August 13, 2002 3:23 PM PDT

Sex.com case turning dirty

Although it's an arcane case about property rights in the digital age, the Sex.com saga has all the trappings of a juicy pulp fiction novel: a fugitive on the lam in Mexico, would-be bounty hunters and porn.

Now justices in the 9th Circuit Court of Appeals are hoping to sort out at least one of the issues: whether domain name registrar VeriSign can be held responsible for turning the Sex.com name over to someone who sent the company a forged letter requesting the transfer.

The case offers more than a glance into the prurient world of Net porn. It could have important legal implications for companies that administer domain names, including determining the duties and liabilities for domain name registrars that handle Web addresses. In addition, the case could help settle how domain names are treated under property law.

On Tuesday, a three-judge panel heard arguments from lawyers representing Gary Kremen, the businessman who lost and then won back the rights to the sex.com domain name; VeriSign, which turned over the domain name; and Stephen Cohen, the man who tricked VeriSign into giving him the name for five years and now apparently is hiding out in Mexico.

In this phase of the legal saga, which has gone on for more than six years, the appellate judges are trying to decide VeriSign's culpability in the case.

The Sex.com name is one of the most lucrative sites on the Web because it's become a natural destination for those looking for porn. Kremen originally registered the name in 1994. Soon afterward, Cohen sent Network Solutions (which is now owned by VeriSign) a fraudulent letter authorizing the transfer of the name to him.

Kremen sued, and last year he won the name back from Cohen, but he has yet to see the $65 million in damages a judge ordered Cohen to pay him. However, the court also ruled that Kremen cannot sue VeriSign for the transfer because a domain name isn't tangible property. Now Kremen's hoping the appellate panel will overturn that ruling.

During Tuesday's hearing, the judges seemed to cast doubts on VeriSign's claims that it's not responsible for turning the name over to Cohen after receiving his forged letter.

Judge Alex Kozinski wondered how VeriSign's DNS database of domain names was any different from a stock certificate, which he said connects an owner with some property.

David Dolkas, an attorney at Gray Cary Ware & Freidenrich, the firm representing VeriSign, said that if the judges were asking "is the DNS database somehow representative of an ownership right, the answer is no."

"Why not?" Kozinski replied. "Why isn't that exactly what it is?"

Judge Margaret McKeown also grilled Dolkas, asking him if the company is claiming that it has no responsibility at all in the case.

Dolka reiterated claims that VeriSign shouldn?t be held liable, saying the database is simply a neutral translator between Web addresses and domain names.

He said a ruling against his company would "create a world of hurt," opening the floodgates for all types of suits, including contract and property claims from people whose domains are down for just a short while. Dolkas said people who feel they've been wronged in the domain name process already have a variety of private dispute resolution remedies. "There's no hole that needs to be plugged," he said.

James Wagstaffe, a Kremen attorney, argued that VeriSign broke an implied contract that gave his client ownership of the name. "They didn't do what they said they were going to do," he told the court. Wagstaffe said the whole case could have been avoided if VeriSign had simply phoned or e-mailed Kremen and asked him if he approved the transfer. "They do it now. They should have done it then," he said.

The judges will issue a ruling on the matter sometime in the coming weeks or months.

The lively court hearing also touched on a variety of other issues, including Cohen's whereabouts.

At one point, the judges chastised Cohen's attorney for his characterization of the federal judge who ruled against his client. Mike Mayock said the judge was "sucker punched" and "blindsided" by Kremen, an assertion that didn't go over well with the judges.

"You're really standing there telling us he's a fool?" wondered an incredulous Kozinski. "I don't think it's appropriate for you to call a district judge a sucker."

Meanwhile, Kremen said he's planning to reinstate a $50,000 bounty he offered last year for information leading to Cohen's arrest. Cohen apparently fled to Mexico and has failed to appear at several court hearings.

 

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