WASHINGTON — What if China seized the domain names of U.S. Web sites promoting religions that China bans? Or what if (horrors of horrors!) Nebraska seized and shut down the domain name law.com because its cutting-edge legal content, that state believed, encourages frivolous litigation in violation of state law?
Preposterous, right? Well, not so incredible as to stop a battery of lawyers for Internet businesses, domain registrars, civil liberties groups and others from engaging the state of Kentucky in legal battle over that state’s attempt to halt Internet gambling by seizing 141 domain names whose owners are located primarily out of state or overseas.
Kentucky, which prohibits online gambling, persuaded a state trial judge last fall that the domain names were illegal gambling devices under state law, and the judge issued the forfeiture order to registrars — not owners — of the domain names. An intermediate appellate court recently disagreed, 2-1, and the state government late last month filed its notice of appeal with the Kentucky Supreme Court. Vicsbingo.com and Interactive Gaming Council v. Wingate and Kentucky, No. 2008-CA-2036.
As it heads into the state high court, Kentucky sees even odds: Two judges have agreed with its approach and two have disagreed, said Michael Brown, secretary of the Kentucky Justice and Public Safety Cabinet, who, along with Governor Steve Beshear, is leading the state’s effort.
But there is nothing “even” about the impact on Internet businesses if Kentucky’s legal approach prevails, say its opponents.
“I think it would make the lay of the land very uncertain for Internet businesses,” said John Krieger, a partner in the Las Vegas office of Phoenix-based Lewis and Roca, and counsel to the Poker Players Alliance, which filed an amicus brief opposing Kentucky.
The whole idea behind the law, he said, is to try to make it clear enough so businesses can structure their conduct accordingly and see the legal ramifications of their actions.
“If Kentucky were able to go ahead, it certainly would make it much more uncertain for Internet businesses as to what conduct they could engage in and what jurisdiction and laws they would be subject to,” he added. “It opens up a Pandora’s box.”
And it is a box with national and international implications, said A. Jeff Ifrah, shareholder in the Washington office of Greenberg Traurig, who, along with Bruce Clark and Ian Ramsey, Kentucky partners at Stites & Harbison, is counsel to the Interactive Gaming Council, whose members include about 60 owners of the 141 domain names at issues.
“The long-term consequence is you could have any state official on a Web-site-by-Web-site basis making moral or other determinations as to whether they believe their residents should have access,” he said. “That’s a First Amendment issue, a dormant commerce clause issue and an anyone-in-the-Internet business issue.”
Case of first impression
The Kentucky litigation, according to Krieger and others, is the first of its kind. The state’s move to get a court order demanding forfeiture of the domain names mobilized strong reaction from associations and trade groups that represent the registrars of those domain names as well as from civil liberties groups such as the Center for Democracy and Technology (CDT), the Electronic Frontier Foundation and the American Civil Liberties Union.
“No state that I know of has kind of gone down this path of trying to use domain names to control something on the Internet,” said John Morris, general counsel of the CDT. “There are lots of problems, putting aside the really big picture of free speech and censorship. Although there are certainly areas like protecting privacy that state governments are well suited to help in the process of addressing content on the Internet, in most areas, the Internet is really like the interstate highway system. A particular state shouldn’t require all trucks driving through the state to use a different size tire than other states.”
Although the Kentucky litigation raises a number of constitutional and other legal questions, the core concern for Internet business owners is the jurisdictional issue.
Does a state court have the authority or power to seize domain names when none of the domain owners is present in the state and all of the names are registered outside of the state?
In one of several unusual twists to the Kentucky case, the state sought a civil forfeiture pursuant to a criminal statute — domain names are illegal gambling devices — when there had been no conviction. The state attorney general is not representing Kentucky and, in fact, opposed being joined in the litigation. Instead, the governor sought and hired private counsel to pursue the litigation on a contingency fee basis.
D. Eric Lycan and William H. May of Lexington, Ky.’s Hurt, Crosbie & May, who represent the state and did not return calls for comment, argued that the court had in rem jurisdiction — jurisdiction based on the location of the property.
But that raised an issue that some courts have struggled with and divided over in recent years: Are domain names “property”?
There have been a few cases where domain names have been treated as property, primarily in the trademark context, but the law is clearly unsettled on that point, said David Sorkin of The John Marshall Law School Center for Information Technology and Privacy Law in Chicago.
Domain names are “primarily just sites that link to or advertise other offshore gambling sites,” he said. “Really just what they’re doing is referral — not engaging in gambling with Kentucky residents or receiving money.”
A domain name is an alphanumeric text representation — often a word — that identifies an Internet address, making it easier to remember, said Greenberg’s Ifrah.
Network Solutions LLC, one of the world’s largest registrars of domain names — including more than 20 of the 141 at issue in the Kentucky case — argued in an amicus brief that domain names were neither property nor gambling devices. The majority of courts to have considered the question have found they are not property, it claimed.
Domain names are essentially addresses and entail only contract, not property, rights, the amicus brief said.
“A domain name does not come into existence until there is a registration agreement,” argued Michael R. Mazzoli of Louisville’s Cox & Mazzoli. “It ceases to exist when the registration agreement [with the owner] terminates or otherwise so provides. It cannot be seized or forfeited.”
There also are significant distinctions between a domain name and a device, added Ifrah. “Seizing a domain name doesn’t seize the content stored on a server overseas. You’re only seizing the numerical equivalent to sportsbook.com, not the content behind the Web site.”
Nonetheless the trial court concluded that domain names were intangible property, like patents, and the judge noted several similarly decided cases, including a 2003 decision by the 9th U.S. Circuit Court of Appeals.
But was that property located in Kentucky?
The state’s lawyers said that the domain owners and operators ran “massive, illegal gambling enterprises” inside Kentucky and established sufficient minimum contacts with the state. By their use of domain names — “devices to operate these enterprises” — Lycan, the state’s lawyer, said the domain names have sufficient minimum contacts with Kentucky to subject themselves to in rem jurisdiction.
The trial judge ruled that the 141 domain names “transport the virtual premises of the Internet gambling casino inside the houses of Kentucky residents, and are not providing information and advertising only. The Defendants['] 141 Domain Names perform a critical role in creating and maintaining connection by way of the various interfaces to transact a game or play.” Based on that, the court concluded, the operators and domain names are “present” in Kentucky and the domain names are gambling devices.
But on Jan. 22, the Kentucky Court of Appeals overturned the trial court in a decision that focused narrowly on whether domain names fit the definition of “gambling devices” under the state law.
“It stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a ‘machine or any mechanical or other device . . . designed and manufactured primarily for use in connection with gambling,’ ” Judge Michelle Keller wrote in the majority opinion.
As the case heads into the Kentucky Supreme Court, those watching it closely predict that Kentucky’s appeal will focus primarily on the intermediate appellate court’s statutory interpretation of “gambling device” and its ruling that domain names are not covered.
The state high court could base a ruling on that issue alone and not reach the constitutional issues, they said, or it may be drawn into the jurisdictional question as well.
Not the end of the story
“I think in this case, ultimately, even if the state here won in the sense that the forfeiture order was proper, it isn’t the end of the story,” said Matthew Zimmerman, senior staff attorney with the Electronic Frontier Foundation. “Another important part of this story is the role of third-party intermediaries that make Internet discourse possible.”
In the Kentucky case, he said, the forfeiture orders were not sent to the domain owner-operators, but to the domain name registrars — the companies with which the owners register the domain name. “This underscores a larger problem — if you’re trying to silence speech or activity on the Internet, it has occurred to litigants to go to the middlemen or chokepoints, not the one you have a dispute with,” he said. “Kentucky finds it difficult to get after the people it doesn’t like, so it flays around to find someone it can hold responsible.”
Lewis and Roca’s Krieger agreed, saying that Kentucky’s use of the forfeiture process was an attempt to get the domain name owners to appear at the forfeiture hearing.
“There were marshals at the hearing, and I have no doubt, if they had shown up, they would have been arrested,” he said.
The owners did not appear, and the jurisdictional battle was joined.