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Sometimes a comment is so good that it deserves to be turned into a post. That is the case with a comment left by John Berryhill on November 26, 2013 on TheDomains.com in response to the post entitled, “Federal Judge Rules Domain Names Are Not Property Under Virgina Law”
Things get lost in comments sometimes and in my opinion Mr. Berryhill touched upon something that is far bigger than a Virginia property ruling.
It is something every domain investor should read and bookmark.
Here is the comment:
It is an article of religious faith among some domainers that the world would magically be a better place if domain names were, for all purposes, property.Okay, let’s have a show of hands:
How many of you want:
1. To pay sales and transfer taxes on this “property” when it is bought and sold?
2. To have them be considered marital assets during a divorce?
3. To have them subject to liens?
If the states of Arizona, Florida, or Virginia got wind of the notion that GoDaddy, Moniker and Netsol have been selling goods all these years without paying the applicable sales tax on them, then rest assured, they are going under.
I’ve been at this for coming up on 20 years, have seen a lot of domain disputes of all shapes and sizes, and have NEVER found myself wringing my hands and saying, “Gee, I wish these things were property”. Even the sex.com case could have reached the correct result on an alternative legal theory. But it became a big issue there because the plaintiff got married to a conversion theory. In other words, it was only important because of the way the case was framed from the get-go. Have hi-jacked domain situations been rectified in other jurisdictions without introducing a property shibboleth? Yes indeed they have.
“at what point will all of these competing rulings result in a case going before the SCOTUS?”
It’s hard to imagine a situation which would compel that. Every domain registration contract – and that’s what you have, a contract with a registrar – specifies the jurisdiction in which that contract is made. Do states differ on matters of contract interpretation? Sure. Does it require a Supreme Court ruling to sort out? No.
When you register a domain name with GoDaddy, you have a contract that is, by its own terms, going to be construed in accordance with Arizona law. When you have a contract with Moniker, it is going to be construed in accordance with Florida law. There is no US Supreme Court, present or future, which is going to say “From now on, we’re going to invent a federal rule which is going to govern how a contract with express jurisdictional terms is going to be interpreted and applied in any of the 50 states, DC, Puerto Rico, Guam, US Virgin Islands, Northern Marianas, and American Samoa”. Not. Gonna. Happen.
It would require an act of federal legislation – from a Congress that passed something like 49 bills so far – for the extraordinary purpose of solving a “problem” that doesn’t exist except as an article of religious faith among domainers.
As to the question above, a contract to receive a service is as transferable and subject to claims of rights as is anything else. Have you ever bought or sold an airline ticket? There are no “goods” at the other end of that contract. I have a coupon from USAirways that will entitle the bearer to have his or her carcass hauled for 1000 miles. I’ll sell it to you if you like, but the act of hauling your carcass is not “property”, nor is the right to receive said carcass-hauling a form of “property”.
The comment got even more interesting in the last couple of days as I found out that domain name sales are subject to sales tax in New Zealand for those that live inside the country.
According to Tim Johnson CEO of .kiwi “The sale price of a premium name, is subject to a tax of 15% that needs to be paid to our Government as a sales tax, actually we call it GST”
Great!!!
German sales tax is 19% and domain names are considered property that can be taken away in case of bankruptcy
The Great John Berryhill – The Domainer’s Best Friend.
John makes some excellent points, but might find opposition from the Ninth Circuit in California which in fact, has ruled that domains ARE property. Domains are usually referred to as cyber real estate and that notion is part of the reasoning behind sales of domains for millions of dollars. There may indeed be a future case that pits the decisions in the West against the decisions in the Virginia Federal courts holding that domains are contractual rights which could take the conflict to the SCOTUS.
But I agree with John that contract rights can be bought and sold and in fact, valued in the millions of dollars. The reality is that nobody owns domains, they are leased for terms up to 10 years (if the definition is “property”), or, in the alternative, a Registrant can have a contract to use a domain for up to 10 years (+ renewals). Either way, they have a value that can be bought and sold.
This is a great reply from that post. I would have a host of questions (tech pun intended) about a number of issues related to domain names, matters of equity and matters of law. That’s another post – perhaps another blog, entirely.
I have always believed we are dealing with a contract right on a digital parcel, an online address that is very close to real property. I have always likened these rights to domains to those a pro team may have on a player, who can still be traded or sold to another team. That puts it above the level of an airline ticket, although I understand the corollary.
eNom falls under the jurisdiction of the 9th circuit
TB, great… maybe domains can be considered as collateral for loan? Its great for credit-fraudsters
@ google, domains are considered collateral for a loan . . .
Thanx for highlighting this comment in a post. Enjoyed the comments by Howard Neu, and Danny Pryor, and will bookmark this article.
– sounds like a good analogy.
@Howard and @Danny, further down that thread, I left an invitation to really confuse domainers by having one of you go through the “bundle of rights” stuff to the effect that “property” doesn’t mean any one thing at all times anyway.
I always go back to “I Dig A Pony” from the Let It Be album on this one….
“Well you can re-ify anything you want,
Yes you can re-ify anything you want, I told you,
All I want is you.
Ev’rything has got to be just like you want it to
Because”
(thank you on behalf of the group and ourselves and I hope we’ve passed the audition)
John you have said that California has not stated officially that domains are property is that correct ?
In the context/s of the case/s they heard, though, isn’t it?
I gather (maybe wrongly) some people want an outcome of domain names being property under any circumstances or no ifs, ands or buts. However, some of them maybe don’t realize that outcome can work for or against them, depending on their situation.
Hello MHB,
Real Property is geographically compromised. A .COM Franchise Address is an uncompromised and unlimited Conduit to the worlds largest Channel of consumer traffic. PRICELESS
Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)
No Jeff, a .com franchise address is not PRICELESS.
But your comments are WORTHLESS. lol
Wow. For a second I thought that said “Domain King” not Denise King. I wonder if they are related?
@Dave – “under any circumstances”
That’s a key point. At issue in the sex.com federal case was whether a domain name was property “for the purpose of a conversion claim.” It only because an issue in that case because the plaintiff had married himself to a conversion theory, instead of some other cause of action on which the domain name could have been re-assigned back.
@Raymond – Yes, that was true at the time. When a federal court faces a novel state court issue, they can ask the highest court in that state “hey, waddya think?” In that instance, the CA state supreme court decided not to answer, so the federal court ruled on the basis of what they thought the state supreme court would think. So, you end up with this weird situation of “state law for the purpose of federal suits” until the state courts get their mitts on an actual case.
The more interesting case in CA, however, is the action that Karl Kronenberger pursued against the remaining Zuccarini domain names. Karl and/or his client, who was always something of a mystery, bought some of the original ACPA judgments against John Zuccarini from the plaintiffs in those cases, who weren’t interested in trying to collect them. Then, he filed an action in CA to levy against the domain names. After a long chain of various shenanigans, the court ordered an auction of the domain names in satisfaction of the judgment Karl’s client had bought.
Karl’s a sharp guy. He got Kronenberger.com by filing an ACPA suit against a dead real estate agent who had been using the domain name for his real estate business. Knowing a dead guy wouldn’t show up, it was an easy win.
in Portugal there is a tax for selling domains. in fact, there is a tax for everything if the government wants it :). the tax is applied for intangible items and intellectual property.