A classic case of cyber-squatting turned into a noteworthy legal and business development. While we have been of the opinion that domains can be used as collateral, this decision cements the possibility of garnishing domain names and forcing NSI under its own dispute policy to comply with a court order to sell a domain name.
Background
The judgement creditor is UMBRO International, Inc., and owner of an internationally known trademark UMBRO. The judgment debtor, a Canadian corporation and purveyor of pornographic material over the Internet, registered the domain name “umbro.com”.
The judgment creditor demanded USD$50,000.00 payable to an Internet charity and a free, unlimited supply of Umbro products to the owner of the judgement debtor in exchange for the transfer of the domain name umbro.com.
Umbro sued and obtained judgement and an award of attorney’s fees totalling USD$23,490 which it wished to collect. Umbro proceeded to obtain a writ of fi fa and also commenced garnishment proceedings to force a judicial sale of the Judgement debtor’s other domain names. NSI filed a response that it did not hold any money or garnishable property of the judgement debtor.
Law
The questions of law that follow, considered under Virginia Statute, were whether:
1. a domain name is the kind of property subject to garnishment;
2. specifically, the judgement debtor has a possessory interest in the domain name as an intangible property.
In response to the first question, the Virginia statute clearly states that a writ of fi fa is a lien on all the intangible property of the judgement debtor. With respect to the second question, NSI argued that a writ of fi fa does not apply to domain names because its registration agreement was dependant on unperformed future and continuing conditions. The court found that NSI, by its dispute policy, undertook to abide by any order and therefore its argument was immaterial. Furthermore, the court, true to fundamental property principles, held that “property can be garnished that may be subject to other liens that affect the value of the property”.
Therefore, it would be entirely possible for an Ontario court to rule with respect to a domain name garnished under the Ontario Personal Property Security Act (PPSA) or under a general security agreement. As a chose in action, an intangible form of personal property, a domain name may be subject to a security interest under, for example, the PPSA or under a general security agreement. The PPSA provides that upon default, the secured party may enforce a security interest, take possession by any method permitted by law, take possession and dispose of the collateral.