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Domain names are property, court rules

In a trademark infringement suit, a Virginia court finds domain names can be garnished to pay off debt.

Domain names are property--just like a house or valuable jewels--and they can be garnished to pay off a debt, a Virginia court has ruled.

The groundbreaking decision comes in a case involving James Tombas of Canada Incorporated, who registered the domain name "umbro.com," and then allegedly asked Umbro International for a lifetime supply of the soccer apparel company's products, as well as $50,000 for himself and another $50,000 for the Internet-focused charity of his choice. The clothing manufacturer responded to Tombas's offer by suing him for trademark infringement.

A federal court sided with Umbro on the trademark charge, and now the U.S. Circuit Court in Fairfax County has ordered that Tombas's other domain names be garnished by ".com" registrar Network Solutions (NSI) and then auctioned off in order to pay Umbro's attorney fees.

"Until Umbro's effort, domain names apparently have not been subjected to garnishment, but that is no reason to conclude that this new form of intellectual property is therefore immune," Judge Langhorne Keith stated in the ruling.

Analysts say the ruling is straightforward and intuitive; the plaintiffs say the suit's outcome could deter the practice of domain name speculation--putting names on hold and then trying to sell them to the highest bidder.

At the least, the case drums up interesting questions about who exactly "owns" a domain name.

In a court filing Network Solutions essentially argued that it leases domain names on a "conditional" basis, and therefore they can't really be owned by anyone--except NSI.

"Like a telephone number, a domain name cannot function on the Internet, and therefore does not exist, in the absence of Internet services performed by domain name registrars such as NSI," the company wrote in a December 1998 court brief. "One does not own a domain name any more than one 'owns' a telephone number."

But the Virginia court disagreed, stating that domain names are property that can be garnished.

"The fact that this form of intellectual property results from a service that NSI provides does not preclude the property from garnishment any more than the service provided by the Patent Office immunizes patents from garnishment," the ruling states.

Overall, legal experts say the case was an easy call because domain names are considered real estate on the Net, so they can easily be considered property.

"The value of a domain name is that it's a storefront," said Rich Gray, an attorney with Bergeson, Eliopoulos, Grady & Gray.

"What the court is saying is unremarkable: A party seeking to get its attorney fees back can try to [tap] the assets of [the defendants] and these domains names are just like a building or property," he added.

According to Morrison & Foerster attorney Jonathan Band, "It strikes me that it's an obvious ruling, but one that would need to made."

Network Solutions has appealed the decision to the Virginia Supreme Court, according to the National Journal, but in the meantime Umbro International's lawfirm, Alston & Bird is celebrating the victory.

"Businesspeople will see this as confirmation that when you buy and sell domain names, you have an enforceable agreement," David Stewart Umbro's attorney told the National Journal's Technology Daily. "From a legal standpoint, this gives much more leverage over a domain name pirate."