news The dark side of granting “lease to own” domain sales via Afternic

[News]

Afternic is rolling out the option of offering lease to own (LTO) opportunities to potential domain buyers.
Copied from Dan.com that streamlined the process, the Afternic process appears to be a welcome option for domain investors.

Read More.

 

[Brian L.]

I feel like the risk is worth the reward. Leasing opens up so many possibilities to those with limited budgets.

 

[jberryhill]

I would instead argue that I didn't know that the lessee was a competitor of the TM owner.

Which is what every single landlord says about their property being used as a brothel, drug den, etc., in forfeiture proceedings when their property is seized for permitting their property to be used as a brothel, drug den, animal fight venue, etc..

It does not matter.

I quote from this page a lot. It would be a really good idea for folks to just read the WIPO Overview of frequent UDRP issues, because it answers 99% of the questions that people have:

https://www.wipo.int/amc/en/domains/search/overview3.0/

The "someone else was using it for something" defense is addressed here:

https://www.wipo.int/amc/en/domains/search/overview3.0/#item35

Particularly with respect to “automatically” generated pay-per-click links, panels have held that a respondent cannot disclaim responsibility for content appearing on the website associated with its domain name (nor would such links ipso facto vest the respondent with rights or legitimate interests).

Neither the fact that such links are generated by a third party such as a registrar or auction platform (or their affiliate), nor the fact that the respondent itself may not have directly profited, would by itself prevent a finding of bad faith.

That has typically come up in the context of "that's a registrar parking page - I had nothing to do with it" defense, but it would certainly apply when you agreed to allow your domain name to be used by people who you didn't even ask what they were going to do with it.

The current lessee's (mis-)use of the domain name is considered evidence of the seller's intent at the moment of registration?

Yes, it can be. The UDRP talks about bad faith in renting the domain name to a competitor. Again, if that's what happened, then without some other explanation, we assume that people intended to do the things they do.

What can the lessor do which can be used as evidence that he did care about what the domain name was going to be used for?

Well, let's see, if I had staircase.com and someone wanted to rent it from me, I might be motivated to take a look to see whether there are any uses I should specifically say won't be tolerated.

If you rent out a room through AirBNB and you don't want it to be used for underage drinking parties, what might you put in the house rules of your AirBNB rental? Hmmmm....

After the seller lease out the domain, what is precisely within his control?

Whatever the seller includes in the contract. If your contract says that the lessee shall not use the domain name to sell hot dogs and that you can terminate the lease if they sell hot dogs, then you control whether or not they sell hot dogs using the domain name.

If you don't care what they use the domain name for, then you are in the position of the seedy hotel owner who claims to have no idea what's going on in the rooms he rents out, after the fifth guy shot dead in the parking lot this month over a drug deal gone bad.

 

[jberryhill]

I feel like the risk is worth the reward. Leasing opens up so many possibilities to those with limited budgets.

That's certainly a determination one can make on a case by case basis.

Being aware of a risk and accepting it is one thing. Being unaware of a risk and finding out about it after the fact is another thing entirely.

The bottom line is that you can lose the domain name as a consequence of things the buyer does, and the Godaddy agreement structure provides you with no recourse. That is in sharp contrast to typical private contracts which hold the buyer liable for the value of the domain name in the event of loss.

And, Peter, the UDRP is just one example. If the domain name is used in some sort of criminal scheme, the domain name can be seized by law enforcement and you are not getting it back.

 

[Brian L.]

That's certainly a determination one can make on a case by case basis.

Being aware of a risk and accepting it is one thing. Being unaware of a risk and finding out about it after the fact is another thing entirely.

Very true.

 

[jberryhill]

Incidentally, I recently discussed this topic with Andrew Alleman:

https://domainnamewire.com/2023/08/21/legal-talk-ltos-brokers-dnw-podcast-449/

...and also noted that, in general, UDRP's are rare events compared to the quantity of registered domain names.

 

[Peter45]

But the terms DO NOT, anywhere I can find, state that the buyer remains liable to the seller for the value of the domain name.

I came to the same conclusion discussing with Bob H. about LTO-seller protection in DAN's LTO ToS

While this is good news for the sellers who leased their domain yesterday, currently in DAN ToS:
a) there is no mention of any penalty re damages incurred by the seller.
b) there is no mention of any indemnification to the seller.

The word indemnification is used only in regard to damages incurred by DAN.

I can't see any protection for the lessor.

This would be consistent with DAN getting integrated into the GD/AN system.

Whatever the seller includes in the contract.

In other words LTO-sellers shouldn't be shy in using that "Add additional information (non requested)" feature.

JB!

If you rent out a room through AirBNB and you don't want it to be used for underage drinking parties, what might you put in the house rules of your AirBNB rental? Hmmmm....

If you don't care what they use the domain name for, then you are in the position of the seedy hotel owner who claims to have no idea what's going on in the rooms he rents out, after the fifth guy shot dead in the parking lot this month over a drug deal gone bad.

How can one be angry and funny at the same time

 

[jberryhill]

How can one be angry and funny at the same time

I am frequently told that it is hard to tell the difference and I've started to agree with that. I am sometimes asked if I'm joking, but I'm not always completely sure myself.