Virginia Court Says Domain Names Are Not Property

Legal Issues

from the so-can-they-be-seized? dept

There’s an interesting blog post by Venkat Balasubramani about a little noticed ruling in Virginia from last year concerning a bankruptcy proceeding, which came to the conclusion that domain names are not property, but rather a contractual right. The ruling is somewhat specific to the bankruptcy context, but basically says that phone numbers and domain names are not really property:

Although the Fourth Circuit has not specifically addressed this issue, it is well-settled that the contours of the property interests assumed by the trustee are determined by state law…. Accordingly, Appellant cites the Virginia Supreme Court’s relatively recent decision in Network Solutions, Inc. v. Umbro International, Inc. for the proposition that a judgment debtor has no property right in its telephone numbers and web address. In Network Solutions, the Virginia Supreme Court held that a web address and telephone number could not be garnished by a judgment creditor because the debtor lacked a property interest in them… (stating that “a domain name registrant acquires the contractual right to use a unique domain name for a specified period of time” and that a domain name is not personal property, but rather “the product of a contract for services”).

In the absence of controlling Fourth Circuit precedent, this Court refers to Network Solutions to define a debtor’s property interest in its web address and telephone numbers in Virginia. Although ACG argues that Network Solutions is distinguishable because it relates to a garnishment proceeding rather than a bankruptcy, the garnishment context does not change the Network Solutions court’s holding that the use of a domain name is a “contractual right” that does “not exist separate and apart from [the provider]’s services that make the domain names operational Internet addresses.” … While telephone numbers and web addresses are important branding tools and certainly have value to those who use them, that subjective value does not equate to ownership under Virginia law. The Virginia Supreme Court confirmed in Network Solutions that neither telephone numbers nor domain names were wgarnishable personal property because “neither one exists separate from its respective service that created it.” … Therefore, because Virginia does not recognize an ownership interest in telephone numbers and web addresses, neither were property of Alexandria International’s estate and neither were subject to sale by the trustee (nor would they be subject to sale in any future proceeding).

Venkat looks at what this means from a bankruptcy context and concludes probably not that much… But I’m wondering what it means when it comes to domain name seizures done by Homeland Security and its ICE division. Those were all based on laws concerning the ability to seize property supposedly used in the commission of a crime. Yet… if domains aren’t property, can they be seized in this manner? While this ruling only applies to the state of Virginia, since .coms are registered via VeriSign, and VeriSign is based in Virginia, an argument can be made that all .coms are not “property” under this ruling. That, potentially, leads to a whole host of other problems, so I wouldn’t jump to the conclusion that this is automatically a good thing. But it conceivably leads to another way for cites that are seized by the US government to fight back.

Filed Under: bankruptcy, domain names, property, virginia