Kentucky Persuades Court to Seize Domains

Sedo's General Counsel, Jeremiah Johnston, responds on behalf of the ICA

By Elizabeth Oliveira, Legal Team

On October 16, 2008 the Kentucky Circuit Court for Franklin County ordered the seizure of 141 domain names, forcing registrars to forfeit the registrations of these domains to the state of Kentucky. This order was the result of the Circuit Court’s holding that internet domain names are a form of physical property located within the state and therefore subject to in rem jurisdiction of the courts. Though currently on appeal, the courts decision in this case could have a serious negative impact on all domain owners due to its sweeping expansion of jurisdiction. The good news is that, many in the internet and domain industry believe that the ruling will not stand upon review by the Court of Appeals.

The key to this case is the court’s determination that domain names are a form of intangible property. In making this determination the court relied on a prior court decision which held that domain names are to be governed by property law. As such, the Kentucky court was not only able to acquire jurisdiction over the domain names themselves, but also able to issue a seizure order for the domains under Kentucky’s anti-gambling laws.

In rem jurisdiction provides a court with the power to exercise its authority over property if that property is the subject of the action and the court is unable to acquire jurisdiction by any other means. In this case neither the registrars nor the domain owners were located in the state of Kentucky. Nevertheless, the court stated that because the gambling websites were accessible to persons located in the state of Kentucky and allowed these persons to create accounts and purchase gambling credits, as such, these domains were clearly present in the state and therefore could be subjected to the courts in rem jurisdiction.

In addition, Kentucky law contains a statute which provides that Kentucky’s “gambling devices” are subject to forfeiture. The statute defines a “gambling device” as a tangible device manufactured and designed specifically for gambling. Even though the court determined that domains were a form of intangible, not tangible, property they held that the intent of the statute was to prevent illegal gambling and that in upholding the intent of the law, the domains offering gambling services were “gambling devises” that were subject to seizure under Kentucky law.

Many internet free speech and civil liberties organizations have intervened in this case and urged that the Kentucky courts decision be overturned based on an alleged violation of a number of constitutional rights. Further, these organizations emphasize the danger that could result if a state court can order the seizure of domains regardless of where they are registered. These organizations argue that if the Kentucky ruling stands, it is possible that courts all over the world could simply seize a domain if its content in some way violates a local law regardless of whether the content is legal in every other country around the world. This international accessibility of a website is certainly a factor that was not given proper consideration at the lower court level.

 

Sedo's General Counsel, Jeremiah Johnston represents Sedo as a founding member of the Internet Commerce Association (ICA) and sits on the Board of Directors in the role of association president, helping to shape the future of domain names in the political space. With regards to the Kentucky case, Johnston responded by stating,

“The Internet Commerce Association is aware of the extreme concern of ICA members regarding the seizure of 141 gaming related domain names. It appears that there may be no statutory basis for this unprecedented action, that Kentucky may lack sufficient jurisdictional grounds and that it also may violate the Commerce Clause of the US Constitution.The ICA intends to immediately investigate this matter, including outreach to affected ICA members as well as to those registrars subject to the Kentucky order. Once we have gathered additional information, the Board will consider further appropriate action to confront this dangerous precedent.”

Update: The Kentuck Online Gambling case resumes today, Dec. 12th, and we’ll be monitoring the results. The future of this case is now left in the hands of the Court of Appeals.