The Ninth Circuit issued an interesting ruling last week regarding the ownership and status of a domain name as property. In Office Depot, Inc. v. Zuccarini, ___ F.3d ___, Feb. 26, 2010, the Ninth Circuit ruled that a judgment creditor can levy a domain name of a judgment debtor to satisfy his judgment. This ruling was interesting for a couple of reasons. First was the location where the domain name can be levied, and second the facts of the case make the result somewhat ironic.
John Zuccarini registered hundreds of domain names incorporating the trademarks owned by others, one of which was “officedepot.com.” Office Depot sued Zuccarini under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d). The ACPA protects trademark owners from persons who register their marks as domain names in bad faith, seeking to profit financially from having the mark owner’s domain. Apparently that’s what Zuccarini did, and Office Depot obtained a judgment against him. Unfortunately for Office Depot, it was unable to collect on the judgment and assigned the judgment to DS Holdings (“DSH”). DSH got creative it its attempt to collect on the judgment.
First, DSH registered the judgment in the Northern District of California and obtained a preservation order from the district court. DSH sought to levy some of the other 250 domain names Zuccarini had registered with VeriSign, a domain name registry located within the Northern District. DSH then asked the district court to order VeriSign to transfer ownership of the domain names to it. However, the district court could not grant that request because the state statute at issue, California Civil Procedure Code Section 699.040 did not permit a court to order a third party to transfer property held by a third party. DSH then sought to have a receiver appointed to take possession of the domain names. The district court agreed to appoint a receiver to take possession of the domain names rather than have them transferred directly to DSH.
The Ninth Circuit affirmed the district court. The Court agreed that while the domain names were intangible, they were “property” and as such were subject to levy. The Court also found that the Northern District was a proper court because that is the district in which the registry holder, VeriSign, resided. The district court therefore had “type two quasi in rem” jurisdiction over the matter, which is a fancy way of saying that’s where the property is. Thus, the court recognized that for at least these purposes, the domain name “is” where the registry (or the registrar) is. In reaching this conclusion, the Ninth Circuit noted that the ACPA provided for in rem jurisdiction for the domain name in the district in which the registry or the registrar resides.
On one level, then, the decision seems to offer an alternative to a judgment creditor seeking to collect on the judgment: levy on the domain names the judgment debtor owns, even if the litigation had nothing to do with the domain name. However, for many judgment debtors, the domain names, if any, will not be worth enough to justify the trouble and expense of having a receiver appointed to take possession of and sell the domain names. If the domain names are commercially valuable, however, the effort might be worth it.
That leads to the second reason the decision is interesting. The result of the Ninth Circuit’s ruling is that DSH received the domain names that Zuccarini owned. It could then sell the domain names to try to satisfy the judgment. But doesn’t that seem wrong? Zuccarini has been found liable under several ACPA claims for bad faith ownership of domain names because his purpose in registering them was to sell them to trademark owners to profit financially. He registered hundreds of domain names either the same as or similar to the domain names of trademark owners. So now DSH owns those domains and it acquired them in order to sell them to any interested buyer, and presumably the trademark owner would have the most incentive to buy the domain.
The question is why wouldn’t the offering for sale by the judgment creditor also be a violation of the ACPA? This situation might not meet the definition of bad faith in the same way as Zuccarini, but in the end it’s the same result. Someone owns the domain name that is the same or similar to the mark owned by a trademark owner and seeks to sell it for a profit. The only value the domain name holds for the judgment creditor is the likelihood that the trademark owner will buy it. Wouldn’t it be ironic if the method approved by the Ninth Circuit for collecting on a judgment led to another ACPA lawsuit, this time against the judgment creditor? We’ll have to see if that happens.