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| Moving Offshore: Jurisdiction in an Internet World Without Borders |
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| Written by Deborah A. Logan, Esq. |
| Wednesday, 14 July 2010 19:39 |
One common question asked by domainers is as to the advantages and disadvantages of moving their domain portfolio or business “offshore”. Offshore, in this context, is simply meant to imply a location outside of the United States.
Moving your business offshore or your domain name portfolio to a non-U.S. registrar may seem like a good idea. However, doing so may actually work against you since such an action may raise the specter of improper behavior if you later find yourself on the wrong end of some judicial action. Additionally, several cases over recent years have determined that U.S. courts can still claim jurisdiction over a domain name regardless of the location of the registrant and even the domain name registrar. The recent, highly publicized case in Kentucky illustrates the reach of the judicial system with regard to domain names located outside of the country. Back in 2008, the state of Kentucky filed an action in state court to seize 141 domain names it believed were used for illegal gambling sites. Apparently, most of the sites were located offshore and served gamblers both inside and outside of Kentucky. The state court ordered forfeiture of the domain names. An appeal was filed and a “writ of prohibition” was sought against the forfeiture. The appeal was granted. The state of Kentucky appealed and sought review with the state supreme court to reverse the writ and was successful in March 2010. Com. ex rel. Brown v. Interactive Media Entertainment and Gaming Association, Inc., 2010 WL 997104 (Ky. March 18, 2010) Interestingly, the ultimate issues underlying the Kentucky case (whether the sites were tantamount to gambling devices as defined by statute and whether the state has authority to seize them) were not decided since none of the domain name holders came forward. The attorneys who filed for the writ of prohibition in the appellate court were found to lack standing since they failed to show they represented the actual domain name holders. The writ of prohibit to stop the state seizure was filed on behalf of the domain names (which the state supreme court indicated cannot have an interest in itself) and assorted gambling trade associations. Since there was no standing, they were unable to argue to reverse the lower court’s decision to seize the domain names. The domain names remain frozen to date. One of the initial cases to decide jurisdiction over foreign domain name registrants accused of cybersquatting was Atlas Copco v. Atlascopcoiran.com, et al., in the United States District Court for the District of Virginia in January 2008. This lawsuit was filed under the Anticybersquatting Consumer Protection Act of 1999 (ACPA) by a trademark holder. The registrants of the eleven alleged offending domain names appeared to be located in Iran, Afghanistan or India. Since the three registries of the domain names (including VeriSign) were located in Virginia, the Court determined that it had in rem jurisdiction, judgment was issued and transfer of the names was ordered. In an in rem proceeding, the court is able to exercise jurisdiction over the property itself (and not the one in control of the property). In February 2010, the Ninth Circuit Court of Appeals in the case of Office Depot, Inc. v. Zuccarini, was asked to determine whether and where a judgment could be executed against 190 <.com> domain names owned by defendant. The Court determined based upon prior decision that domain names are intangible property, and observed that while it a legal fiction to attach a situs or location to intangible property, precedence in other circuit courts as well as the language of ACPA, support the finding that a trademark owner may proceed in rem against a domain name where personal jurisdiction cannot be established against the domain name holder in any district in the United States. The Court found that the Northern District of California was the proper court to exercise jurisdiction because that is where the registry holder was located. Leaving aside the well known reputation of the named defendant, this case carries a cautionary tale for all domainers since it involved a judgment creditor that was able to levy the domain names of a judgment debtor to satisfy its judgment. See Office Depot Inc. v. Zuccarini, 2010 WL 669263 (9th Cir. Feb. 26, 2010). Thus, while moving domain names offshore may protect domainers from personal jurisdiction, it will not prevent the courts from exercising in rem jurisdiction over the domain names themselves. This doesn’t mean, however, that just any U.S. court will exercise such jurisdiction. Trademark holders that try to make an end-run by filing lawsuits directly against domain names should be careful to pick the proper venue. The U.S. District Court of Nevada recently dismissed two erroneously filed cases.’ In May 2010, both Andre Agassi and his wife, Steffi Graf, filed cybersquatting lawsuits with regard to domains containing their personal names registered by other parties. Oddly, instead of filing separate actions against each of the six domain name registrants (only one of which appeared to be an entity located outside of the United States), the two filed “in rem” actions against the domain names under ACPA in Nevada. No registrar, registry or other authority associated with the domain names was located in Nevada, and the court found that no in rem jurisdiction could be exercised over the domain names. It appears that plaintiffs had intended to serve the complaint on the domain name registrars in the hope that the registrars would sign Registrar Certificates to be deposited with the district court in Nevada thereby establishing jurisdiction over the domain names. However, this strategy failed. In short, trademark holders cannot unilaterally file an action in a venue convenient to themselves hoping that the ACPA will confer some independent basis of jurisdiction; an action must be initiated in a judicial district within which the registrar, registry or other domain name authority is located. Given the broad interpretation of in rem jurisdiction over domain names accorded by various courts (including the federal court in the Northern District of California where VeriSign, the registry for <.com> and <.net> domains, is located), it is clear that the long arm of U.S. law can reach across oceans to offshore locations serving as havens to domainers. Moving domain names to a foreign registrar or company will provide little protection against even creditors so long as the registry or other domain name authority is located within the boundaries of the United States. Deb Logan, Esq. is a partner with Lipton, Weinberger & Husick, an intellectual property firm located outside of Philadelphia. Ms. Logan has been a litigator for 20 years and focuses her practice on the intersection of intellectual property and Internet law, particularly with regard to domain names and trademark matters.She can be reached at: This e-mail address is being protected from spambots. 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| Last Updated on Tuesday, 27 July 2010 19:40 |
Obviously, one of the seeming advantages to moving a business or domain name portfolio to an offshore location is to protect it from the reach of the U.S. judicial and alternative dispute resolution system. Keep in mind that if you operate a website that engages in contacts within the United States (i.e., through online sales of products or services), you are not sheltered from the long arm of the courts. Further, if personal jurisdiction is what you are looking to avoid, don’t plan on seeking to set aside an unfavorable UDRP decision or attempt to reverse a seizure of your domain names by a court. Doing so will directly submit you to such jurisdiction.