Court denies conversion claim because it says domain names are not property.
The Supreme Court of the State of New York has denied (pdf) a claim one of Michael Gleissner’s companies brought against Network Solutions.
Gleissner’s company NextEngine Ventures LLC said it bought the domain name Quentin.com for $9,990 in March 2016. It subsequently transferred the domain name to GoDaddy.
After the transfer Network Solutions pulled the domain name back to the account of the previous owner, a woman in Argentina, ostensibly because she claimed the domain name was stolen from her Network Solutions account before being sold. DomainTools historical Whois records show a change in admin email address before the domain was transferred to NextEngine.
NextEngine wanted Network Solutions to pay the $9,990 purchase price plus $28,000, which it says was the appraised value at the time the domain was removed from its account at GoDaddy.
The court denied NextEngine’s claim on the grounds of jurisdiction. It also said that, even if it had jurisdiction, it would have denied the claim. It noted that courts in New York (and Virginia, where the .com registry is located) do not recognize domains as property, so it follows that they can’t be subject to conversion.
(Hat tip: John Berryhill.)
John Berryhill says
“The Supreme Court of the State of New York”
It’s probably worth mentioning that in New York, a “supreme court” is any of the trial-level courts of the judicial system of New York. The highest court in New York is the Court of Appeals. This decision is from the Supreme Court of New York for New York County.
Josh says
One part of this story I don’t understand: how did NetSol manage to claw back the name after it had been transferred to GoDaddy?
Andrew Allemann says
There is a process by which registrars (usually) work together to recover stolen domains.
J.R. says
These type decisions should scare anyone heavily invested in domain speculation. The fact that Next Engine paid for the quentin.com asset, transferred it to GoDaddy, believed they were the registrant, and then unknowing to Next Engine the domain was ‘stolen’ from their account. I hope that Next Engine appeals this decision to the Court of Appeals and sues Network Solutions and GoDaddy for damages beyond the price of the domain costs. This is the perfect sort of case to work its way to the Supreme Court of the United States. We have 50 states confused about the status of domain names; that are million dollar assets! In some states domain names are property; in other states they are contracts for service. The issue needs to be decided and settled at the SCOTUS level as of yesterday…
Andrew Allemann says
OK, but what about the person who the domain was stolen from? Don’t get me wrong, NextEngine got screwed. But if it bought hot merchandise then the person it was stolen from got screwed as well.
J.R. says
You bring up a good point. If it has been proven that the domain is stolen, Net Engine should received the $28K value, but they failed to file the case in federal court. This is another reason why I still haven’t figured out why domain names as valuable as they are do not have an insurance system. What other asset worth so much is not insurable?
But my real issue was with the New York courts determination that the domain assets are not property. Their is no consistency about the status of domain names, and at this juncture there should be a single status for domain names. Either domains are property or they are not; and only SCOTUS can make a final determination.
John Berryhill says
“If it has been proven that the domain is stolen, Net Engine should received the $28K value”
From whom?
Who would owe them $28k for having bought a stolen name?
If some guy on the street sells me your bicycle for $100, then why is anyone liable to me for the $1000 value of your bicycle when it is found and returned to you?
You don’t get a payout for buying stolen goods. That’s absurd.
Quite obviously it was proven to have been stolen to the satisfaction of both NSI and GoDaddy, which is why it was transferred back.
Ms. Claudia Quentin is the wife of Mr. Alejandro Quentin, the founder and CEO of Pampa Capital (which is identified in the WHOIS history as well). Pretty sure they didn’t sell the family name for $9k just after an update to the admin contact email address, which had been static for years.
J.R. says
I don’t believe anyone should be rewarded for receiving stolen domain names. In fact, since the Sex.com debacle, I would think a better system for protecting domains would be in place. However, my main issue with this case was the determination that domains are not property in New York or Virginia, but in California, Mississippi, and some other states they are property. This sort of legal confusion is easily avoidable with a ultimate determination from SCOTUS.
J.R. says
Another reason to fear a decision like the one in this case.
If domain names are contracts of services between a registrant and the registry; why can’t registries in the near future simply stop issuing these ‘leases’ and steal every domain in their registry system and sell the ones with commercial meaning to corporate America? Who owns domains; the registry or the registrant? How can you lease something to another party that you do not own?
I’m just using this example as a hypothetical to show the slippery slope of this decision. Bottom line, someone needs to appeal these decisions from the state courts to SCOTUS so that a final determination can be made on the status of domain names as property or contracts of service…
John says
Well…
One could also suggest this is one of the best things for domain investors. Imagine if it happened to you. For example, I’m not exactly a lawyer myself, but it would seem to me that if you experienced theft of a valuable domain, then this…
good faith purchaser for value (google it)
…might meant that you can’t recover the domain had it been the other way around. Which would mean a party like this Gleissner would get to keep it. Would you really want that?
John Berryhill says
Or, one can look at a case where that argument was tried in the domain context…..
http://www.internetlibrary.com/cases/lib_case496.cfm
“In reaching this result, the Court rejected defendants’ claim that they were a good faith purchaser for value under California law. “As a general rule, an innocent purchaser for value and without actual or constructive notice that his or her vendor has secured the goods by a fraudulent purchase is not liable for conversion.”
The same does not apply to a party that purchases property from a thief as a thief cannot convey good title. The Court held that defendants had purchased the property from a thief, and thus rejected their good faith purchase defense, because plaintiffs had never voluntarily transferred the Express.com domain to a third party.”
Ramiro Canales says
In at least one unpublished case, the Fifth Circuit Court of Appeals (Texas, Louisiana, and Mississippi) found that a domain name is the property of an estate in a bankruptcy proceeding. The domain at issue was petfinders.com.
J.R. says
Exactly my point. different courts in different jurisdictions within the federalist system are issuing opposite status definitions for domain names.
In this case of Next Engine, the New York based court, cited another New York case Wornow v. Register.com, Inc. (2004) where they stated, “a domain name that is NOT trademarked or patented is not personal property, but rather a contract right for service.” Based on my interpretation, this could mean to some legal scholars or interested registries that ‘technically’ all domains are owned by the registry; even though yet to be created!
The U.S. Supreme Court needs to make a final determination of the status of domain names. Domain speculators should pay careful attention to the fact that these states and federal courts are saying that the property right is created by owning a trademark or patent. See WashingtonJournal.com UDRP for a good test case…