Ruling Due on Effort to Seize Domain Names

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The Kentucky Court of Appeals is expected to issue a ruling soon on whether a state court can order the seizure of Internet domain names that are registered in another state or country. The appeals court is deliberating whether to uphold a lower court's approval of a Commonwealth plan to seize Internet domain names belonging to 141 online gambling sites.

Jennifer Brislin, a spokeswoman for the Kentucky Justice and Public Safety Cabinet, said that the agency sought to shut down the gambling sites last year to protect Kentucky citizens from an "illegal, unregulated and untaxed industry." The state argued that the sites promoted online gambling activities that are illegal in Kentucky.

"We think we should have the ability to exercise our laws when illegal business is being conducted inside the borders of our state," Brislin said. "Our only goal is to have these sites blocked within our borders. In no way do we want to be the owners of these domain names."

In an amicus brief filed in the appeals court, Matthew Zimmerman, senior staff attorney at the Electronic Frontier Foundation (EFF) a San Francisco-based advocacy group, called the Franklin County Circuit Court's ruling "unconstitutional and made without jurisdictional authority."

"The principle that the State of Kentucky is trying to convince the court of is that if a local jurisdiction doesn't like the content of a Web site they can issue an order forcing a domain name registrar or other intermediary " to take the site down," Zimmerman said. "One can easily imagine a repressive regime somewhere saying it doesn't like the [content] on a site, and ordering "middlemen" to take it down.

Zimmerman said that he expects the the three-judge Kentucky Court of Appeals panel to issue a ruling later this month. The lower court order has been stayed until the appeals court rules.

Judge Thomas Wingate of the state's Franklin County Circuit Court In September 2008 ordere the domain registrars of each of the 141 domains to transfer ownership to the "account of the Commonwealth' without any configuration changes.

Wingate's order was immediately challenged by lawyers representing various Web sites on the grounds that domain names are not tangible property, and thus cannot be seized by the state. The site owners also questioned whether a state court has authority over 141 domain names registered in other states.

After reviewing the challenges, Wingate in October upheld his initial order, ruling that domain names are intangible property, but can be owned, controlled, and sold like any other property. "Property is about the relationship of people with respect to things, both tangible and intangible," the judge wrote.

Wingate also ruled that the state has jurisdiction over the 141 domains because they enabled Kentucky residents to gamble withing the state's borders. Wingate also contended that because Internet domain names are essential to allowing gambling activities, they fit the state's definition of a "gambling device." He later amended the ruling to exempt online gambling sites that use filtering techniques to block residents of Kentucky from accessing them. Online casinos have argued that such filtering techniques are too costly to implement.

Anita Ramasastry, director of the Shidler Center for Law, Commerce & Technology at the University of Washington School of Law in Seattle, said the implementation of the lower court's ruling would set a dangerous precedent. Wingate's ruling is probably the first time that a court has invoked "in rem" jurisdiction over domain names, she said. In rem jurisdiction allows legal action to taken against a property itself, not against the owners of the property.

Wingate's reasoning is disturbing, said Ramasastry in a blog post about the issue. She said it remains to be seen whether the order would be enforceable, even if upheld by the appeals court, because all of the Web sites are registered outside of Kentucky. But the real concern "is the legal reasoning behind this," Ramasastry added, noting that intangible property is typically considered to be located where the registrant is located, Ramasastry said. "One state is suddenly opining and acting in a way that has implications for people all over," she said.

Zimmerman added that owners of sites not registered in Kentucky will most likely be under no legal obligation to comply with the court order. He noted that so far, it is unclear whether the affected domain registrars will test that theory, or will simply comply. Already one of the major registrars involved in the Kentucky case is believed to have indicated its willingness to comply with the courts orders and hand over the domain names as instructed, he said. Established sites will likely be tempted to follow the order for multiple reasons, such as avoiding legal hassles or potential threats to their reputations, he said.

"Strictly as a legal matter, it is not enforceable at all," Zimmerman said. "But if we are talking about domain name registrars who are willing to comply, this thing is as enforceable as they are willing to make it."

Joe Brennan, chairman of the Interactive Media Entertainment & Gaming Association (IMEGA), a Washington D.C.-based trade group, said that upholding the order would provide governments with "essentially the ultimate weapon," allowing it to curb not just on-line gambling but any other form of on-line expression. IMEGA is one several entities that have petitioned the appeals court to overturn the ruling.

He also said that many of the domain registrars involved in the case-- a majority of which are based overseas -- have indicated that they would shut down sites if the order is upheld. Some he said, have already shut down sites, he added. "This has created an awful lot of confusion."

This story, "Ruling Due on Effort to Seize Domain Names" was originally published by Computerworld.

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