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Gary Kremen, the original owner of the Sex.com Web site, has won the right to sue VeriSign's Network Solutions division because it transferred ownership of the site to a con man without verifying the transfer with Kremen.

The ruling, which was issued July 25 by the Ninth U.S. Circuit Court of Appeals in San Francisco, reverses a trial court decision that said VeriSign wasn't liable in the dispute because a domain name was "intangible property."

In this decision, a panel of three judges disagreed with the trial court decision, saying that a Web address is indeed property and that VeriSign should be held liable for giving it away without Kremen's permission.

"Like other forms of property, domain names are valued, bought and sold, often for millions of dollars," Judge Alex Kozinski wrote on behalf of the panel of judges. "Exposing Network Solutions to liability when it gives away a registrant's domain name on the basis of a forged letter is no different from holding a corporation liable when it gives away someone's shares under the same circumstances. The common law does not stand idle while people give away the property of others."

Domain Debacle

The case originated in 1995 when Stephen Cohen sent a forged letter to registrar Network Solutions, which VeriSign purchased in 2000, requesting that the Sex.com domain be transferred to his name. Network Solutions transferred the domain without verifying the move with Kremen, and Cohen proceeded to build a thriving pornography business around the popular domain.

Kremen sued Cohen in 1998 for the unlawful conversion of his property, although courts have generally held that under the tort of conversion, property must be tangible.

The U.S. District Court for the Northern District of California ordered the domain name returned to Kremen in 2001 and hit Cohen with a $65 million judgment. The court rejected Kremen's claim against VeriSign, however, so he appealed that decision.

Cohen fled the country, and Kremen wasn't able to collect the money from him, so Kremen went after VeriSign. But VeriSign claimed that a domain name wasn't property and that therefore it wasn't responsible for the transfer, according to Sex.com.

A VeriSign spokesperson said the company doesn't comment on ongoing litigation.

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