Domain Name Case Moves to Appeal Stage

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August 19, 2002 (Computerworld) -- In what could be a landmark case in Internet law, the U.S. Court of Appeals in San Francisco last week heard arguments over whether VeriSign Inc. can be sued for damages for transferring a domain name to a person who forged a letter authorizing the change.

The case could open the door to other lawsuits over mishandled domain names and make such mistakes very expensive for the companies that manage domain-name registries.

Gary Kremen, owner of the pornographic sex.com Web site, has spent seven years and $3.4 million in legal fees fighting a battle that started when the domain name was taken away from him. Two years ago, Kremen won a partial victory when a U.S. District Court judge in San Jose ordered sex.com returned to his company, San Francisco-based Grant Media LLC. He was also awarded $65 million in damages from the forger, which he hasn't collected.

The Court Isn't Convinced

But Kremen failed to convince the court that the former Network Solutions Inc., now part of Mountain View, Calif.-based VeriSign, was liable for its actions. The judge ruled that the company's role in the matter was limited under law. In last week's appeal hearing, Kremen sought the right to bring VeriSign to trial in an effort to force it to pay millions of dollars in damages.

VeriSign "just can't hold up their hands and say, 'We have no liability for mistakes,' " Kremen said. "Their argument is, 'We can turn off anyone's domain at any time.' Imagine if they did that to IBM. It's ridiculous."

VeriSign officials declined to comment on the case last week. But in legal papers, the company has raised a range of arguments against Kremen's claims, including the question of whether a domain name is real or intangible property. The trial judge in the case ruled that it's the latter.

However, Kremen's appeal has found support from advocacy groups such as the Washington-based American Internet Registrants Association (AIRA) and the San Francisco-based Electronic Frontier Foundation. Both filed legal briefs backing his position.

The stakes "are very substantial," said William Bode, an attorney who represents the AIRA. If the appeals court rules in Kremen's favor, Bode said he expects "to see dozens and dozens of lawsuits filed" against VeriSign.

Potential Impact If the appeals court rules against VeriSign, the fallout could include the following: At a minimum, domain name registrars would have to carefully check transfer requests. Registrars could find it difficult to limit their financial liability for errors to minuscule amounts. A lower-court ruling that domain names are intangible property could be overturned.

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