Commercial law collides with cyberspace: The trouble with perfection - insecurity interests in the new corporate asset

Washington and Lee Law Review, Winter 2002 by Nguyen, Xuan-Thao N

C. Domain Names and Property Interests

1. Domain Name Formation

in the top-level domains such as .com, .gov, org, .net, and .edu.169 Currently, an initial two-year domain name registration with NSI costs $35 per year and is renewable in perpetuity thereafter for successive one-year terms.170

to the corresponding Internet Protocol (IP) number for the desired Internet site.172 The company performs such services pursuant to a domain name service agreement whereby registrants must make certain representations about their rights to use their domain names and the fact that this use does not interfere with the rights of another party.173 Furthermore, registrants must agree to be bound by NSI's "Uniform Domain Name Dispute Resolution Policy" as approved by the Internet Corporation for Assigned Names and Numbers (ICANN) on October 24, 1999.174

2. Domain Names: Contractual fights or Intangible Property?

generate significant return for the regis,177 However, the value of the domain name often depends on how the registrant uses it.178 Consequently, a domain name without value or goodwill added by the user is usually not valuable.179

The electronic medium of the Internet and the recent growth of e-commerce, however, have challenged the notion that domain name value is dependent on use. Many people now consider domain names to be valuable assets irrespective of any goodwill attached to them.180 Parties are trading these names in the open market at high prices unrelated to their content or goodwill.181 These domain names are often generic words because the market rewards genericness with higher prices.182

International, Inc. v. 3263851 Canada, Inc.,185 a Virginia circuit court held that a domain name registration is personal property and, thus, subject to judgment liens and garnishment proceedings.186 The judgment creditor in that case, Umbro International, sought to garnish domain names registered by the judgment debtor, 3263851 Canada, with the garnishee, NSI.187 NSI opposed the garnishment by arguing inter alia that a judgment lien cannot extend to domain names because the rights set forth in domain name registration agreements depend on unperformed conditions, such as the registrar's rights to indemnification and the registrant's continuing obligation to maintain an accurate registration record.188 The court rejected this argument because NSI essentially agreed to garnishment under its dispute policy.189 Furthermore, the conditions would serve merely to discount the value of the domain names at a sheriff's auction.190

of any service.193 Thus, the court concluded that "a domain name registration is the product of a contract for services between the registrar and registrant" and, therefore, is not a liability under the Virginia garnishment state.194

The Umbro court also ignored the fact that NSI's domain name registration agreement provides registrants with contractual rights to the exclusive use of their names, amounting to a current possessory interest in their use.207 As observed by the two dissenting justices in Umbro, these contractual rights are not conditional, uncertain, or akin to personal services because both parties already have fulfilled their obligations.208 For example, in this case, the judgment debtor submitted its registration forms, made certain representations, and paid the registration fees.209 NSI completed the registration of the judgment debtor's domain names under NSI's first-come, first-served policy, thus giving the judgment debtor the right to the exclusive use of the domain name for an initial period of two years.210 The dissenters concluded: