Sex.Com Announces Partial Victory in Domain Name Property Dispute; Federal Appeals Court Looks to California State Supreme Court

Jan 16, 2003, 00:00 ET from Grant Media, LLC

    SAN FRANCISCO, Jan. 16 /PRNewswire/ -- Sex.Com (
 announced pivotal results today in the pending Court decision against
 VeriSign (Nasdaq:   VRSN).  With signs pointing towards a win for Sex.Com, the
 Ninth U.S. Circuit of Appeals in San Francisco has asked the state Supreme
 Court, the final authority on California Law, to intervene and decide whether
 a domain name is property that can be converted as well as guidance to assess
 damages that might amount to $100 million.
     Attorneys for Gary Kremen, founder and chief executive officer of Sex.Com,
 said the order, which recognizes domain names as a type of property, was a
 step toward victory in the case.  The case involves Kremen, VeriSign, formerly
 Network Solutions, Inc. (NSI), and Stephen Cohen.
     VeriSign unilaterally took the Sex.Com domain name from Kremen upon
 receiving a forged letter from Cohen, asking that Sex.Com be transferred into
 his name.  Without verifying the authenticity of the letter, NSI obligingly
 transferred the Sex.Com domain name into Cohen's name, in which he proceeded
 to build a multi-million international porn empire.  Kremen produced
 definitive proof of the forgery and fraud, yet VeriSign refused to transfer
 back the registration to Kremen.
     Additionally, the U.S. Court of Appeals rejected fugitive Cohen's appeal
 to the U.S. Court of Appeals for a rehearing on the underlying issue, leaving
 only the U.S. Supreme Court for recourse.
     From the hearing in August 2002, when the U.S. Court of Appeals agreed to
 expedite oral arguments in Sex.Com's appeal against NSI, Judge Alex Kozinski
 expressed his surprise at NSI's disregard for an obvious forged letter.  "I
 mean this is really sloppy," said Kozinski to VeriSign's attorneys.
     Kremen holds NSI duly responsible for using inadequate safeguards to
 protect his property.  NSI claims that a domain name isn't property and thus,
 they are not responsible for the negligent transfer.
     During the hearing, the Judges seemed to cast doubts on VeriSign's claims
 that it's not responsible for turning the name over to Cohen without
 rudimentary authentication or verification.
     The appeals court majority noted that the state Supreme Court had ruled as
 far back as 1880 that intangible property -- represented, in that seminal
 case, by a stock certificate -- could be converted.  Judge Kosinski said in
 his written opinion that it is clear from the 1880 case and many lower-court
 rulings since then that a domain name is property that can be converted and
 thus NSI has liability.
     Judge Kozinski wrote that the Ninth Circuit should have granted Kremen a
 victory in the case, based on this legal analysis of domain names and property
 law. He wondered how VeriSign's DNS database of domain names was any different
 from a stock certificate, which he said connects an owner with some property.
 "Domain names, like corporate stock, are clear and discrete property rights.
 One who alters title to a registered domain name is fairly on notice that he
 may be affecting someone else's property," Kozinski wrote.
     Calling the issue "a new and substantial issue of state law in an arena
 that will have broad application," the three-judge panel deferred the question
 to the seven justices of the California Supreme Court.
     The final ruling could leave an indelible mark in the world of Internet
 domain registrars.  A California Supreme Court ruling in favor of Kremen could
 result in numerous lawsuits against domain registries, and, ultimately have
 the strongest impact on VeriSign, who could face a multimillion-dollar damage
 claim from Kremen.
     Kremen has been unable to collect most of the $65 million verdict from
 Cohen, but seeks to collect the balance from NSI for allowing the fraudulent
 transfer, said Kremen's lawyer, James Wagstaffe.
     Sex.Com (www .sex .com), wholly owned and operated by Grant Media, LLC, is
 the premium adult Internet search engine, receiving on average
 150,000 - 200,000 unique users and 400,000+ page-views daily.  A majority of
 the traffic is type-in adult traffic; many are first time surfers looking for
 specific adult content.  Additionally Sex.Com distributes its search results
 and banners to over 25 other search engines internationally.  Sex.Com is
 committed to maintaining a leadership position in the quality of our products
 and services.  As a result of its strong adherence to the laws and practices
 in the global Internet community, Sex.Com is able to ensure a safe, stable and
 growing online advertising environment.
     This release was issued through The Xpress Press News Service, a
 reasonably priced solution to reach reporters and media outlets using e-mail
 technology.  For more information, visit

SOURCE Grant Media, LLC