But if nobody is making “big bucks” from leasing domains toward which they are turning a blind eye, then the loss is also no big deal. In your example of a “million dollar domain name”, then leasing it at ten dollars a month is probably not a good idea.
And if nobody can underwrite your risk, then you have to consider that in determining the lease value, no?
It’s like the old saying goes, never loan anyone money you can’t afford to lose.
John Berryhill says
Oh, and, this goes quadruple for blind “zero click” arrangements.
I have seen some traffic leasing agreements that were absolutely horrific in this regard.
For example, I’ve seen agreements that said, in so many words, “We’ll decide where to send the traffic, and you are liable for any infringement.”
That’s just an awful set-up. You might have a dictionary word domain name, say “cheer.tld”, which would be fine for greeting cards. Some nitwit leases the traffic to point at laundry detergent, and then you have Procter & Gamble all over your junk.
If the traffic is going through a broker, then you need to see the OTHER side of the agreements as well – i.e. that between the broker and the end user – to make sure that the liabilities for infringement arising from the combination of your domain name AND the end user’s use, are properly assigned.
LS Morgan says
TheBigLieSociety: I find your posts disorienting and totally incoherent.
That is all.
Are Domain Leasing and Payment Plans Dead In The Wake Of Domain Seizures?
Are Domain Leasing and Payment Plans [FOR THE NEW Top Level Domains] Dead In The Wake Of Domain Seizures?
1. Some fool pays $185,000 for a new Top Level Domain
2. Ten or twenty thousand fools flock to register sub-domains
3. Domain Platforms demand millions to “Carry that TLD” like Cable TV Channels
4. The TLD Registry and servers are seized because the sub-domains appear to be for some socially undesirable purposes.
Thanks for playing.
John Berryhill says
“I find your posts disorienting and totally incoherent. That is all.”
There are certain persons of moderately high intelligence who suffer from personality disorders involving delusions of grandeur and unduly inflated assessments of the value of their ideas. Not being able to convey those ideas in socially acceptable ways, or to constructively advance them in cooperation with others, they become what are known as “cranks”. Characterized by paranoid ideation, they become convinced that nearly everything around them is the product of a corrupt conspiracy of persons engaged for the purpose of suppressing their brilliant insights. Often, they develop their own vocabulary and shorthand for their various theories, and after a while they simply spew emotive gibberish to their imaginary companions along urban sidewalks. Once in a while, you come across one who has some sort of secure income from royalties, a settlement, or a trust fund, and they just keep babbling on forever.
Thanks for the kind words
Oh you were talking about the other guy.
FTC to Fine Bloggers up to $11,000 for Not Disclosing Payments
John Berryhill says
“Thanks for the kind words”
Lol, I forgot to include those ne’er-do-wells who do nothing but pick up PPC checks every month.
Bob Fontaine says
Complicated issue, no doubt. A few thoughts if I may:
*If you agree to forward the leased domain to the lessors website, or frame their site, so that the actual illegal content is NEVER on your domain? What’s a court going to say “true, the illegal content isn’t actually on your domain, but you send that illegal site some, much, most of it’s traffic”. Heck, Google would be toast if that were true. Linking would be over.
*Perhaps an insurance policy taken out and paid for by the lessee, payable to the lessor would provide an acceptable level of protection?
* HUrtz (spelled wrong in case they are also investors of Righthaven 🙂 can afford to lose 1 car among tens of thousands. If you had thousands of other equally valuable URLs, then losing 1 of them because the lessee abused their contract with you would be no bid deal either. A cost of doing business… But.
Typically when we lease a domain or sell a domain with financing, the domain is moved to the other parties servers, with all the contact info remaining with the owner of the domain.
I think eventually whether the objectionable stuff on the domain is hosted on the domain owners servers or on the lessee’s servers will help a court rule in the domain owners favor, but again your talking about a lot of time and money for a domain owner to get their property back.
Its now a system where “the government grabs your property first” and you have to go chase your property, rather than “innocent until proven guilty” system.
Bob Fontaine says
I’ve always been of the opinion that the ‘domain name’ should be no different than the ‘telephone number’ , perhaps even a “street address”, in the legal context.
Another words, those are just the identifyers of the illegal activity. Is RightHaven or the Feds going to take my domain name if it is http://www.IFFHHHE12-345.com – when I can just as easily operate THE EXACT SAME content under http://www.IFFHHHE12-345B.com, tomorrow.
Why cease a useless domain name while leaving the offending, hosted, content intact?
Next they’ll apply eminent domain rules that allow for the taking of private property for the betterment of community to domains too. And a name like Boston.com will belong to the Commonwealth of Massachusetts.
@John Berryhill on “I find your posts disorienting and totally incoherent. That is all.”
Also, why don’t we all get together and form an agreement not to renew our domains next year. Price of registry will plummet. We then take over Verisign and re-domicile the only registry that counts somewhere less big brother.
That is a conspiracy plan, ie not theory.
John Berryhill says
“somewhere less big brother”
I always tell my libertarian friends that if they want no taxes or government interference, Somalia is a tough choice to beat.
Sean Patrick says
I’ll shed some light on what’s a more realistic scenario. I used to own TaxRelief.net. I bought the domain in the aftermarket, built it up via SEO and after about two years or selling leads and leasing it to a reputable company I decided to sell it. I used to enjoy building up sites, getting them to a certain point and then selling it off and repeating the process. Now I’m more in the building and holding mode. Before I sold off my site I was getting many offers. The tax debt vertical was extremely hot at the time, its cooled off a bit due to government regulation regarding the way that tax relief firms are allowed to operate.
So about three weeks before I closed on a deal selling the site outright I got an offer from one company who was willing to pay a sum for a lease (and lease only!!) that seemed almost too good to be true…
I declined the offer and went with the outright sale. I honestly was bored with the site and I hadn’t done anything with it in over a year. Other larger projects had my attention and time. So the site gets sold and I’m off to manage my other projects.
Cut to four months later… I’m getting ready for work and on The Today Show is a story about how American Tax Relief based out of Beverly Hills has been shut down by the FTC for allegedly ripping off Americans to the tune of $60 Million.
This coming from a company that was spending hundreds of thousands every month marketing their services and garnering endorsements from football legend Pat Summerall. “Hand off your tax problems to the pros at American Tax Relief!” – Pat Summerall.
Well for the next two weeks when you went to AmericanTaxRelief.com you were greeted with a message from the FTC that the site was shut down and to go to FTC.gov for more information.. While it was not as ominous as the ICE logo on the movie pirating sites it still accomplishes the same effect.
Had I leased the domain to this company where would my domain be? Would it be considered part of this criminal organization? Is it going to be taken as part of the restitution settlement? PowerTaxRelief.com is still registered in the name of Alex Hanh but he obviously was not controlling it. I seriously doubt he put that message up saying that his company is shut down by the FTC. When does one find the time for that while sitting in jail waiting for arraignment?
The point of all this is that these are the truly scary scenarios. If you lease freemovies.com to some guy in the Ukraine and expect that he’s not going to be doing something illegal well then you’ll probably think that there are real Rolex watches available for $300 and those poor saps paying $9k for a stainless steel submariner don’t know about “retail markup”.
Don’t sell leads or clicks to every person who offers to buy them. Things are getting a bit scary.
If you’re responsible and make an effort to only sell data to legit companies I believe you’re going to be okay.
But if you think that a lease (based on all of the above) is the only way a domain owner would ever be at risk, I think you’re mistaken.
I could see a scenario where the following could happen:
You park your keyword match domain with whomever. Well the company that ends up getting the most clicks because they were willing to pay 30% more than anyone else takes American consumers for $100 Million. Their entire marketing campaign over two years was all based on PPC marketing. Through tools like SEMRush and SpyFu some overzealous AG determines that you (your site) were responsible for 8% of that traffic. Does that mean that you’re on the hook for $8M? Does that mean that because you earned $3.00 a click 40,000 times over two years that you should be contributing $120,000 towards the victims restitution?
Who is an easier target to try to squeeze money from? Google, Microsoft or a well funded parking company…. No I think the domain owner makes a much easier target.
At the end of the day I think the recent domain seizures via ICE aren’t anything that necessarily translates into a doomsday scenario for domain owners. But it’s always a very good idea to know exactly who you’re partnering with and be prepared to show in the event that it turns out you’ve been selling leads to a “Madoff” that you had no way of knowing and you did everything you could to prevent it.
Thanks so much for sharing your story.
I don’t think much more needs to be said on this topic everyone go and read Sean’s post and then go read it again
A Bully Finds a Pulpit on the Web
why Reputation.DNS is desired by consumers
very few Domainers will pass the next round of filters (seizures)
Jon Schultz says
Good post and comments (most).
Thanks, MHB, for continuing to share info that is helpful for domainers.
Looks like the lawyers will be busy learning to “Appraise” works of art and web-sites selling them ?
“Hundreds of unknown Picasso works discovered in Paris
Elderly man claims extraordinary collection of paintings, drawings, sketches and lithographs were gifts from artist…The collection of 271 paintings, drawings, sketches and lithographs, many of which were previously unknown, dates from 1900 to 1932.”
OMFG! You certainly are a proper live one, you must be plugging yourself in to a twat generator every morning when you wake up from your sick pit..
I totally can not tollerate people like this!!
There really is no right or wrong with you is there! You have totally got to be muttering through life like a half mad buffoon with absolutely no direction other than the obvious malpractice your parents taught you!
What F-ing use are you to anyone “the planet” other than to menstruate in your own little obscure fantasies – just please piss off !
And WTF is that web site dude? – what seriously jilted you into puking up that shocker ???? It’s as if the world and his mother is revolving around your head with only seconds from impact, and you need to get your point over before it all collapses back up your arse hole!
GET WITH THE PROG, SMELL THE TRUTH and get real dude – stop shafting your brain any further in public – keep it to yourself so if you do turn out to be a bomber you’ll do it indoors !
Sorry guys, he makes me nervous.. 🙂