Should domain names be considered “service contracts” or “property rights”?



The legal status of domain names is one of the most debated topics when it comes to the evolution of property rights and how they should be applied to technological and intellectual property “innovations” in cyberspace. At present, there are two opposing factions on this subject: on the one hand, there are those who argue that domain names should be considered as contracts for services, which stem from the contractual agreement between the registrant and registrar. On the other hand, we have the parties who argue that domain names are intangible property rights that reside with the registrant of the domain name.

As the law evolved, property was defined as “an abstract right or a legally constructed relationship between people with respect to things” or “a set of rights, powers, privileges and immunities that define its relationship with a resource ”. These theories have been more beneficial for normal property rights, but courts have found it quite difficult when trying to determine how these concepts apply to domain names.

In this thematic report, I will discuss service contract rights and the theory of ‘rights bundle’ ownership, as well as review case law in a number of jurisdictions, and present an argument as to why domain names should be considered “property rights”.

Domain names as service contracts

A number of courts have classified domain names as service contracts. This in itself is not incorrect, as domain names are transferred to an individual through a contractual agreement between that individual and the domain name registrar. The role of the registrar is to provide a functional mapping and translation between the domain name and an IP address. The holder retains his right to the domain name as long as he pays the associated fees to the registrar and ensures that the domain name is not used in bad faith or infringes the intellectual property of others.

An analogy has been made between domain names and phone numbers, along with an argument that both domain names and phone numbers are assigned and ultimately managed by a registrar or phone company, and as such should be recognized as a contract of use and services. Thus, a person who registers a domain name or is assigned a telephone number is simply the contractual holder of this resource and does not become its owner. The property remains with the registrar or the telephone company.

Gild Against Arel was the first litmus test of the theory that domain names form service contracts and that owners have no ownership rights over them. The judge ruled in favor of the plaintiff, Rose Marie Dorer, finding that the domain name of the defendant Brian Arel had infringed the plaintiff’s mark. The court awarded the plaintiff damages in the amount of $ 5,000 and ordered the defendant to refrain from infringing the plaintiff’s trademark. However, the defendant did not comply with the judgment handed down against him. Subsequently, in an attempt to be creative, Rose Dorer filed a writ of execution to satisfy the debtor’s property judgment. The plaintiff’s wish was for the court to order the defendant’s registrar to transfer the domain name to her. The court ruled that domain names, which do not enjoy protection under trademark law, are nothing more than service contracts and cannot be freely traded in the open market. As such, “a judgment creditor cannot impose and sell the service mark or registered trademark of a judgment debtor.”

This case did not ultimately answer the question of whether domain names constitute property, in particular with regard to the writ of fieri facias. Instead, the tribunal indicated that other options were available to the complainant, namely registrar policy or ICANN’s UDRP process. Either option offered Rose Dorer the chance to secure a successful transfer of the domain name.

A similar view was taken by the court in Network Solution Inc. v. Umbro International according to which the act of registering a domain name does not confer on an individual any right opposable to a third party (garnishment) with the exception of the right of the holder to a right of possession during the term of the contract with the registrar. The Supreme Court of Virginia, reversing the judgment of the trial court, held that domain names cannot be exempted from the contractual agreement with the registrar and are intrinsically linked to the services provided by Network Solutions Inc.

Dr Konstantinos Komaitis argues in his book “The Current State of Domain Name Regulation: Domain Names as Second Class Citizens in a Brand-Dominated World” that domain names should not be protected on the sole basis of commercial use. Instead, it claims that the value of a domain name lies in the name itself. The potential value of domain names lies in their popularity, recall, and other key elements of value creation. Thus, limiting the appreciation of domain names to their relationship with brands ignores the evolution of the Internet and its true character of perpetual innovation.

Why domain names should be considered property rights

The concept of property was characterized by a number of contradictory philosophies and postulates before reaching some degree of harmonization among jurists. However, it was Hohfeld and Honoré who first articulated the “Rights package” theory, which is widely accepted as one of the strongest definitions of property. The term “property” is a multidimensional concept that incorporates a set of rights, immunities, privileges and powers that define the established position of an individual, institution or government in relation to a resource.

This includes the right to own, receive income, alienate, exclude, alienate or reclaim title from anyone who has illegally obtained ownership of the resource. Ownership includes virtually all types of valuable rights and interests. Therefore, it can be argued that while the process / system of registering a domain name can be viewed as a service contract, the accumulated value and income earned from a domain name through legitimate contractual rights means that ‘it can be considered as a property. As a result, domain names are increasingly recognized as intangibles, subject to seizure or applicable as a source of in rem jurisdiction.

For example, in Commonwealth of Kentucky c. 141 Internet domain names, the court held that since property is broadly rationalized as a set of rights which includes the right of ownership, majority interests, the right to prohibit, the right to earn income, the right to transfer inter vivos and causa mortis , domain names should be recognized as some kind of property.

In another case, Kremen v Network Solutions, Inc., the court ruled that a three-pronged test should be adopted to establish whether domain names are property. There must be (1) a finely-defined interest, (2) it must be capable of exclusive control, and (3) the putative owner must have established a legitimate right to exclusivity. The court ruled that the domain names met all of the stated criteria and, as such, should be classified as property.

Referring to the legal approaches to domain names in the United States, Great Britain and India, the court ruled in Tucows.Com Co. v Lojas Renner SA that domain names could be considered personal property. The decision appeared to be an extension of case law that considers other types of intellectual property, such as patents, as property. The court also cited Hohfeld’s academic theory in recognizing that property is not a thing but rather a collection of rights held by people over physical things, in particular the right to exclude others.

The Anti-Cybersquatting Consumer Protection Act (ACPA) allows trademark owners to sue when the registrar or domain name registry is located in the United States. This is particularly useful when the registrant is anonymous or cannot be located. Given that in rem proceedings are generally limited to tangible property, it could be argued that ACPA applies property rights to intangibles. A supporting perspective was presented in Cable News Network v. cnnnews.com whereby the court ruled that domain names are properties that are located where they are created (where the registrar is domiciled).

Conclusion

So why is it important for domain names to be classified as property? On the one hand, it allows owners to exploit its business value, especially with regard to the acquisition of financing. Additionally, domain name ownership rights provide legitimacy that allows domain name holders to vigorously challenge claims made by trademark owners in legal proceedings. The ability to develop a domain name to attract millions of visitors and potentially bring in millions of dollars is where its value lies. However, to date, there is still insufficient case law to establish a solid precedent for legal proceedings that treat domain names as property rights. Yet court rulings and legal opinions in the US, UK and EU seemingly converge on property rights and away from service contracts.


Previous MYNIC services down, all concerned .my domain names
Next Soon Internet domain names in Indian languages