Sex.com case heralds end of Internet – NSI

Court filing reveals doomsday scenario

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Network Solutions - the Internet's biggest domain name registrar and the owner of the .com domain - has heralded the end of the Internet in court filings to the Californian Supreme Court.

It warns that if a forthcoming decision by the court goes the wrong way it "would cripple the Internet and jeopardize the national economic benefit for e-commerce". It would also "threaten all Internet registrars' survival".

The astonishing revelations feature in a 14-page submission sent to the Supreme Court on 23 January and regard the on-going legal dispute with Gary Kremen, owner of the domain Sex.com.

What is this decision that threatens to wipe out the Internet in one fell swoop? It is whether Network Solutions (NSI) can be held accountable for wrongly handing over ownership of the extremely lucrative Sex.com domain to a Michael Cohen after he sent a faked fax to the company's headquarters - in 1995.

The fax claimed Mr Kremen had been fired from the company listed as the owner of the domain and that that owner, Online Classifieds (OCI), was handing over ownership of the domain to a Michael Cohen. It was signed by a Sharon Dimmick, the apparent president of OCI, and gave final authorisation of the move to, er, Michael Cohen.

Unfortunately, NSI didn't attempt to check whether this information was true, didn't contact Mr Kremen and duly signed over the domain rights to Mr Cohen. After a five-year court battle, Mr Kremen won back the domain in April 2001 and was rewarded $65 million in compensation from Mr Cohen. Mr Cohen promptly moved his assets offshore, left the country and remains at large.

The issue of whether NSI can be held accountable remains outstanding however. If it loses, it faces a $100 million claim. Not underestimating its own importance, this claim would put the entire Internet at risk, the NSI says.

Simply a legal tangent

However the court filing in which this doomsday scenario is played out is merely an adjunct to the main legal process of whether NSI is responsible. On 16 January this year, the Ninth US Circuit of Appeals asked the Supreme Court to intervene and decide on the technical point: "Is an Internet domain name within the scope of property subject to the tort of conversion?"

Put simply: Can anyone actually ever "own" a domain name? Incredibly, the NSI feels confident enough to tell the Court of Appeals in its submission that its question is "inaccurate" due to its "shorthanding" of the domain name question. It clearly doesn't understand the domain name system as well as NSI does.

Instead, it suggests the question be restated to ask whether the law of tort (civil wrong or injury in which compensation can be claimed) can be applied not to a domain name but to "Internet domain name registration services". How the Ninth US Circuit of Appeals managed to miss this distinction is anyone's guess.

If this improvement on the basic question is made, NSI is happy for the Supreme Court to consider the question.

On the other hand however, Gary Kremen has asked the court to refuse to consider either the Court of Appeals question or the NSI's amended question. Mr Kremen argues that the basis for such a referral to the Supreme Court - namely, that the question is unsettled in law and of intense public importance - does not apply in this case.

He argues that the question has already been answered in law many times (and list legal cases to back this up), and that due to a change in domain name contracts years ago, any resulting legal decision is unlikely to apply directly to anyone else ever again (a point acknowledged by NSI).

Kremen also argues that answering the question would not end or even resolve the overall legal action against NSI, since he is also suing it for breach of contract, third party beneficiary and bailment.

Instead, it will only "result in unavoidable and highly prejudicial delay in litigation that has already gone on for almost five years". Mr Kremen has not been able to extract the $65 million compensation he was awarded from Mr Cohen, which he admits has put him in an unenviable financial position. The NSI "remains the primary source for compensating Kremen's losses", his submission states.

Legal argument

Considering the NSI believes the decision may force the end of the Internet and have "enormous ramifications for a large sector of similar service providers, including cable television service and telephone service providers", it is a shame its legal arguments aren't stronger.

Kremen argues that to dismiss Internet domains as intangible properties which cannot be treated with normal property laws would ignore the law regarding shares, bonds, recorded performances and e-tickets and also make their theft an unpunishable crime.

He argues that the computer database which lists all domain names (the DNS) is a document equally as valid as a printed document despite it being held electronically. Otherwise, he points out, merely hitting a print button for the list would cause a major shift in law.

In response, the NSI relies upon its own definition of domains (after all, it was the company that first issued them) as being impossible to own. All someone who registers a domain gets in return for their money is "the right to continued registration services for a period of time" - a point that is becoming more difficult to justify legally as the Internet becomes subject to wider laws.

Instead, "one 'owns' the domain name registration in the same way that a person 'owns' a telephone number", NSI says, perhaps overlooking the fact that domain names are sold and exist freely on top of a system of "telephone numbers" - IP addresses.

As for legal argument, the NSI turns instead to examples regarding goodwill, industry secrets and leasehold contracts, and indirect legal decisions ("If Payne had ruled that all intangible personal property interests could be converted, then Goldschmidt could not have reached this result" [our emphasis], argues one point).

And the result?

The decision on whether to make a decision will most likely take a year. If the Supreme Court does decide to take it on, it could be expected to take a further four years for the case to be finally decided - a mere 10 years after it was first brought.

But while you would think that this decision has far-reaching implications, both Kremen and NSI say that this is unlikely to happen since the NSI changed it contracts years ago (while it was still the sole seller of Internet domain names) to write itself even further out of legal liability for any domains it sells or looks after.

Ironically, however, NSI warns that such a decision could spark calls for legal changes in the domain name system. "Cases like this one will surely encourage attacks on the validity of any contractual liability limitation NSI or other registrars may have," it warns in the submission.

This could happen in such terrible cases as those "affecting public interest" or "those regarding gross negligence or willful wrongs by common carriers".

God forbid that the people that are paid to effect the transfer of an individual's property are sued because they knowingly fail to do so. If this became the case, the NSI explains, "the cost of [registering domain names], currently ranging from $7 to $25 annually, would become unacceptably high".

Presumably, it is at this point that the Internet falls apart. Or, if you were to look at it from a different angle, it is at this point that the Internet finally becomes a global, autonomous entity of its own making, uncontrollable by parties with huge and irreconcilable conflicts of interest.

But that's for the Supreme Court to decide. @reg;

Related Stories
Sex.com could cost VeriSign $100m, says suit
Manhunt starts for Sex.com snatcher
Sex.com owner wins $65m damages
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