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

proceed with the filing of the financing statement indicating that the domain name is being used as collateral.268

This approach is inefficient because it requires the creditor to verify the ownership of the collateral in one place (the WHOIS database) and to file the financing statement covering the domain name at a different place (the office of the secretary of the state in which the debtor is deemed located). Further, it does not give notice to third parties who are accustomed to relying on the WHOIS database for information relating to domain names, to determine if the domain names have been encumbered.

B. Perfection Through Filing with the Registrar of Domain Names

The purpose of perfection is to provide notice to third parties that the collateral at issue has been encumbered.269 To fulfill that purpose, an efficient approach to perfection would be a central filing for all security interests in domain names. Thus, all security interests in domain names would be recorded in the WHOIS database. This system would provide any party who is interested in a domain name easy access to all information regarding the domain names. Most importantly, interested parties could conduct the search electronically at any computer terminal with Intemet access.270

Moreover, some interested parties may not know that they need to conduct a search at the office of the secretary of state to ascertain whether a domain name is free and clear from any security interest. They may not know that they must obtain information about the debtor's location to conduct the search in the appropriate state. Even sophisticated companies with the assistance of legal counsel may encounter similar problems, given the fact that Article 9 of the UCC is silent about domain names in the definitions of various types of collateral, including the classification of domain names as general intangibles.273 Further, no court has had an opportunity to address the issue of perfection of security interests in domain names. Moreover, the ACPA, the only federal statute pertaining to domain names, falls short of providing a means of using domain names to secure payment or obligation incurred by Internet companies.274

amendment should be drafted clearly to avoid the ambiguity of the federal statutes governing trademarks.278 Such an amendment will preempt the filing provisions of Article 9 of the UCC as stated in sections 9-109 and 9-311.279 Because all other information about domain names is currently in the WHOIS database, the recording of security interests in domain names should be included in the WHOIS database to reduce transaction costs and increase search efficiency. The filing of the security interest in a domain name should be recorded with the registrar that registered the domain name. The filing should be done electronically to increase efficiency and minimize paper-based resources.

Further, this amendment to the ACPA would be a strong indication that Congress recognizes the reality of the commercialization of domain names. The amendment would give credence to the fact that domain names are treated as corporate assets and would encourage the use of domain names along with other intellectual property as collateral in commercial financing.280