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Nos. 01-15899 & 01-15886 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT GARY KREMEN, Plaintiff-Appellee/Cross-Appellant, v. STEPHEN MICHAEL COHEN, an individual, OCEAN FUND INTERNATIONAL, LTD., a corporation, YNATA LTD., a corporation, SAND MAN INTERNACIONAL LIMITED, S.A. DE C.V., a corporation, and DOES 1-20, Defendants-Appellants, and NETWORK SOLUTIONS, INC., a corporation, Defendant-Cross-Appellee On Appeal From The United States District Court For the Northern District of California The Honorable James Ware, Presiding BRIEF AMICUS CURIAE AMERICAN INTERNET REGISTRANTS ASSOCIATION IN SUPPORT OF REVERSING THE DISTRICT COURT’S SUMMARY JUDGMENT IN FAVOR OF DEFENDANT-CROSS-APPELLEE NETWORK SOLUTIONS, INC. William H. Bode, Esq. Bode & Grenier, LLP 1150 Connecticut Avenue NW Ninth Floor Washington DC 20036 (202) 862 4300 Counsel for AIRA [edited for Web publication] STATEMENT OF INTEREST Amicus curiae American Internet Registrants Association (“AIRA”) is a Washington, D.C.-based association formed to advocate the interests of Internet domain name registrants. As an advocate for registrants (who are domain name property holders), AIRA has offered testimony before the United States Congress and the Internet Corporation for Assigned Numbers and Names (ICANN) on Internet domain name governance issues. AIRA was a staunch supporter of the class action styled Thomas v. Network Solutions, Inc., 176 F.3d 500 (D.C. Cir. 1999), cert. denied, 528 U.S. 1115 (2000), in which the federal court for the District of Columbia held that $30.00 of NSI’s $100.00 Internet domain name registration fee was an unconstitutional tax. From its inception, AIRA has been extremely concerned about Network Solutions, Inc.’s (“NSI’s”) mishandling of domain names � and, specifically, about the apparent absence of a remedy for those aggrieved. While the Court has before it only the specific issues raised by the misfeasance of NSI with respect to the Internet domain name “sex.com,” the fact is that hundreds and hundreds of Internet domain registrants have lost their valuable property � that is, the use of the Internet name(s) they chose and registered � because of NSI’s gross negligence, lack of accountability, and general disregard for their customers. One class of NSI’s victims includes registrants like Plaintiff-Appellee/Cross-Appellant Gary Kremen, who have lost Internet domain names because of NSI’s failure to adopt even rudimentary administrative procedures that would prevent wrongful usurpation of names by fictional � and/or fraudulent — “buyers.” A second, closely related, class of victims is represented by registrants such as Lee Hinton, who lost the Internet name “domainbiz.com” when NSI wrongfully determined that the domain name registration had lapsed, and released it to the public. (The name � critical to Mr. Hinton’s business — was purchased by a foreign national, leaving Mr. Hinton with no effective remedy.) Yet another class of victims of NSI includes those registrants who lost their domain names when NSI claimed to have misplaced their e-mail addresses and failed to invoice them for renewals at the correct address. This class of aggrieved registrants is represented by Henry Elder, who lost the Internet domain name “luv.com” when NSI professed to have lost his change of address notice. AIRA has been virtually flooded with messages from registrants complaining that they have lost their Internet domain names (including many on which registrants’ businesses � and livelihoods � depended) � and have been left with no recourse. In every instance, NSI’s final response (coming, usually, after the registrant has made many futile attempts to reach a decision-maker at NSI) is to do nothing at all. For the Internet to achieve its commercial potential, the legal system must assure registrants aggrieved by NSI’s misconduct a meaningful remedy. Years of effort in establishing an e-business evaporates into nothing overnight when an Internet domain name is suddenly lost because of NSI lack of care in handling it. In no other area of commerce is a party held to be liability-free for the harm resulting from its negligence. The integrity and governance of the Internet demands, at a minimum, that elemental principles of justice apply to its administration. For these reasons, Amicus Curiae American Internet Registrants Association respectfully submits this brief in support of reversing the District Court’s summary judgment in favor of Defendant-Cross Appellee Network Solutions, Inc. INTRODUCTION Slightly more than a decade ago � on December 12, 1991 � physicists at Stanford University created the first Web pages. See http://www.slac.stanford.edu /history/earlyweb/firstpages. shtml. The text in these pages (and they contained nothing but text) consisted of a default page for the mainframe computing system, a link to a database popular among “high energy physicists,” and a directory of staff, faculty and high-energy physics correspondents’ names and contact information. Id. The pages were accessible through the then brand new World Wide Web. By December 2001, more than 32 million domain names had been registered. See http://www.usatoday.com/ life/cyber/tech/ 2002/01/14/dot-ame.htm. Each domain name specifically identifies one or more IP addresses or web pages.\ That the law has not been able to keep up with the explosive growth of this new technology � or its facially novel legal problems — is perhaps understandable. Because of the enormous impact the Internet now has on everything from the world economy to world communications, however, that the law must do so now is imperative. And that challenge is not as great as, at first blush, it may seem. For once the nature of the property rights in a domain name are understood, it becomes clear that many traditional legal paradigms apply, including conversion, breach of contract and negligence. The Court should take the opportunity presented by this case to settle these issues and bring much needed stability to this crucial means of commerce and communication. ARGUMENT The word “property” is “‘commonly used to denote everything which is the subject of ownership.’” Southern Pacific Co. v. Riverside County, 95 P.2d 688, 692 (App. 1939) (citation omitted). In California, property is much more than “the thing owned,” and is, in fact, “‘the sum of all the rights and powers incident to ownership.’” Texas Co. v. Hauptman, 91 F. 2d 449, 450 (9th Cir. 1937) (citations omitted). In its “strict legal sense,” property means “that dominion or indefinite right of use and disposition which one may lawfully exercise over particular things or objects.” Id. Both tangibles and intangibles “are, when coupled with possession, but the indicia, the visible manifestations, of invisible rights, the evidence of things not seen.” Id. Thus, property rights are properly defined as “the unrestricted right of use, enjoyment and disposal of [the] object.” Id. Where, as here, those fundamental rights in property are wrongfully usurped, justice demands a remedy. THIS COURT SHOULD RECOGNIZE THAT INTERNET DOMAIN NAMES ARE A UNIQUE FORM OF PROPERTY CAPABLE OF BEING CONVERTED AND OF FORMING THE BASIS FOR A BREACH OF CONTRACT ACTION. Registered Domain Names Are a Unique Form of Property. Though often compared to other forms of intangible intellectual property such as trademarks and copyrights, domain names are, in fact, a form of property unlike any other.\ The differences appear most dramatically in the methods by which wrongdoers can � and cannot � infringe on the rights of trademark, copyright and domain name holders. Specifically, while many forms of intellectual property can be “used” or “appropriated” without depriving their owners of their use, domain names cannot. A trademark or a copyrighted work can be wrongfully used by a third party, and will still be valuable to its owner.\ There is, however, no way a domain name can be used by more than one party: one either owns (and has the exclusive right to use) all rights to a domain name or one does not. Panavision International, L.P. v. Toeppen, 945 F. Supp. 1296, 1302 (C.D. Cal. 1996) (“[A]lthough two or more businesses can own the trademark �Acme,’ only one business can operate on the Internet with the domain name �acme.com.’”) See Caesar’s World Inc. v. Ceasars-Palace.com, 112 F. Supp. 502 (E.D. Va. 2000) (in suit brought by trademark owner seeking cancellation of cybersquatter’s registered domain name, cybersquatter’s motion to dismiss denied; court finds domain name to be property and “entire subject matter” of suit). Additionally, as the Panavision court recognized, “trademark law permits multiple parties to use the same mark for different classes of goods and services; however, the current organizations of the Internet permits only one use of a domain name, regardless of the goods or services offered.” 945 F.Supp. at 1302. In other words, the holder of a trademark does not own the word or words in his mark to the exclusion of all others, see Dorer v. Arel, 60 F.Supp.2d 558, 560 (E.D. Va. 1999), while the owner of a domain name does. Other differences emerge in the ways these different forms of property are valued � and how they become valuable. In some cases, “a domain name registration is valueless apart from the way it is used by the entity with rights to it,” Dorer, 60 F.Supp.2d at 561. Thus, some domain names obtain value just as trademarks do: the more valuable the underlying business, the more valuable the mark signifying it. Yet many domain names � like sex.com � “are valuable assets as domain names irrespective of any goodwill which might be attached to them” because “there is a lucrative market for certain generic or clever domain names that do not violate a trademark or other right or interest, but are otherwise extremely valuable to Internet entrepreneurs.” Id. (emphasis supplied by the court). This is because “generic or clever domain names” composed of common words will likely be easily located by search engines, and thus easily found by consumers, making whatever is being marketed at the site much more likely to be sold.\ See D. Streitfeld, On the Web, Simplest Names Can Become Priciest Addresses, Wash. Post. July 15, 1999, at p. A1; Felsher v. University of Evansville, 755 N.E.2d 589, 597 (Ind. 2001) (noting that domain name “wallstreet.com” was sold for $1 million). Finally, domain names, unlike trademarks and copyrights, possess all the traditional indicia of property. Though intangible, they are readily identifiable and segregable items, possessing intrinsic value, that are capable of being bought and sold on the open market. See Hauptman, 91 F.2d at 451; see generally Southern Pacific Co., 95 P.2d at 692 (defining property as “everything that has exchangeable value”). For all these reasons, domain names are a unique and valuable form of property, deserving of protection from the courts. B. Because They Are Uniquely Identifiable, Domain Names Are Convertible Property, And The Trial Court Below Erred When It Determined They Were Not. Conversion, historically, has not been an appropriate cause of action where the subject matter of the tort is what the district court characterized as purely intangible property, “such as �goodwill of business, trade secrets, a newspaper route, or a laundry list of customers.’” Kremen, 99 F.Supp.2d at 1172. It is to this last category that domain names should be assigned, the District Court concluded, because “a domain name is not �merged in or identified with’ a document or other tangible object,” and thus cannot be “protected intangible property.” 99 F.Supp.2d at 1173. Based on its misunderstanding of what kind of property a domain name is, the court wrongly concluded that NSI could not be liable for conversion.\ For the reasons set forth below, Kremen should be allowed to proceed to trial against NSI for conversion. 1. Conversion Occurs When a Third Party Treats Uniquely Identifiable Property as His Own. Conversion “is the wrongful exercise of dominion over the property of another.” Farmers Insurance Exchange v. Zerin, 61 Cal.Rptr.2d 707, 709 (App. 1997). The elements of conversion are: “the plaintiff’s ownership or right to possession of at the time of the conversion; the defendant’s conversion by a wrongful act or disposition of property rights; and damages.” Id. Proof of physical taking is not required. “It is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.” Id. Where, as here, a corporation has wrongfully transferred a registrant-owner’s valuable domain name to a third party, conversion is an appropriate cause of action, and Kremen’s lawsuit against Network Solutions Inc. should be allowed to go to trial. Unwarranted Interference With Another Party’s Domain Name Constitutes Conversion. In California, the gravamen of conversion is “the unwarranted interference by defendant with the dominion over the property of the plaintiff.” Poggi v. Scott, 139 P. 815, 816 (Cal. 1914). The defendant either exercised ownership rights with regard to the plaintiff’s property or he did not: “the act itself is redressable.” Id. Where absolute dominion over the subject matter cannot be determined (as, for example, would be the case with good will), or where the defendant’s wrongful behavior can be said to have interfered with the plaintiff’s dominion, rather than abrogated it (as, for example, would be the case with copyright infringement), conversion does not apply. But that is not the case here. As the trial court below correctly found, “[h]istorically, the tort of conversion [has been] confined to tangible property.” Kremen, 99 F.Supp.2d 1168 at 1172. For example, the jeweler who takes your pearl necklace and sells it to another customer has converted it. However, also correct is the fact that California courts, more recently, have expanded the coverage of the tort to encompass the “conversion of intangibles represented by documents, such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts.” Id. (emphasis supplied by the court). This would be the case where your neighbor takes the claim ticket for your pearl necklace to the jeweler, claims the pearls, and sells them. The neighbor has not converted the piece of paper bearing the receipt information; but, rather, has converted the pearls. In sum, under California law, to be “convertible property,” the property in question must be either tangible or otherwise uniquely identifiable. The expansion of the conversion tort to include intangibles occurred, in large measure, because documents or other facially valueless items serve to earmark otherwise fungible items as the identifiable property of specific owners, thus making conversion an appropriate remedy for their appropriation. See Atkins v. Gamble, 42 Cal. 86, 88 (1871) (“identity of the thing owned is the essence of all property under [California] law[;] whatever a party cannot identify as being specifically his in a court of law, he does not show to be his property”); see, e.g., Farmers Insurance Exchange v. Zerin, 61 Cal.Rptr.2d 707, 709 (App. 1997) (emphasis added; citation omitted) (“money can be the subject of an action for conversion if a specific sum capable of identification is involved”); Russell v. The Praetorians, 28 So.2d 786, 789 (Ala. 1947) (same); see generally Black’s Law Dictionary 1351 (5th ed. 1979) (emphasis added) (defining trover as: “A possessory action wherein plaintiff must show that he has either a general or special property in the thing converted and the right to its possession at the time of the alleged conversion. Such remedy lies only for wrongful appropriation of goods, chattels, or personal property which is specific enough to be identified.”) The district court’s reluctance to “extend the law of conversion” is thus misplaced. No further expansion of the law is required in order to allow Kremen’s suit for conversion to go forward, because, in fact, it is not the presence or absence of “documents” that renders intangibles convertible. Instead, logic dictates that “representation by documents” is merely shorthand for what is fundamental to a cognizable conversion suit: the presence of some method of establishing the specific identity of the thing converted, so as, in turn, to establish the right of a specific claimant to dominion over it. For, in California, there has been a remedy available for “the conversion of every species of personal property” for more than a century. See Payne v. Elliot, 54 Cal. 339, 341 (1880) (in case involving conversion of certificate of stock, certificate is but additional evidence of title, and if trover is maintainable for the certificate, there is valid reason why it is not maintainable for the thing itself that the certificate represents); Atkins, 42 Cal. at 95 (stock certificate is “but the evidence that the holder is entitled to an undivided share in the assets and business of the corporation”). See, e.g., Black’s Law Dictionary 300 (5th ed. 1979) (emphasis added) (conversion is “any unauthorized act which deprives an owner of his property permanently or for an indefinite time”). And while documents (e.g., stock certificates) serve this “identification” purpose in many circumstances, they are not necessary here, because the very essence of a domain name � the basis, in fact, for its value � is its uniqueness. Indeed, although “[d]omain names have been compared to trademarks, addresses, or telephone numbers, . . . domain names, addresses, and telephone numbers, unlike some trademarks, are unique.” Umbro, 529 S.E.2d at 82-3. The purpose of registering a domain name with NSI is to acquire “the contractual right to use a unique domain name for a specified period of time.” Id. at 86. Thus, a registered domain name is either under one’s dominion or it is not. And, as a result, registered domain names must be convertible property. 3. Because Registered Domain Names are Convertible Property, Network Solutions, Inc.’s Reckless Handling of Kremen’s Domain Name Constitutes Conversion, for Which NSI is Strictly Liable. Remarkably, Network Solutions, Inc. successfully argued in the District Court that its bungling of the registration of one of the most valuable domain names around � an act of bureaucratic recklessness that so far has cost a legitimate domain name owner millions of dollars in lost profits, lost opportunities and attorneys’ fees � should cost it nothing at all. No responsibility; no liability; no damages. This simply cannot be the law. Indeed, in California, long-settled law requires that “every one must be sure of his legal right when he invades the possession of another.” Poggi, 139 P. at 816. This is an “absolute duty,” which Network Solutions absolutely violated when it canceled Kremen’s registration of sex.com and gave the name to Cohen. Moreover, the District Court’s opinion to the contrary, Network Solutions state of mind when it handed over sex.com to the forger � acting as an accomplice, albeit unwittingly, to the conversion — is irrelevant.\ “Neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance” matter. Poggi, 135 P. at 816. See, e.g., Swim v. Wilson, 27 P. 33 (Cal. 1891) (in action for conversion, stockbroker held liable to owner for value of owner’s mining shares received for sale from person who stole them, despite fact that stockbroker acted in good faith and without notice, and paid proceeds of sale to thief, relying on thief’s claim of ownership). For more than a century, California courts have recognized that “every species of personal property,” Payne, 54 Cal. at 341, is capable of conversion. Anything — even those “things to the imagination in the light of tangible objects,” like domain names — which can be “the subject of contract, sale, gift” or which are “subject to taxation, attachment, execution, levy and sale” can be converted. Id. at 341-42. Additionally, it has recognized a strict duty on every person who holds the property of others to know, upon penalty of loss if he is wrong, for whom he acts. Swim, 27 P. at 34. Kremen’s claim for conversion must be allowed to proceed to trial. Registered Domain Names Are the Property of the Registrants. In Some Superficial Ways, Domain Names are Similar to Telephone Numbers, But The Analogy is Imperfect Because Domain Name Registrants Always Have Property Interests in Their Domain Names. At the hearing below, the District Court found merit in the contention that, “the right to use domain names �exists separate and apart from NSI’s various services . . .” 99 F. Supp.2d at 1173 n.2 (quoting Network Solutions, Inc. v. Umbro International, Inc., 529 S.E.2d, 80, 89 (Va. 2000) (Compton, J., dissenting)). This right is similar to the property interest many courts have found that businesses hold in their telephone numbers. Indeed, the First, Second and Fifth Circuits have concluded that telephone numbers are rightfully the property of subscribers because, as one court noted, “for a business[,] . . . telephone numbers constitute a unique property interest, the value of which increases as the number becomes widely known through publication in guidebooks, posting on billboards, and imprinting on publicity items.” In re Security Investment Properties, Inc., 559 F. 2d 1321, 1324 (5th Cir. 1977). See, e.g., American Express Travel Related Services Co., Inc. v. Accuweather, 105 F.3d 863 (2d Cir. 1997) (phone number “1-900-WEATHER” is property of American Express); In re Personal Computer Network, Inc., 85 B.R. 507, 509 (N.D. Ill. 1988) (telephone numbers are property of debtor). Indeed, in some superficial respects, as this Court has recognized, domain names appear to be like telephone numbers. See Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1044 (9th Cir. 1999) (“[e]ach web page has a corresponding domain address, which is an identifier somewhat analogous to a telephone number”). For example, telephone numbers, like domain names, are unique. Both assist their owners in selling their products and services by “directing customers to the company.” M. Chertok and W. Agin, Restart.Com: Identifying Securing and Maximizing the Liquidation Value of Cyber-Assets in Bankruptcy Proceedings, 8 Am. Bankr. Inst. L. Rev. 255, 278 (2000) (citing A. Mechele Dickerson, From Jeans to Genes: The Evolving Nature of Property of the Estate, 15 Bankr. L.J. 285, 304-05 (1999) (comparing worth to debtor businesses of unique domain names and telephone numbers to debtor businesses and considering effect this has on property rights in bankruptcy settings)). See In re Fontainebleau Hotel Corp., 508 F.2d 1056, 1058 (5th Cir. 1975) (noting that bankruptcy trustees for hotel had filed application to enjoin telephone company from disconnecting telephone service and beginning new service under new telephone number because “[k]eeping the present numbers is important to the hotel because it has invested substantial sums in advertising that lists the number”); Colman Transmission Systems, Inc. v. Melody, 851 F. Supp 660 (E.D. Pa. 1994) (defendants, who breached terms of franchise agreement, enjoined from further use of franchise telephone numbers, because of “potential damage to [plaintiff franchisor's] name, reputation and good will and the risk of public confusion to be engendered by the continued use of the same phone numbers in [franchisor's] advertising”); see generally Dorer, 60 F.Supp.2d at 561 (“telephone number can be . . . an extremely valuable commercial tool”). Additionally, like domain names, telephone numbers can take on secondary meaning. Several federal courts “have granted trademark protection to phone numbers that spell out a corporation’s name, trademark, or slogan.” Brookfield Communications, Inc., 174 F.3d at 1055, n.17 (citing Dial-A-Mattress Franchise Corp. v. Page, 880 F.2d 675, 677-78 (2d Cir. 1989), American Airlines, Inc. v. A 1-800-A-M-E-R-I-C-A-N Corp., 622 F. Supp. 673, 683-84 (N.D. Ill. 1985)). And, also like domain names, telephone numbers that “spell out” generic or clever words can have great value to their owners. See Dorer, 60 F. Supp. at 561, n.13 (“[f]or example, �1-800-COLLECT’ or �1-800-FLOWERS’”). But in several key respects, as commentators have noted, the analogy to telephone numbers is imperfect. First, domain names as a rule have even greater value to their owners than do telephone numbers: Unlike a telephone number, a domain name is frequently the name under which the company does business and for virtual companies, the only (or primary) means by which customers can find the entity. In addition, domain names have arguably greater utility and value than . . . telephone numbers because they are used as locators within search engines, portals and Internet computer text to draw traffic to a particular web site. M. Chertok and W. Agin, Restart.Com: Identifying Securing and Maximizing the Liquidation Value of Cyber-Assets in Bankruptcy Proceedings, 8 Am. Bankr. Inst. L. Rev. 255, 274 (2000). Second, telephone numbers are provided to customers by common carriers, subject to detailed tariffs (terms, conditions, rate structures), which, as several courts have noted, constitute the applicable law in many disputes between carriers and their customers. See, e.g., Shehi v. Southwestern Bell Telephone, 382 F.2d 627 (10th Cir. 1967); Carter v. American Telephone and Telegraph Co., 365 F.2d 486 (5th Cir. 1966); First Central Service Corp. v. Mountain Bell Telephone, 623 P.2d 1023 (N.M. Ct. App. 1981). No such tariffs apply to domain names or the Internet. Finally, many telephone company tariffs explicitly state that telephone numbers are not the property of subscribers. See e.g., In re: Best Re-Manufacturing Co., 453 F.2d 848, 849-50 (9th Cir. 1971) By comparison, most courts to have considered the issue have concluded that domain name registrants have at least a “property interest” in their domain names; while others have explicitly found domain names to be registrants’ property. See Lucent Technologies, Inc. v. Lucentsucks.com, 95 F.Supp.2d 528, 535 (E.D. Va. 2000) (“domain names are property”); see also Ford Motor Co. v. Greatdomains.com, Inc., 2001 WL 1661564 *8 (E.D. Mich. 2001) (internet auctioneer “does not transfer or receive for consideration the domain names that are sold on its website[;]” instead, “ [a]lthough it does provide a forum at which such transfers and receipts may take place, the property interests associated with each domain name remain with the person �transferring’ and pass directly to the person �receiving”" the domain name); Network Solutions, Inc. v. Clue Computing, Inc., 946 F.Supp. 858, 860 (D. Colo. 1996) (by implication) Even Where Telephone Numbers Are Not Considered the Property of Subscribers, Courts Have Held That Subscribers Cannot Be Deprived of Them Without Justifiable Cause. Thoughout the United States, the right of telephone companies to “alter numbers at will” has been held to be limited, and has not been “construed to authorize the telephone company to exercise arbitrary dominion over the number so as to cause harm and injury” to a subscriber. See Shehi v. Southwestern Bell Telephone Co., 382 F.2d 627, 630 (10th Cir. 1967) cited in Dantos v. New England Telephone & Telegraph Co., 449 A.2d 953, 955 (Vt. 1982); accord Price v. South Central Bell, 313 So.2d 184, 188 (Ala. 1975). Indeed, even where tariffs have given telephone companies the right to change subscriber’s numbers, courts have held that when “after a telephone number is given to a subscriber in business, the telephone company, without any justifiable cause, assigns the telephone number to another subscriber,” a contract has been breached, and the subscriber has remedies. See, e.g., Clayton Home Equipment Co. v. Florida Telephone Corp., 152 So.2d 203 (Fla. App. 1963), Johnson v. Southern Bell Telephone and Telegraph Co., 169 So.2d 36 (Fla. App. 1964), cited in First Central Service Corp. v. Mountain Bell Telephone, 623 P.2d 509, 512 (N.M. Ct. App. 1981). See Muskegon Agency, Inc. v. General Telephone Co., 85 N.W.2d 170 (Mich. 1957) (improper directory listing could be grounds for damages in suit brought by insurance company for lost business opportunities); Southwestern Bell Telephone Co. v. Reeves, 578 S.W.2d 795 (1979) (sustaining damage award for lost business for attorney who changed his phone number and arranged for intercept that phone company then failed to install). Certainly, the law should provide at least as much protection (and at least as many remedies) for domain name owners whose domain names are negligently � or recklessly � taken away. If Telephone Subscribers Can Maintain a Cause of Action for Breach of Contract Against Telephone Companies Who Take Away Their Telephone Numbers “Without Justifiable Cause,” Then Kremen Must Have a Cause of Action Against NSI for Taking Away His Much More Valuable Domain Name For No Cause at All. In the case below, even after the court determined the domain name “sex.com” was a form of intangible property, it nevertheless found that Kremen, its rightful owner, had no remedy whatsoever against NSI when the latter � without notice and without any justifiable cause � gave away his valuable domain name to a third party. In support of its position that it has no responsibility for the damages caused by its gross negligence with regard to “sex.com,” NSI argues that there was no contract between itself and Kremen. The basis for this argument is that, at the time Kremen registered “sex.com,” NSI did not charge money for registrations, and therefore received no payment for the registration. Kremen, 99 F. Supp.2d at 1171. As a result, the company claims, there was no consideration for the contract, and, hence, no contract. This argument is both self-serving and tautological. In California, of course, money is not the only form of consideration sufficient to support a contract. Indeed, in cases like the one now before this Court, promissory estoppel is an adequate and appropriate substitute for consideration, and should be held to apply here. For where, as here, a promise has been made “‘which the promisor should reasonably expect to induce action or forbearance on the part of the promisee . . . and which does induce such action or forbearance,’” that promise “‘is binding if injustice can only be avoided by enforcement of the promise.’” Wilson v. Los Angeles Metropolitan Transportation Authority, 1 P.3d 63, 66 (Cal. 2000) (citations omitted). At the time he registered “sex.com,” Kremen of course relied on NSI not to transfer the valuable domain name to anyone else absent his permission (or to be responsible to him for damages should it do so) and NSI reasonably should have expected him to so rely.\ Indeed, the sole purpose of registration was (and is) to obtain exclusive use of a domain name, and Kremen had every reason to believe that, having invested time and effort in registering “sex.com,” it would be his to keep until he chose to dispose of it. By means of comparison, telephone companies in California and throughout the United States have been held liable for breach of contract � even in the face of tariffs containing limitations on liability � when their failure to provide service (i.e., perform the one service customers contracted with them to perform) resulted in damage to businesses. See, e.g., Product Research Associates, 94 Cal.Rptr. at 222 (summary judgment for telephone company reversed; company could be liable for lost business suffered by plaintiff as a result of company’s failure to provide telephone service); Muskegon Agency v. General Telephone, 85 N.W.2d 170 (Mich. 1957) (telephone company liable for breach of contract for failing to assign proper telephone number in directory); Clayton Home Equipment Co. v. Florida Tel. Corp., 152 So.2d 203 (Fla. App. 1963) (plaintiffs obtained telephone number and publicized it in advertising; five months after receiving number, telephone company, without cause, assigned new number to plaintiffs’ business; court reversed dismissal of complaint, finding telephone service subscribers could not have their telephone numbers changed without just cause). In similar circumstances � with conduct far less egregious than NSI’s here � a federal court determined that plaintiff’s claim for breach of contract would likely succeed. See Kilgallen v. Network Solutions, Inc., 99 F. Supp.2d 125, 130 (D. Mass. 2000) (NSI posted plaintiff’s renewal check for domain name to wrong account and canceled plaintiff’s domain name, which was promptly registered by another subscriber; on claim for breach of contract, court concluded that plaintiff has “likelihood of success on the merits” before transferring case based on forum selection clause). NSI breached its contract with Kremen, and summary judgment in its favor on this issue should be reversed. NSI’s Reckless Handling of “sex.com” Also Gives Rise to a Cause of Action for Negligence In California, “contract law exists to enforce legally binding agreements between parties; [while] tort law is designed to vindicate social policy.” Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454, 459-60 (Cal. 1994). “Conduct amounting to a breach of contract becomes tortious only when it also violates an independent duty arising from principles of tort law.” Id. at 460. Where, as here, a party’s performance of its sole contractual duty (that is, to maintain “sex.com” as Kremen’s exclusive property) is either grossly negligent or entirely absent, a cause of action for tort can be maintained. See Eads v. Marks, 249 P.2d 257, 261 (Cal. 1952). Indeed, as California courts have recognized, “[a] contract for the performance of services . . . necessarily carries with it both the reasonable expectation and implied at law promise that it will be performed with reasonable care.” North American Chemical Co. v. Superior Court, 69 Cal.Rptr.2d 466, 478 (App. 1997) (emphasis added). “[F]or over fifty years, California [has] recognized the fundamental principle that �[a]ccompanying every contract is a common-law duty to perform with care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of contract.’” Id. at 774 (quoting Roscoe Moss Co. v. Jenkins, 130 P.2d 477 (App. 1942) (emphasis added)). This rule applies whether one is a party to the contract � or a third-party beneficiary of it. See Eads v. Marks, 249 P.2d 257, 259 (Cal. 1952) (parents’ agreement with dairy regarding placement of glass milk bottles “was made expressly for . . . benefit of their minor child, the third party beneficiary thereof,” and when agreement was breached, and child injured, parents could bring action in contract and tort on child’s behalf); The trial court’s characterization of NSI’s haphazard handling of its contractual duties toward Kremen as the innocent performance of “a purely ministerial function,” is hardly accurate. See 99 F.Supp.2d at 1173. At the very least, the NSI executive who transferred sex.com solely on the basis of a letter written by one individual he did not know to another (neither of whom was the person who originally registered the site) was grossly negligent. As a result, NSI is liable to Kremen for breach of contract and negligence, and Kremen’s causes of action against NSI on these theories should be allowed to proceed to trial. To date, NSI’s reckless disregard of Gary Kremen’s property rights has gone entirely unpunished. In California, “tort law is designed to vindicate social policy,” including, presumably, society’s disapproval of gross carelessness with the property of others. Applied Equipment Corp., 869 P.2d at 460 (citation omitted). By contrast, contract law “exists to enforce legally binding agreements between parties.” Id. at 459-60. Circumstances do not often exist where both tort and contract claims arise out of the same behavior. But the behavior of NSI here is sufficiently egregious to warrant both types of claims. For all these reasons, Amicus Curiae AIRA respectfully requests that this Court reverse the summary judgment granted to Network Solutions, Inc., and remand this case for trial on the merits. Respectfully submitted, William H. Bode, Esq. Bode & Grenier 1150 Connecticut Avenue NW Ninth Floor Washington, DC 20037 202.862.4300 Counsel for AIRA Anne R. Noble, Esq. Bode & Grenier 1150 Connecticut Avenue NW Ninth Floor Washington DC 20036 Of Counsel

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