Sex.com announced today a final settlement with VeriSign (formerly Network Solutions, Inc.), concluding a six-year legal fight that set several important precedents for the future of the Internet. After the Ninth Circuit Court of Appeals granted Sex.Com a sweeping victory that held VeriSign/Network Solutions, Inc. (collectively "VeriSign") strictly responsible for mishandling the famous domain name, Sex.Com and VeriSign have settled Sex.Com's lawsuit against VeriSign.
The implications of the lawsuit are far-reaching in all areas of Internet infrastructure and governance, as well as intellectual property law. Sex.Com single-handedly caused the courts to define domain names as property, and thus changed the laws governing the World Wide Web.
"After years of litigation, the Sex.Com legal battle set the key precedent requiring domain name registrars to be accountable for their mishandling of such an important public resource as the Internet domain name system," said Robin Gross, an attorney who specializes in cyberspace law. "Now, registrars must use the same level of care as any other business and will be responsible for abusive practices," she added.
In October 1995, Stephen Michael Cohen, a many-time convicted felon, had supposedly sent a forged letter to VeriSign, requesting the transfer of the Sex.Com domain name from Kremen, the rightful owner of the name. VeriSign led the courts to believe that Cohen made this request via a forged letter. It now appears that Cohen simply picked up the phone, asked for and was granted the Sex.Com domain name immediately. This was at a time when the queue for domain names was over four weeks. VeriSign made no attempt to verify Stephen Cohen's connection to Sex.Com — of which there was none.
"It was already damaging that VeriSign had taken my domain name away from me without my permission, and refused to give it back when shown proof that it was stolen," said Gary Kremen, chief executive officer of Sex.Com. "I'm ecstatic that we have reached a settlement so we can put the case behind us and find peace in knowing that the Ninth Circuit's opinion in the Sex.Com case will have an influential role in holding Internet registrars responsible for mishandling their customers' domain name properties."
In its landmark decision, the U.S. Court of Appeals found that VeriSign was subject to the tort of conversion by not returning property that was owned by another party. Despite Kremen's written complaints with absolute proof, VeriSign did nothing to use their powers to reverse their improvident transfer.
"The decision of the Ninth Circuit was a great victory for Internet Domain Name registrants, and Mr. Kremen's perseverance in securing that decision was truly commendable," said William Bode, managing partner of the Washington, D.C. law firm, Bode & Grenier, LLP, General Counsel for the American Internet Registrants Association, and author of a friend of the court brief filed in the case. "Hundreds of domain name registrants lost their valuable property due to the negligence of Domain Name Registrars. The court's decision proclaimed that those afflicted registrants have a remedy under law to recover their damages — providing much-needed protection to Internet entrepreneurs. This ultimately will enhance Internet commerce."
Douglas Masters, a partner with Loeb & Loeb LLP in Chicago, Illinois, says, "Gary's Sex.Com victory is likely to influence legal developments in important areas beyond domain names. In this digital age, the handling of intangible property has taken on enormous importance. The 9th Circuit's decision is an important step in applying settled principles to this new realm."
Kremen was awarded a $65 million judgment against Cohen for stealing the domain name, which the U.S. Supreme Court declined to overturn on June 12, 2003.
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