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Domain Theft Causes of Action to Recover Stolen Domain

By John DiGiacomo

Domain names are valuable to companies and private individuals alike because they connect entities to the World Wide Web—the Internet Age’s most dynamic, expansive, and heavily trafficked marketplace. Whether dealing in goods, data, or ideas, an online presence is a necessity for almost everyone. However, like all other property, domain names can be stolen. This can damage the owner significantly, and a legal remedy for such a theft is required in order for the owner to be made whole again. But the availability of legal remedies is much less expansive than the current domain name theft problem. Some states recognize tort claims as suitable causes of action, but others do not. The federal government has stepped in to try and help and has provided some moderate support in the form of the Computer Fraud and Abuse Act’s civil cause of action option, as well as amending the Lanham Act in order to protect trademarked domain names. While the current slate of remedies may be insufficient in some cases, there is reason to believe the legal field is moving towards recognizing the value of domain names and offering up more ways to recover a stolen domain name.

  1. Common Law Conversion

The most workable common law remedy to recover a stolen domain name would seem to be a conversion tort claim. “The tort of conversion is generally defined as the unauthorized and wrongful exercise of dominion over the personal property of another. Its basic elements are (1) a plaintiff’s ownership or right to possession of personal property; (2) a defendant’s disposition of that property in a manner that is inconsistent with and exclusive of the plaintiff’s property rights; and (3) resulting damages.”[1] “Personal property” in conversion cases has historically meant physical, tangible, property (chattels). However, the “merger doctrine,” accepted in all jurisdictions, expanded conversion to include intangible items that were merged with physical property (usually papers).[2] This includes stocks, master recordings, etc.[3] The Restatement of Torts 2d suggests a test for conversion of intangible property: “(1) Where there is conversion of a document in which intangible rights are merged, the damages include the value of such rights. (2) One who effectively prevents the exercise of intangible rights of the kind customarily merged in a document is subject to a liability similar to that for conversion, even though the document is not itself converted.”[4]

When it comes to domain names, there is no majority or minority rule, most likely due to the novelty of the legal question. However, California and New York, two of the technology industry’s biggest hubs, have both allowed conversion claims for domain name theft.[5] In the seminal case on point, the Ninth Circuit applying California law rejected the tangible and merger doctrine requirements of the restatement and held that domain names constituted personal property susceptible to conversion.[6] In Kramer v. Cohen the Ninth Circuit citing the lower state court determined that domain names met all the criteria for property rights: (1) a well-defined interest, (2) capable of exclusive possession or control, and (3) legitimately claimed to be exclusive.[7] The court wrote:

In short, California does not follow the Restatement’s strict requirement that some document must actually represent the owner’s intangible property right. On the contrary, courts routinely apply the tort to intangibles without inquiring whether they are merged in a document and, while it’s often possible to dream up some document the intangible is connected to in some fashion, it’s seldom one that represents the owner’s property interest. To the extent Olschewski endorses the strict merger rule, it is against the weight of authority. That rule cannot be squared with a jurisprudence that recognizes conversion of music recordings, radio shows, customer lists, regulatory filings, confidential information and even domain names.

Were it necessary to settle the issue once and for all, we would toe the line of Payne and hold that conversion is “a remedy for the conversion of every species of personal property.” 54 Cal. at 341.[8]

The Ninth Circuit has repeatedly held similarly,[9] as have California courts.[10] Even a District Court in Texas, applying California law, allowed a stolen domain name claim to be brought as a conversion claim.[11]

But not every state recognizes domain names as convertible property. For example, the court in the Texas case just mentioned noted that if it were to apply Texas law, the claimant could not be able to claim conversion.[12] Pennsylvania has denied conversion claims for recovering stolen domain names in the past. In v. Perot Systems, the Eastern District of Pennsylvania held that under Pennsylvania law, domain names did not constitute personal property able to be converted.[13] In Virginia, the Eastern District Court denied conversion of a domain name under the merger doctrine.[14] Interestingly though, the Virginia ED Court in another opinion alluded to the fact that the Virginia Supreme Court would consider domain names as convertible personal property.[15]

However individual states define convertible personal property, and whether or not domain names fit into that definition, the national movement appears to be towards allowing stolen domain names to be litigated as conversion claims. The Seventh Circuit, D.C. Circuit, and Ninth Circuit have all recognized conversion for intangible personal property,[16] and California and New York[17] have extended that to domain names specifically.[18] As technology advances, so too will the law, and any legal doctrine designed to protect the personal property interests of individuals will have to extend protection to new types of property. The Ninth Circuit made that point clear in writing: “[i]t would be a curious jurisprudence that turned on the existence of a paper document rather than an electronic one. Torching a company’s file room would then be conversion while hacking into its mainframe and deleting its data would not.”[19]

  1. ACPA

The Anti-cybersquatting Consumer Protection Act protects domain names that feature trademarks. It is an amendment to the Lanham Act and imposes civil liability on one who “has a bad faith intention to profit” from a mark owned by another, and “registers, traffics in, or uses a domain name that … is identical or confusingly similar (in the case of a distinctive mark)” or “is identical or confusingly similar to or dilutive … (in the case of a famous mark).”[20] The elements that must be proven to find a violation are: (1) a defendant uses a designation; (2) in interstate commerce; (3) in connection with goods and services; (4) which designation is likely to cause confusion, mistake or deception as to origin, sponsorship, or approval of defendant’s goods or services; and (5) plaintiff has been or is likely to be damaged by these acts.[21] Upon a finding of “bad faith” adoption of a domain name, the owner of the name may recover actual damages or elect statutory damages that could run as high as $100,000 per domain name affected.[22] The Act only protects domain names that feature trademarks and are involved in interstate commerce.[23]

In American Online v. LCGM, the Eastern District of Virginia found that LCGM had violated the Act by sending emails to AOL members with the name in the “from” line of the message.[24] The court held that every elements had been met, focusing on the fourth element which seeks to find if confusion existed amongst recipients.[25] The court noted that the unauthorized sending of bulk emails had been held to be in violation of the Act in the past.[26] While the Act provides a significant amount of protection, most domain names do not contain trademarks and thus do not fall under the Act.

  • CFAA

The Computer Fraud and Abuse Act criminalizes certain unauthorized cyber conduct.[27] It also provides for a civil cause of action for certain violations of the act, including actual damages above $5,000.[28] The Act requires that the alleged violator was unauthorized to access the computer in question. In cases to recover stolen domain names, the absence of authorization should be easy to prove, therefore if the claimant can show he suffered damages over $5,000, he can bring a claim under the Act. Please see attached legal summary for a more in-depth look at the CFAA.

[1] 40 A.L.R.6th 295 (Originally published in 2008).

[2] Id.

[3] Id.

[4] Restatement Second, Torts § 242.

[5] 40 A.L.R.6th 295.

[6] See Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003).

[7] Id.

[8] Id. at 1033.

[9] See, e.g., CRS Recovery, Inc. v. Laxton, 600 F.3d 1138 (9th Cir. 2010) (holding that internet domain names are subject to conversion under California law, notwithstanding the common law tort law distinction between tangible and intangible property for conversion claims).

[10] See e.g., Express Media Group, LLC v. Express Corp., 2007 WL 1394163 (N.D. Cal. 2007) (holding that a purchaser of a domain name from an unknown third party which had wrongfully taken the domain name from its owner could be sued for conversion and ordered to return the domain name to its rightful owner).

[11] See Emke v. Compana, L.L.C., 2007 WL 2781661 (N.D. Tex. 2007) (holding that whether a claim was stated for conversion of a domain name depended on which state’s law would be applied; Texas law would preclude the claim whereas California law would allow it—California law was eventually applied and the conversion claims was allowed).

[12] Id.

[13] See Inc. v. Perot Systems Corp., 158 F. Supp. 2d 589 (E.D. Pa. 2001).

[14] See RitLabs, S.R.L. v. RitLabs, Inc., No. 1:12-CV-215 AJT/IDD, 2012 WL 3263893, at *8 (E.D. Va. Aug. 9, 2012).

[15] E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., No. 3:09CV58, 2011 WL 4625760, at *5 (E.D. Va. Oct. 3, 2011) (“The Restatement and its reporter acknowledged the evolving nature of conversion law in 1965 when the Restatement was first published. Even then, the Restatement authors recognized the importance of providing protection for intangible rights, and they wrote in an era devoid of ecommerce. The Seventh Circuit, the Ninth Circuit, and the D.C. Circuit have recognized actions for conversion of intangible property, and this Court concludes that, if confronted with the issue, the Supreme Court of Virginia also would permit a conversion action for converted intangible property of the sort here at issue: confidential business information about the manufacturing process and about a company’s business plans.).

[16] Id.

[17] See Shmueli v. Corcoran Group, 9 Misc. 3d 589, 802 N.Y.S.2d 871 (Sup 2005).

[18] 40 A.L.R.6th 295.

[19] See Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003).

[20] 15 U.S.C. § 1125(d)(1)(A)(i) and (ii).

[21] See First Keystone Federal Savings Bank v. First Keystone Mortgage, Inc. 923 F.Supp. 693, 707 (E.D.Pa.1996).

[22] 15 U.S.C.A. § 1117(d).

[23] 15 U.S.C. 1125(a)(1)

[24] See Am. Online, Inc. v. LCGM, Inc., 46 F. Supp. 2d 444, 449 (E.D. Va. 1998).

[25] Id.

[26] Id. (The unauthorized sending of bulk e-mails has been held to constitute a violation of this section of the Lanham Act. America Online, Inc. v. IMS, et al., Civil Action No. 98–11–A (E.D.Va.1998); See also Hotmail Corp. v. Van $ Money Pie Inc., et al., 47 U.S.P.Q.2d 1020, 1998 WL 388389 (N.D.Cal.1998) (granting injunction where plaintiff was likely to prevail on the merits under the Lanham Act)).

[27] See 18 U.S.C. § 1030.

[28] Id. at § 1030(g).

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