legal Heidi Powell Update

[jberryhill]

Incidentally, for those interested in the Heidi Powell case, the Washington Heidi Powell is now arguing most strenuously that domain names ARE NOT property (see attached brief).

There seemed to be some upset when I mentioned previously that this is the best argument for her.

 

[Addison]

A precedent that could have a profound affect on all of us.

John, you have my gratitude for keeping us informed!

 

[Silentptnr]

Incidentally, for those interested in the Heidi Powell case, the Washington Heidi Powell is now arguing most strenuously that domain names ARE NOT property (see attached brief).

There seemed to be some upset when I mentioned previously that this is the best argument for her.

What outcome do you predict in this matter. Certainly you might refrain from making a prediction, but do you think this latest position of the debtor is valid?

 

[Keith]

I'm of the belief that domains are property but the holder is the only person that can determine the ultimate value. In this case let's call it a $5 million dollar domain. Is the imposter going to pay?

If they're not property then there's no case here...

I once bought a domain, Summerhill.com, which was auctioned as a bankruptcy asset. At the very least you'd expect the market to decide the real value, not a trustee who has zero experience in the domain space.

 

[Cdomains]

Incidentally, for those interested in the Heidi Powell case, the Washington Heidi Powell is now arguing most strenuously that domain names ARE NOT property (see attached brief).

So, @jberryhill , how will this impact us as domain investors, if she is successful, and domains are deemed "not property"?

What are the consequences for us if the opposite is true?

Thanks.

 

[168]

I would assume it would depend on which state is ruling
I came across this in 2014
see below
this may give Gma Heidi some legs in her defense.

Virginia Court Says Domain Names Are Not Property
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 otherproblems, 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.

 

[clasione]

I feel this response to the court on Grandma Heidi's behalf looks very good and very strong. Great that you posted it. Fantastic in fact,.

 

[168]

Some interesting points of view on contractual rights v property status

1. “a domain name that is not a trademark arguably entails only contract, not property rights.”

So, If one obtains a TM associated with the domain then does one gain intellectual property rights thus gaining greater legal protections thus transmuted to intellectual "property status" "encumbering" the contractual right of the domain which violates the agreement between registry and registrant?

If a TM is an enhancement of intellectual property rights how could any claim based on a TM be valid if all domains are subject to contractual rights only?

Should "confusingly similar" be irrelevant in UDRP cases and domains only subject to "confusingly similar" use?
That would be a win for domain investors.
"You shall not in any way transfer or purport to transfer a proprietary right in any domain name registration or grant or purport to grant as security or in any other manner encumber or purport to encumber a domain name registration.”

2. "contractual rights. The right to use the domain name only lasts for the duration of the contract and only exists as a result of the contract. Each subsequent contract ends, and is superseded by a new contract, which grants the limited rights to the domain name for another period of time. Without the contract, all rights to the domain name cease".

I don't see the difference between the above and real property rights.

The right to use, "own" real property only lasts as long as you pay yearly property taxes and only exists because you agree to pay yearly property taxes. This grants the "land owner" limited rights to the use of the land for another period of time. Without paying the property taxes all rights to the real property cease.
Isn't this the same as the "contractual rights" except these rights can be encumbered?

3.The result of this last comment should be interesting as well.
It will be important to know how a domain should be listed in a bankruptcy

"Whether that executory contract should have been identified in the 2012 Petition and whether any value can be exempted are dealt with in a separate reply and response".

Why should it be listed if the executory contract is 1yr reg fee in most cases 30 dollars or less and it's not recognized as a real property or intellectual property asset for determining value ?

 

[platey]

I know nothing lol

But allegedly the domain is not for sale

And that should be the end of the matter I'd have thought

Or if the owner wants to sell?

Why not put a $50m price tag on it and see if a buyer wants to buy it then

Prices have increased significantly in the last few years

Banks lend against property?

Take the domain down to a bank and see if they recognise the domain as being property? If you and if the bank recognises the domain as property etc then the bank would obviously be more than willing to lend against the domain
(it being property) and etc and if they don't lend against the domain as they don't view it as property that should decide whether the domain is property or not

I wouldn't be surprised if a big cheese in the domain industry doesn't offer to defend this domain on principle free of fees

 

[Addison]

Crucial points of relevance:

if you want domain names to be property, then they are subject to assignment in divorce, various liens, bankruptcy, and property tax. If you are "buying" them from registrars, then you are also rooting for the payment of sales tax.

one of my pet peeves - the irrational insistence by some domainers that domain names should be "property" instead of personal service contract rights. Quite a few states, Virginia being a prominent example, do not consider domain names to be attachable property in bankruptcy. I don't know whether that's the case in Washington, and the trustee in his withdrawal motion, noted that the status of a domain name as property is unclear.

From [GoDaddy's] Domain Registration TOS:
Ownership. You acknowledge and agree that registration of a domain name does not create any proprietary right for you, the registrar, or any other person in the name used as a domain name or the domain name registration and that the entry of a domain name in the Registry shall not be construed as evidence or ownership of the domain name registered as a domain name. You shall not in any way transfer or purport to transfer a proprietary right in any domain name registration or grant or purport to grant as security or in any other manner encumber or purport to encumber a domain name registration.

(Emphasis added to emphasize the emphasized by emphasizing.)

 

[Addison]

For the pedants, those three quotes are from Defend HeidiPowell.com

 

[platey]

If the domain was owned by a big company who had a few quid and didn't mind throwing a few million quid at the best lawyers to keep the name on principal i reckon the name would stay with the original owner

The problem is that when anyone uses lawyers to argue usually the fees become so astronomical that usually the side than cannot afford to continue paying the ever increasing fees tends to lose irrespective of whether they should have won the case or not

Reminds me a bit like a card came where the winner might not have the best hand but as long as they have enough $'s to keep raising the stakes so as to not allow the other player to see their cards they will win etc unless the opponent with 4 aces can afford to match and raise considerably consistently they will lose

The only winners here are the lawyers

 

[jideofor]

On a more serious note, the panel of judges can't tell me that they lack common sense to handle this issue. This is something simple but greed for the money wouldn't let them do what is right. They know who own the domain name and yet, they want to frustrate the rightful owner to hand over to a thief.

I have watch this happen over time and I think WIPO or UDRP has been largely compromised, a panel of criminals who only answer to the highest bidder when the need arises.

 

[platey]

The deal to be done is this

But it would need a huge dollop of common sense by all concerned to be achieved

The person wanting the domain pay all legal fees both sides and present a blank cheque to person who currently owns the domain with A limit of 7 figures in compo in exchange for the domain name

That way the legal battle ends the person wanting the domain gets the domain but the person who currently has domain would have to hand the domain over but would be free of existing legal fees and have a good few quid to enjoy The happy retirement and the sought after domain would recoup some of the settlement costs

Time is always more important than money and would be enjoyed more with a few quid

That way all parties would get what they want with the exception of not keeping the domain but would be compensated for that loss

The alternative to this is even more expensive Legal fees and more arguing hatred and anger which will solve nothing but have a detrimental affect on health

 

[Addison]

Emphasis added to the provocative portions.

Steve says
MARCH 16, 2017 AT 8:33 PM

The ramifications due to the decision can be significant:

• Estate planning/disputes
• Bankruptcy proceedings
• Seizure of assets by parties (the leading cause of bankruptcies in the USA is “medical poverty” — will healthcare groups become the holders of “distressed” domains?

Crossover between domains as property and Frank Schilling's scathing decisions at Uniregistry:

William
March 8th, 2017 at 12:27 pm

The current debate about whether domains are property that can be owned or contracts for service raise some interesting questions regarding the price increase. If the courts decide domains are a contract for service, the service provider can simply charge whatever they want. But if registering a domain name creates an ownership relationship between the domain registrant and the domain name, I wonder if by selling something under the guise of a low renewal and then changing it after the fact couldn’t be considered operating in bad faith.

Imagine buying a house from an HOA with a monthly fee to the HOA of 100 a month and then having them raise the price to 1000 a month after the first year. I’m not an attorney but it seems like this would trip some consumer protection laws.

kd
In reply to William | March 8th, 2017 at 1:32 pm

William – very interesting points/questions you bring up! I wholeheartedly agree. If someone gave me a house for $100 a month, and when they gave it to me there was nothing stated about ridiculous price increases, but then all of a sudden that price jumps to $3,000 a month in the next year after I moved there, setup residence, changed my address… That does not seem just unethical, but could be borderline illegal depending on where you live and the laws surrounding this. I mean, who is to say it was not bad faith on the Neighborhood Association’s part? Who is to say that this was not ploy to get a bunch of people to move into this specific neighborhood? Even more, if I’m in a neighborhood where the prices rose, and the next neighborhood over is owned by the very same Neighborhood Association and their prices do not rise – this is totally an issue! If I were a registrar I would disassociate myself with such future problems and bad actors in the nTLD community.

I’m shocked Frank / Uniregistry / North Sound Names took this approach.

 

[TRY]

Source - heidipowell.com
Another update yesterday:
the Trustee filed a request to change the hearing date to July 12, 2017. His reasoning for requesting a continuance is his need for time to review the declarations we filed on June 7, 2017 which were filed in response to his motion to sell my domain name and contract with Godaddy.

 

[platey]

It won't be long before this case involves godaddy if it continues much further which could be interesting because gd could quite easily resolve this matter by buying the name by outbidding and leasing it back

 

[cooljub]

Hopefully justice will prevail over greed and when the dust settles Heidi can keep the name. As I understand, at the time she went bankrupt the name was not considered valuable, so wouldn't have to be declared as an asset. If it takes on some value after she's discharged, then good luck to her. She's done nothing wrong there. The other Heidi should be happy with her .net - a great ranking cool extension that, monetary value aside, in my opinion suits a lifestyle site better anyway. She's acting like a spoiled brat who can't have what she wants.

Looks like the case is in court again today -
https://www.heidipowell.com/#LegalStatusHistory

 

[clasione]

Hopefully justice will prevail over greed and when the dust settles Heidi can keep the name. She's [Arizona Heidi] acting like a spoiled brat who can't have what she wants.

Well said.

 

[Gaptooth]

I'm sad to report that the same judge who decided to sell her my name has denied our motion to obtain a Stay. A stay would have stopped the sale waiting for an appeal decision. Without the stay there is no point to an appeal as the sale will take place without the ability to get it back should we win on appeal. In place of a stay the trustee has requested a $20K bond as insurance if we lose on appeal (to stop the sale while appealing) to protect his interests should she walk away during the appeal process. The bonding company requires a $20K letter of credit to cover it. People who have gone through bankruptcy can't get a letter of credit. Unless there is a miracle by Monday it's gone.