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CLICKS OR MORTAR: Are Domain Names Property?


Ellen Rony
Copyright © February 27, 2000 Ellen Rony. All rights reserved.
Initially published by
Domain Notes, February 2000

Four or five united would be able to raise a tolerable dwelling in the midst of a wilderness.
- Thomas Paine, Common Sense (February 14, 1776)

What are your long term plans for your domain name? Do you expect to convey the name and the goodwill associated with it to an interested buyer or bequeath it your heirs? Perhaps you intend to use the domain name to secure a loan1 for a business expansion or for your child's college tuition. You may be in for a surprise.

Network Solutions, Inc., the .COM, .NET and .ORG registrar, is a spoiler of such practical plans. A prohibition roosts near the end of NSI's new Service Agreement3:

23. NON-ASSIGNMENT. Your rights under this Agreement are not assignable. Any attempt by you to assign2 your rights shall render this Agreement voidable at our option. Any attempt by your creditors to obtain an interest in your rights under this Agreement, whether by attachment, garnishment or otherwise, shall render this Agreement voidable at our option.

In order to register any dot-com name with NSI, you must agree to this and 24 other terms and conditions set forth in the Service Agreement. No matter how large your investment in the domain name or how tenacious your effort to promote the moniker, NSI compels you to waive your personal right to assign the name. Posted in January, the Service Agreement is the registrar's latest attempt to inhibit the rules of property law from applying to domain names.

Feudal Foundation

NSI's approach has a distinctly feudal feel to it. Centuries ago, in order to govern their vast realms, kings awarded land grants to nobles in return for their homage, fealty and military support. Those lords also controlled large tracts, known as the "demesne" (from which the word "domain" is derived), so they, in turn, allowed vassals to live and work on the land in exchange for safety and protection. The feudal system bound vassal to lord and lord to king, but ownership title did not pass to those who actually cultivated the land and enhanced its value.

NSI, the primary registrar among 110 accredited by the Internet Corporation for Assigned Names and Numbers, presents itself as the strict overlord, allowing .COM, .NET and .ORG domain registrants to develop the virtual landscape while denying them permanent use and rights of reassignment. In NSI's view, a domain name registration conveys not an absolute right but one that is conditional upon the registrar's sole discretion. The dictim disregards both the natural expectations of most registrants and the indicia of property.

The legal touchstone of "property" is the exclusive right to control how and by whom a particular thing may be used. If a domain name is property, a bundle of rights accrue, including the right to use, convey, develop, exclude, bequeath, profit from, assign and dispose of, with or without consideration.4 If this pivotal part of online technology is property, the contractual rights associated with its use do not vanish when you divorce, die or distribute your business assets. When property is susceptible to monetary evaluation, it forms part of the owner's patrimony.

In judicial pleadings and academic essays, the domain name has been likened to an address, alias, brand, directory, handle, patent, trademark, telephone number, and even a cow.5 More than a mnemonic locator, it gets the Internet user to a specific web site, may hint at what is found there, provides connections between a brick-and-mortar business and its goods or online services, delivers a message, makes a promise, conveys a personality, publicizes an event, or tells a story.

But is a domain name property?

The intellectual property community asserts that domain names, as source indicators, are akin to trademarks. However, trademark law cannot be effectively grafted on to domain names because of the discrepancies over geographical boundaries and context-sensitive use. In order for a trademark registration to issue, the mark must be used in interstate commerce to identify the source of a class of goods or services. Identical trademarks can co-exist so long as they are associated with non-competing types of goods or services or are used in different geographic areas.

Domain names are registered on a first-come, first-served basis. The first individual or company to complete the registration template for an available name gets the sole right to be associated with it. For a reasonable fee, currently hovering at $35 a year, the registrant can brand and propagate the name in a worldwide marketplace. The registrant receives the exclusive right to use that name for a website presence, global e-mail, and network file transfers.

But every domain name must be unique, and it is this technical requirement that makes domain names potentially valuable resources which are substantively different from trademarks. Compaq Computer Corp paid $3.35 million in July 1998 for rights to ALTAVISTA.COM, purchased from a California start-up called Alta Vista Technology. The transaction included existing traffic of a half million visitors a day who were already expecting to find the Alta Vista search engine at that domain name.

Many domain names have become the cornerstone of multimillion-dollar business plans. In the fall of 1999, VirtualVineyard of Palo Alto, California, acquired Wine.Com of Napa, primarily for its domain name. While the $3.3M-plus acquisition included an operating business, the CEO of Wine.Com estimated that about 70 percent of his company's value was its name.6

Unlike trademarks, a domain name can have value irrespective of its functionality as a locator for a particular computer or identifier of a specific commercial supplier. Short, recognizable and memorable names domain names now command million dollar sums in a brisk resale market. In April of 1999, DRUGS.COM sold at auction for $823,456 and WALLSTREET.COM attracted a cool $1.03M. Shortly afterward, COMPUTER.COM sold for $1M in cash, securities, and other consideration without any content or branding associated with the domain name. BUSINESS.COM sold in 1997 for $150,000 and only two years later fetched a staggering $7.5 million.

In Rem Litigation

Several lawsuits have addressed the nature of domain names as property. In 1996, NSI attempted to avail itself of a legal approach, the interpleader, which is only available with respect to property. An interpleader may be filed when two parties are involved in a lawsuit over the right to collect a debt from a third party, who admits the debt is owed but does not know which person to pay. In Clue Computing v. Hasbro,Inc. and NSI, the registrar filed a Complaint for Interpleader which said, "Network Solutions, as an impartial and unbiased stakeholder, has no interest in the property in dispute and is prepared to assign the registration and use of the 'CLUE.COM' domain name as determined by the Court."7 The "property in dispute" was, of course, the CLUE.COM domain name registration.

In Porsche Cars North America, Inc. et al v. Porsch,net, et. al.,8 the auto distributor initiated litigation against the "property-in-issue" -- 128 domain names -- for dilution of its famous marks. Rather than serving a summons upon the many individual registrants of domain names incorporating Porsche's marks or similar words, Porsche brought an in rem lawsuit in Virginia, the judicial district where the registrations are administered.

In rem, an adjective from Latin meaning "against or about a thing," refers to a lawsuit or other legal action directed toward property, rather than toward a particular person (called in personam).9 Because many of the registrants could not be found, Porsche filed the proceeding in rem, or against title to the property. The location of the property determines which court has jurisdiction, and enforcement of a judgment must be upon the res, or property; it does not follow a person.

To facilitate the proceeding, NSI surrendered the identified domain name registrations, i.e., the "property", to the district court. However, Porsche's petition for injunctive relief and cancellation of the domain names registrations was dismissed. The court held that the U.S. Trademark Dilution Act, under which the suit was initiated, did not permit in rem proceedings, but it issued no opinion on whether domain names are property.

A different facet of property rights in domain names was addressed by Umbro International, Inc. v. 3263851 Canada Inc.10 Here, a Virginia court opined that a domain name registration represents property subject to garnishment and judicial sale under Virginia law. The owner of the Canadian company that registered the UMBRO.COM domain name attempted to sell it to Umbro International for $100,000--cash plus charitable donation--and a lifetime supply of Umbro athletic gear. Instead, Umbro sued for trademark infringement and dilution in federal court in South Carolina. When the domain name registrant failed to respond to the lawsuit, the court entered a default judgment in favor of Umbro, including $23,489.98 to cover attorney fees and costs.11

Because the defendant had no property in the United States, Umbro filed a garnishment proceeding in Virginia state court against Network Solutions, to force the judicial sale of the defendant's 27 domain names. Garnishment is the process by which a judgment creditor, in this case Umbro, enforces the lien of his execution against any debt or property due his judgment debtor in the hands of a third person, the garnishee. Although NSI balked and tendered arguments why domain names cannot be subject to garnishment, the Circuit Court of Fairfax County, Virginia, held that domain names are property and thus can be disposed of by judicial sale to satisfy a judgment lien against a domain name registrant.

Judge M. Langhorne Keith wrote in his letter Opinion in Umbro, "There can be little question that domain names are a form of intellectual property. Domain names can receive trademark protection from the Patent Office. . . . The fact that this form of intellectual property results from a service that NSI provides does not (as NSI argues) preclude the property from garnishment any more than the service provided by the Patent Office in issuing a patent immunizes patents from garnishment."14

The court ordered NSI, the garnishee, to deliver the domain names to the court for judicial sale to the highest bidder. NSI has filed an appeal of this decision.

A Legal Thicket

On November 29, 1999, President Clinton signed into law the controversial Trademark Cyberpiracy Act, which allows an in rem action in a domain name dispute when an in personam jurisdiction is unavailable. The U.S. law reads, in pertinent part,

(2)(A) The owner of a mark may file an in rem civil action against a domain name in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located....15

The Trademark Cyberpiracy Act and the seminal opinion in the Umbro litigation both reinforce the notion that a domain name is a form of property that can be subject to an in rem action or seized to satisfy an outstanding judgment at the request of a judgment creditor.16 Other courts may hold different opinions,17 but pressure from mergers, acquisitions, auctions, dispute settlements, marriage dissolutions, and estate liquidations may forge a new system of property rights in domain names. In rem litigation is a powerful tool for trademark owners who have been unable to obtain jurisdiction over bad faith registrants whose whereabouts are unknown. Under the Trademark Cyberpiracy Act, the property of an in rem defendant can be in the judicial district where the domain name registrar, registry, or other domain name authority is located. Even .COM registrants who reside outside the United States can be brought to court in Herndon, Virginia, the domicile of the .COM, .NET and .ORG registry. But domain name registrants may also find a boon in a new system of rights that allows them to challenge a registrar's wrongful acts, which may be considered a "taking" of their property,

The current controversies over domain names highlight the interplay of technology, law, economics and politics. Court opinions trail society's changes and conundrums resulting from technology of recent vintage. Yet, nearly everyone agrees on one point: domain names are caught in a legal thicket. If domain names are property, then existing contracts such as NSI's harsh Service Agreement must be rewritten. Although the implications of the Umbro decision are yet to be fully assessed, and NSI's appeal remains to be heard, the magistrate recognized that each knotty domain name dispute before the court may be breaking new legal ground. His words shed philosophical light on the tentative kinship between clicks and mortar:

The problem of shaping the new to the old, of reconciling the dual demands of stability and change, is surely congenial to legally trained minds. Just as our profession combines the theoretical and practical so also it furnishes insights into the perennial push of new demands pressing upon older interests. "History," to use Paul Freund's arresting phrase, "is itself a tension between heritage and heresy which law in its groping way seeks to mediate."18

Fortunes are being built upon $70 domain names. While writing this article, online news reported that LOANS.COM sold at auction for $3 million.

As the price bar for domain names rises, NSI's customers may resist being subject to the vagaries of the registrar's feudal regime. Simple and unencumbered ownership endows the registrant with a type of predictable, if limited, sovereignity. Through legislation and judicial acknowledgment, registrants who meet certain individual responsibilities should be allowed a perpetually renewable and assignable right to enjoy this new source of wealth.


1. The Industrial Bank of Korea is offering "mortgages" on Internet domain names, blurring the distinction between actual and virtual real estate. See "'Mortgages' for domain names," BBC News (November 23, 1999) at

2. assign: 1) v. to transfer to another person any asset such as real property or a valuable right such as a contract or promissory note. 2) n. the person (assignee) who receives a piece of property by purchase, gift or by will. The word often shows up in contracts and wills. From Gerald and Kathleen Hill, The Real Life Dictionary of the Law at

3. NSI Service Agreement Version 6.0, (1/00) at

4. property, n, 1. Something owned; a possession; a piece of real estate; something tangible or intangible to which its owner has legal title: properties such as copyrights and trademarks. Possessions considered as a group. 2.The right of ownership; title. 3. An article, except costumes and scenery, that appears on the stage or on screen during a dramatic performance. 4. a.A characteristic trait or peculiarity, especially one serving to define or describe its possessor. b.A characteristic attribute possessed by all members of a class. 5.A special capability or power; a virtue: a medicine with special properties. [Middle English from Old French propriete, from Latin propriets, ownership (translation of Greek idiots); see idiot from proprius, one's own; see per1 in Indo-European Roots.] Source: The American Heritage¨ Dictionary of the English Language, Third Edition at

5. See Carl Oppedahl, "Remedies in Domain Lawsuits: How is a Domain Name Like a Cow?" 15 John Marshall Journal of Computer & Information Law 437 (1997), draft posted at

6. Peter Sinton, "Virtual Vineyard Swallows," San Francisco Chronicle (September 14, 1999) at

7. Complaint for Interpleader Pursuant to 28 U.S.C. ¤ 1335, Network Solutions, Inc. v. Clue Computing, Inc. et. al., 96 D 1530, D. Colorado (June 21, 1996) ; Order of Dismissal (October 29, 1996) at

8. Porsche Cars North America v. Porsch.Net, et. al., Memorandum Opinion, CV 99-0006-A, Eastern District of Virginia (June 16, 1999) at

9. in personam adj. from Latin for "directed toward a particular person." In personam is distinguished from in rem, which applies to property or "all the world" instead of a specific person. This technical distinction is important to determine where to file a lawsuit and how to serve a defendant. In personam means that a judgment can be enforceable against the person wherever he/she is. However, if the lawsuit is to determine title to property (in rem) then the action must be filed where the property exists and is only enforceable there. Hill, The Real Life Dictionary of the Law -

10. Umbro International, Inc. v. 3263851 Canada Inc., Letter Opinion, No. 174388 (Va. Cir. Ct. Fairfax Cty. (Feb. 3, 1999) at

11. Umbro, op. cit.

12. Garnishment is a proceeding which exists only by virtue of statutory enactment. Under statutes, [Va. Code Ann. ¤ 8.01-511, et seq.], garnishment is the process by which a judgment creditor enforces the lien of his execution against any debt or property due his judgment debtor in the hands of a third person, garnishee. See In Virginia, on motion of a judgment creditor, the clerk of the court issues a writ of fieri facias, which orders an appropriate officer to satisfy the judgment out of the judgment debtor's personal property. Va. Code ¤¤8.01-466 et seq; id. ¤8.01-501 et .seq.

13. NSI argued, unsuccessfully, that a garnishment proceeding cannot extend to domain names because the contract rights set forth on the Registration Agreement are dependent on unperformed conditions. NSI also claimed that the contract right to the performance of a service is not garnishable because, among other things, it would force NSI "to perform services for those with whom it may not desire to do business." However, NSI does not vet its registrants nor does it monitor how registrants use the domain names they register. Umbro, op. cit.

14. McClaskey v. Harbison-Walker Ref. Co., 138 F.2d 493 (3d Cir. 1943); see Cherie L. Lieurance, Judgment Creditors' Access to Intellectual Property Rights &endash; Is Simple Execution i n Sight?, 7 Whittier L. Rev. 375 (1985) - Cited in Umbro, op. cit.

15. S.1948 - Title III, Trademark Cyberpiracy Prevention Act (November 29, 1999). Reproduced at

16. "A domain name with significant value on the open market certainly would be an attractive, arguably appropriate target for a judgment creditor seeking to satisfy a judgment from a wayward debtor." From Rose Marie Dorer and Forrms, Inc. v. Brian Arel, Memorandum Opinion, No. Civ.A. 98-266-A, 1999 WL 691677 (E.D. Va., Aug. 26, 1999) at

17. Lockheed Martin Corp. v. Network Solutions, Inc., et. al., CV 96-7438 DDP (ANx), (985 F. Supp. at 964-68) Order Granting Defendant's Motion for Summary Judgment (November 17, 1997) at

18. Umbro, op. cit. Also reference Daniel J. Meador, ed., Hardy Cross Dillard, Writing and Speeches 41 (1995)

Other articles, editorials and domain-related comments by this author:

At Large Membership: ICANN's Ultimate Tarbaby

The ICANN-VeriSign Agreement: A Sweetheart Deal

The Divine Right of Names: New TLDs Prep for Start-up

The Envelope, Please: New Top Level Domains on the Horizon

Procter & Gamble Bids Adieu to SINUS, THIRST and FLU

Words First!

Sunrise+20: The Numbers Tell the Story

Famous Marks

Res Ipsa Loquitur

IIR: Internet Impact Report

The Devil is in the Details

RDND: Reverse Domain Name Denigration

IIR: Internet Impact Report

The Devil is in the Details

An Alternative to ICANN?

Comments on the WIPO Interim Report RFC-3











Ellen Rony is co-author, with Peter Rony, of The Domain Name Handbook: High Stakes and Strategies in Cyberspace, published in July 1998 by R&D Books. She is not an attorney and tenders this article as informed opinion not legal advice. This article may not be republished on the Internet without express permission of the author. Links to this page are welcomed.










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