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Apr 17, 2001 4:57 pm PST

Sex sells, so the domain name Sex.com has considerable value. Indeed, in what is believed to be the largest domain name award ever, a federal judge in San Jose on April 3 ordered the former owner of Sex.com to pay $40 million in compensatory damages and an additional $25 million in punitive damages to the person who originally registered the domain name.
As the story goes, Gary Kremen registered Sex.com with Network Solutions Inc. in 1994 but did nothing specific with the domain name. According to Kremen's lawsuit, Stephen Cohen obtained the domain name from Network Solutions in 1995 based on a forged letter.
Cohen argued in his defense that he properly bought the domain name for $1,000. He also alleged that he had trademark protection for Sex.com, based on an online bulletin board system he had run previously.
Federal District Court Judge James Ware sided with Kremen and several months ago ordered the return of the domain name to him.
The judge also ordered an accounting of the financial operations of the Sex.com Web site; required the placement of $25 million, to be held by the court until both a final judgment and full assessment of damages occurred; and prohibited Cohen from selling or transferring assets related to the Web site.
The stakes, of course, are considerable, as some people believe that the Sex.com domain name alone is worth tens of millions of dollars. In addition, Kremen's attorney, Timothy Fox, reportedly said that Cohen has made $43.3 million from the Sex.com Web site, quite close to the ultimate $40 million compensatory damages award.
According to a press release from Kremen's attorneys, Ware reached his ultimate ruling by finding that Cohen had "devised and executed a fraudulent plan to steal the domain name Sex.com from Gary Kremen."
The trial included a warrant for Cohen's arrest based on his failure to appear in court as ordered. Ware's April 3 decision specifically provides that the arrest warrant should remain outstanding until Cohen surrenders property of his various ventures to the court.
If this wasn't trouble enough, Cohen is apparently under house arrest for other reasons in Tijuana, Mexico.
And the saga doesn't end there: An Oregon attorney now claims that he's entitled to a 15% interest in the Sex.com site, based on his early work for Kremen in the case against Cohen.
To the extent that there is real money behind Sex.com, the attorney's fees issue could become a real brawl. It has been reported that Kremen conferred with more than 20 attorneys during the life of his case.
At the end of the day, there can be little doubt that certain domain names in cyberspace have real-world economic value -- even if their ownership is sometimes difficult to determine.
Copyright © 2001 IDG Communications, Inc.
Copyright © 2022 IDG Communications, Inc.

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The Sex.com saga has all the trappings of a juicy pulp fiction novel. Now an appeals court must determine if registrar VeriSign can be held responsible for turning over the domain name.

Now justices in the 9th Circuit Court of Appeals are hoping to sort out at least one of the issues: whether domain name registrar VeriSign can be held responsible for turning the Sex.com name over to someone who sent the company a forged letter requesting the transfer.

The case offers more than a glance into the prurient world of Net porn. It could have important legal implications for companies that administer domain names, including determining the duties and liabilities for domain name registrars that handle Web addresses. In addition, the case could help settle how domain names are treated under property law.

On Tuesday, a three-judge panel heard arguments from lawyers representing Gary Kremen, the businessman who lost and then won back the rights to the sex.com domain name; VeriSign, which turned over the domain name; and Stephen Cohen, the man who tricked VeriSign into giving him the name for five years and now apparently is hiding out in Mexico.

In this phase of the legal saga, which has gone on for more than six years, the appellate judges are trying to decide VeriSign's culpability in the case.

The Sex.com name is one of the most lucrative sites on the Web because it's become a natural destination for those looking for porn. Kremen originally registered the name in 1994. Soon afterward, Cohen sent Network Solutions (which is now owned by VeriSign) a fraudulent letter authorizing the transfer of the name to him.

Kremen sued , and last year he won the name back from Cohen, but he has yet to see the $65 million in damages a judge ordered Cohen to pay him. However, the court also ruled that Kremen cannot sue VeriSign for the transfer because a domain name isn't tangible property. Now Kremen's hoping the appellate panel will overturn that ruling.

During Tuesday's hearing, the judges seemed to cast doubts on VeriSign's claims that it's not responsible for turning the name over to Cohen after receiving his forged letter.

Judge Alex Kozinski 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.

David Dolkas, an attorney at Gray Cary Ware & Freidenrich, the firm representing VeriSign, said that if the judges were asking "is the DNS database somehow representative of an ownership right, the answer is no."

"Why not?" Kozinski replied. "Why isn't that exactly what it is?"

Judge Margaret McKeown also grilled Dolkas, asking him if the company is claiming that it has no responsibility at all in the case.

Dolka reiterated claims that VeriSign shouldn?t be held liable, saying the database is simply a neutral translator between Web addresses and domain names.

He said a ruling against his company would "create a world of hurt," opening the floodgates for all types of suits, including contract and property claims from people whose domains are down for just a short while. Dolkas said people who feel they've been wronged in the domain name process already have a variety of private dispute resolution remedies. "There's no hole that needs to be plugged," he said.

James Wagstaffe, a Kremen attorney, argued that VeriSign broke an implied contract that gave his client ownership of the name. "They didn't do what they said they were going to do," he told the court. Wagstaffe said the whole case could have been avoided if VeriSign had simply phoned or e-mailed Kremen and asked him if he approved the transfer. "They do it now. They should have done it then," he said.

The judges will issue a ruling on the matter sometime in the coming weeks or months.

The lively court hearing also touched on a variety of other issues, including Cohen's whereabouts.

At one point, the judges chastised Cohen's attorney for his characterization of the federal judge who ruled against his client. Mike Mayock said the judge was "sucker punched" and "blindsided" by Kremen, an assertion that didn't go over well with the judges.

"You're really standing there telling us he's a fool?" wondered an incredulous Kozinski. "I don't think it's appropriate for you to call a district judge a sucker."

Meanwhile, Kremen said he's planning to reinstate a $50,000 bounty he offered last year for information leading to Cohen's arrest. Cohen apparently fled to Mexico and has failed to appear at several court hearings.

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Sex.com, a popular domain name on the internet, will be auctioned off in New York this month after its owners defaulted on debt payments
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