Background
Sex.com was originally registered by Gary Kremen of San
Francisco in 1994. At that time there was no charge for registering
a domain name. The following year, Stephen Cohen, fresh out of
prison for a crime of impersonating a bankruptcy lawyer, took the
name from Kremen.
Cohen then ran a highly profitable porn portal – reputedly
taking monthly revenues of $500,000 – until November 2000 when a
court awarded Kremen the return of the domain name
At first it was reported that Cohen had obtained the name by
sending a forged letter of transfer to Network Solutions (which
subsequently became part of VeriSign). It was also reported that
the court returned the name to Kremen after finding that the forged
signature on the letter to Network Solutions misspelled the name of
the purported signatory.
Kremen's company yesterday claimed that "VeriSign led the courts
to believe" that Cohen made the request by a forged letter, but
said: "It now appears that Cohen simply picked up the phone, asked
for and was granted the sex.com domain name immediately."
The company's statement added that "VeriSign made no attempt to
verify Stephen Cohen's connection to Sex.com – of which there was
none."
A Californian district court ordered Cohen to pay the sum of $65
million in damages to Kremen. Cohen has to date paid nothing and
failed to appear at several court hearings.
Instead, Kremen has acquired only Cohen's former mansion in
Santa Fe, California, supporting himself on his share of Sex.com's
monthly revenues – last year reported at $300,000. Despite Kremen
offering a $50,000 bounty for the capture of Cohen, the ex-convict
has never been caught. He was last seen in Tijuana, Mexico.
Kremen then sought to recover damages from the registrar for the
unauthorised transfer. His case was initially dismissed by a
district court, but in July last year he enjoyed a triumphant
appeal on a crucial legal point.
The ruling
Kremen had argued in court that Network Solutions was liable for
breach of an implied contract. But in US law, as in English law,
some consideration is a necessary part of a contract and, because
Kremen's registration in 1994 was free, the court agreed with
Network Solutions that he could not claim breach of contract.
(Incidentally, this is not true of Scots law, where no
consideration is necessary to form a contract.)
But Kremen had another argument: that Network Solutions had
committed a legal wrong known as "conversion" under US property law
– which requires showing "ownership or right to possession of
property, wrongful disposition of the property right and
damages."
Network Solutions had successfully argued in a lower court that
the domain name was intangible property "to which the tort of
conversion does not apply." But this was where the US Court of
Appeals for the 9th Circuit disagreed: domain names, it reasoned,
are a type of intangible property to which the tort of conversion
can apply.
It was therefore open for Kremen to succeed against VeriSign
and, with the case due in court in a few weeks, the dispute has
finally settled. Details of the settlement have not been disclosed
but according to CNET News.com the figure amounts to more than $15
million.
"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 yesterday.
"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."
Cohen continues to serve as CEO of Sex.com, which is wholly
owned and operated by Grant Media LLC. Together with
GalaxySearch.com, its non-adult companion search engine, the sites
receive 25 million search queries every day and more than 150,000
unique users ever day.
