In Kremen v. Online Classifieds, Inc. and Network Solutions, Inc. (9th Cir 2003) the Ninth Circuit Court of Appeals found that a domain name is intangible property to which the tort of conversion applies under California law, reversing the contrary decision of the District Court and opening Network Solutions to a multi-million dollar liability.
Thanks to SoCalLawBlog.com.
Gary Kremen registered the domain name "Sex.com" in 1994. Subsequently, Network Solutions transferred the name to Stephen Cohen, on the strength of a forged letter from Cohen, described by the Court of Appeals as a "con man." Cohen profitably exploited the domain name until ordered to return it to Kremen and to pay $65 million in damages. Rather than pay the judgment, Cohen went to Mexico with the fruits of his misdeeds, leading to a fugitive warrant for his arrest and a $50,000 bounty posted by Mr. Kremen.
Mr. Kremen turned his attentions to collecting his damages from Network Solutions, which was both solvent and subject to service. The parties and the District Court had no trouble agreeing that the domain name constituted property, but Network Solutions persuaded the District Court that such intangible property was not the proper subject for the tort of conversion.
The Court of Appeals discussed the Second Restatement of Torts §242 and various decisions of the courts of the State of California (in which the case arose) which found subject to the tort of conversion such intangible property as corporate stock, a customer list carried on index cards and unauthorized sale of bootleg recordings. The Court also pointed to a federal decision applying California law to domain names when the issue of jurisdiction depended upon finding the name had been converted. The Court rejected a contention that Network Solutions ought not to be be held liable in the absence of negligence, saying: