Update on Kentucky Domain-Name Seizure

Last fall the State of Kentucky convinced a trial court judge to order the seizure of 141 domain names belonging to Internet gambling sites (see posts here and here). The judge ruled that the domain names were gaming devices under state law.  This week the Kentucky Court of Appeals overturned the trial court’s seizure order, holding that “it stretches credulity to conclude that a series of numbers of Internet address, can be said to constitute ‘a machine or any mechanical or other device . . . designed and manufactured primarily for use in connection with gambling.”  The Court of Appeals declined reading “domain names” into the relevant Kentucky statute.  Citizen Law Media Project has a more detailed post about the Court of Appeals decision.

Kentucky’s attempt to seize the names is motivated by money, not morality; the state believes the gaming sites “drained money away from Kentucky’s legitimate gambling.”  The state announced that it will appeal the Court of the Appeals decision to the Kentucky Supreme Court.

Kentucky’s Domain-Name Grab

The governor of Kentucky, Steve Beshear, is cracking down on Internet gambling sites, which he refers to as “leeches on our communities.”  (See story.)  The governor filed a lawsuit in Kentucky state court in an attempt to force gambling sites to prevent access to Kentucky residents.   To get the sites’ attention he asked the court to transfer ownership of their respective domain names to the state.  It’s an audacious strategy that raises a number of issues about the state’s power to achieve it.  Assignment of the names to the state is not the same thing as garnishment but still this case reminds me of NSI v Umbro International–perhaps because I reread it a few days ago.   This is the Virginia case in which Umbro attempted to attach a domain name as collateral for the domain name owner’s debt to Umbro.  NSI, the domain name registrar, objected to the attachment.  The court refused to treat the domain name as property.  The court held that a domain name contract gives the name’s owner a license to use the name for a set period of time.  More specifically, it gives the name owner the right to have domain name root servers point to the owner’s website when someone enters the domain in a web browser address bar.  This contract for services does not give the owner a property right that a creditor can attach.

Blocking these sites from Kentucky residents’ access is also novel, and difficult.  Kentucky is not China or Saudi Arabia, where the government exercises significant control over what Internet traffic crosses the border.  The remedy seems futile.

The trial court judge refused to grant the governor’s motion to transfer the names, asking all parties to brief the issues so he can consider what to do.