Despite what many think, it is perfectly legal to buy and/or sell a domain name. Domain name transfers are commonly conducted as part of the sale and acquisition of businesses and business assets. A domain name is a form of intellectual property, like a trademark or copyright. As such, a domain name can be bought, sold, used as collateral for a loan, etc.

However, like all forms of property, there are some unique features of domain names that require experienced legal assistance when you are trying to buy, sell, and/or transfer a domain name. There are also some practical considerations. We discuss some of those below. First, a bit of background. A domain name must be registered with a “Registrar.” These are companies that are authorized to register domain names. In any given case, the Registrar may be the same company that also “hosts” the website. But, many times, the Registrar company is different from the Hosting company. Generally, a fee — annual or monthly — must be paid to the Registrar company.

Thus, the first practical and legal issue is to gather the details about the Registrar, including who specifically is listed as the person/business registered, the status of payment, and related details. As part of the due diligence, the supporting documentation must be carefully reviewed. Some Registrars also have rules and regulations with respect to how a domain name is transferred, and some charge fees for the transfer. Payment of potential past-due fees or other Registrar fees should be matters subject to negotiation.

Often, this aspect of the process is non-problematic. However, occasionally, problems arise because the domain name was registered to a long-gone employee (or another person), rather than to the company’s name. This raises the legal question of whether the company has the ability — legal right — to transfer the domain name. Obviously, if this problem arises, the problem will require a solution. This might be as simple as finding the long-gone employee and obtaining a signature. Or it might be as complicated as filing a UCANN proceeding or a lawsuit.

There are also some practical and legal issues to be considered at the Closing. Like a real estate or business sale transaction, the best practice is to use an escrow service for the sale/transfer of a domain. Use of such a service will be automatic if the domain name is being transferred as part of a business sale/acquisition. The legal issue here concerns the successful transfer of the domain name and proof of that successful transfer. With a house or other real estate, transfer is accomplished by the transfer of keys. But, generally, there is never a requirement that there be proof that the keys work.

However, it is a bit different for a domain name. There are administrative names, codes, and other things that might be called “keys.” To accomplish a successful transfer of a domain name, at the closing (or shortly thereafter), there must be some proof that the “keys” function correctly. Usually, this involves access to the main Registrar file and a change of passwords or other security codes/processes.

A few other legal issues include:

• Verifying that the domain name is not violating or potentially violating existing trademarks
• Checking on questions like existing or threatened domain name disputes
• Exploring any history of cybersquatting or hijacking with this domain or related domains
• Examining domain names with alternative extensions to check for conflict or other potential risks
• And more

Contact the Internet Law Attorneys at Revision Legal

For more information, contact the experienced Internet Law Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

Valuing a Domain Name

Unlike real property, which has established appraisal methodologies, domain name valuation is more art than science. Key factors that affect a domain name’s value include:

• Extension (.com vs. .net vs. country-code TLDs) — .com domains command a significant premium; .net and .org carry some value; newer generic TLDs (.io, .ai, .app) have rapidly appreciated in certain industries
• Length and memorability — shorter domains are generally more valuable; single-word and two-word domains are premium assets
• Search engine optimization (SEO) history — a domain with a strong backlink profile and a history of legitimate, high-quality content may carry significant SEO value
• Trademark status — a domain name that incorporates a registered trademark is legally riskier to hold and transfer; this affects value
• Comparable sales — platforms like Namebio.com and DNSO.com maintain databases of past domain sales that can serve as comparables

Conducting Due Diligence on a Domain Name Purchase

Before purchasing a domain name, a buyer should conduct thorough due diligence:

• WHOIS lookup — identify the current registrant, registration date, and expiration date; confirm that the seller has the authority to transfer
• Trademark clearance — search the USPTO database and state trademark registries to confirm that the domain name does not infringe an existing mark; a domain name that infringes a trademark is subject to UDRP proceedings or ACPA litigation regardless of who owns it
• Litigation and UDRP history — search court records and WIPO’s UDRP decisions database for any prior disputes involving the domain
• SEO history — use tools like the Wayback Machine, Majestic, and Ahrefs to review the domain’s content history; a domain that has been used for spam, malware, or black-hat SEO may carry reputational baggage that is difficult to overcome
• Renewal and registrar status — confirm that the domain registration is current and that there are no holds or restrictions on transfer

The Domain Name Transfer Process

Domain name transfers are governed by the registrar’s policies and ICANN’s Transfer Policy. The general process is:

• The seller disables “registrar lock” on the domain at the current registrar
• The seller provides the buyer with the domain’s authorization code (also called the EPP code or transfer key)
• The buyer initiates a transfer request at the buyer’s chosen registrar using the authorization code
• The current registrar sends a confirmation email to the registrant of record; the registrant must approve the transfer (or it completes automatically after 5-7 days of non-response)
• The transfer completes within 5-7 days of initiation

For high-value domain transfers, using an escrow service — such as Escrow.com or a law firm trust account — is strongly advisable. The escrow arrangement ensures that funds are released to the seller only after the domain has been successfully transferred to the buyer. Without escrow, either party is exposed to the risk of non-performance by the other.

Tax Treatment of Domain Name Sales

The tax treatment of a domain name sale depends on how long the domain has been held and the seller’s business context. For an individual or business that has held the domain as a capital asset for more than one year, the gain on sale may qualify for preferential long-term capital gains rates. For domain name investors who buy and sell domains as a business, gains may be treated as ordinary income.

The purchase price allocated to a domain name in a business acquisition is also a tax issue. Under the Section 197 intangible amortization rules, a purchased domain name may be amortizable over 15 years. Buyers and sellers in asset purchase transactions should coordinate on the allocation of purchase price among assets (including the domain name) and should consult with tax counsel to ensure consistent treatment.

Contact the Attorneys at Revision Legal

If you have questions or need legal advice, contact the experienced attorneys at Revision Legal. Our team handles domain name law matters for businesses and individuals nationwide. Call us at (855) 473-8474 or use the contact form on our website.