Saper Law Attorneys Tackle Novel Domain Name Disputes

Daliah Saper will be a featured panelist at the Namescon.com conference next week to speak about the various legal issues related to domain names.  In this article, we highlight an interesting domain name dispute that Saper Law attorneys recently successfully litigated.  The takeaway for business owners and domain name owners is an important one.  Read more below:

Whose Domain Name Is It Anyway?

Businesses large and small have come to think of their domain name (or names, since many businesses will snatch up dozens if not hundreds of addresses in order to cover their bases) as one of their most valuable assets.  Your domain name isn’t just a location tool—increasingly the way the vast majority of your customers find you—but also an important part of your overall brand strategy. Natural, then, for business owners to think of their domain names as their property.

Not so fast. Domain names may feel a lot like property—they have value and can be bought and sold—but what are they really? They’re not tangible property of the sort that can be damaged or destroyed or stolen. They’re not intellectual property like copyrights or trademarks or patents; there’s no law like the Copyright Act or Patent Act giving people monopolies over domain names just because they were the first to come up with them.

At the end of the day, a domain name is a contractual right: an agreement between a registrant and a registrar service that a particular word or phrase (saperlaw.com for example) will be associated with a particular server within the top-level domain name registry and the Domain Name System generally.

This can complicate the legal issues involved when domain name disputes arise. And arise they do, especially when companies hire third parties to develop and manage their websites. Saper Law recently defended a lawsuit brought by Airoom, LLC, one of Chicago’s biggest home remodelers, against an online marketing firm that had developed a new website for it located at airoomonline.com. After a disagreement over some unpaid invoices, the marketing firm quit, leaving Airoom to find a new server to host the site.

However, because it wasn’t the registrant, Airoom wasn’t able to immediately direct the domain name to the new server. As a result, the website went dark while Airoom was forced to return to its estranged business partner to ask for the domain name authentication code (necessary to transfer the registration to itself). Outraged at the interruption to its marketing efforts,  Airoom filed suit, claiming, among other things, “Trespass to Chattels” with respect to the airoomonline.com domain name.

Trespass to Chattels is a common-law tort related to conversion. It involves interfering with or dispossessing another person of their property. Though it fell out of favor after the close of the 19th century, it’s found a second life in many jurisdictions as a way to address certain kinds of electronic injuries. Although it was a novel question in Illinois whether Trespass to Chattels could be applied to intangible property rights like domain names, the court entertained Airoom’s claim.

On a motion for summary judgment, however, Saper Law associate Chris McElwain successfully argued that there were several flaws in Airoom’s theory. First, Trespass to Chattels requires either damage to the chattel or else a dispossession for a substantial period of time, and the court found that the three days it took for Airoom to get control of its domain name was not a substantial period of time. Second, where a defendant was authorized to have possession of the chattel, the plaintiff needs to demand possession and have that demand refused before trespass will occur. The court found no evidence of a demand-and-refusal.

Most importantly, though, McElwain argued and the court agreed that Airoom did not have an “absolute and unconditional right to possession” of the domain name, which is required to plead Trespass to Chattels. From the beginning, Airoom had based its claim to ownership of the domain name on its trademark registration. This makes a certain intuitive sense: “Our company’s called Airoom, so of course we own airoomonline.com.”

But trademark rights and domain name rights are not coextensive. It’s true that both federal law and ICANN rules prohibit cybersquatting (registering a domain name in bad faith and simply to profit from its similarity to a someone else’s trademark, e.g. to sell it back to them at an inflated price), but that doesn’t mean that a trademark owner has a right to possess every domain name that incorporates its trademark. After all, Airoom Remodelers might coexist with Airoom-brand shoes, and both companies would have equal rights to “airoom” domain names. Similarly, someone could come along and register airoomsucks.com and set up a website criticizing the company. As long as the registrant isn’t cybersquatting, a trademark owner has no right to push them off of the domain name.

There are several lessons businesses can take away from Saper Law’s victory the Airoom case. The most important is the necessity of drafting clear legal provisions regarding the registration and transfer of domain names before entering into a web development agreement. Since domain names are fundamentally contractual rights, the best way to protect them is contractually.

If you’re involved in a dispute over a domain name and want to explore your potential legal recourse, or if you need to draft a solid web development agreement, contact Saper Law at 312-527-4100.

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