On 22 December, 2005, Recorder Claire Miskin delivered her judgment in the Southampton County Court in the case of The Honourable Nicholas Augustine Plant v Service Direct (UK). One issue in the case was whether an internet domain name is an item of property and, in particular, whether interference with a domain name can give rise to a cause of action under the Torts (Interference with Goods) Act 1977. To appreciate the scale of the issue, at present there are around 86 million domain names registered globally and hence potentially capable of being interfered with.

‘Goods’ are defined under the 1977 Act as "all chattels personal other than things in action and money". The clear intention of the Act is that only physical objects come within its scope. Documentary intangibles — such as promissory notes, bearer bonds or other negotiable instruments — are, nonetheless, subject to the Act.

In her judgment, the recorder held that it was significant that when negotiable instruments are treated as goods they all represent money in one shape or form. Another distinguishing feature of negotiable instruments is that they are all evidenced by a piece of paper — something physical. By contrast, the recorder was of the view that the property in a domain name attaches to the goodwill, if any, which it represents. She therefore held that a domain name was not capable of coming within the definition of ‘goods’ in the 1977 Act.

Permission to appeal is being sought by Plant. The application for permission was initially reviewed by Lord Justice May on 21 February, 2006, when he remarked: "[In] the modern world of internet communication and activity, questions such as these are likely to arise often and may be of some importance generally. It seems to me at the very least that the question whether an internet domain name is capable of being converted is a question which is fit for consideration by this court on a more extensive and considered basis than is possible upon a single judge application for permission to appeal."

The application for permission to appeal, followed by the appeal itself (if permission is granted), is now being listed before a three-judge Court of Appeal, with a specific direction that at least one member of the court should have expertise in intellectual property. It is likely that the hearing will come before the Court of Appeal this autumn.

Nominet UK — which acts as the registry for around 4.9 million publicly available domain names ending ‘.uk’ — is seeking permission to intervene in the appeal to assist the court in reviewing the legal issues in a technical and commercial context.

To examine whether a domain name can come within the scope of the 1977 Act, the Court of Appeal will have to look at the makeup of the domain name system.

Communication between computer networks on the internet is achieved by use of a common internet protocol. A key feature of this protocol is the provision of a unique internet protocol address (IPA) in number format for each computer server.

However, use of numeric addresses to identify individual users would obviously be impractical and uncommercial. Accordingly, all IPAs have a corresponding domain name. In some ways, a domain name is similar to a telephone number — it is a unique reference to a particular electronic resource.

However, while domain names are far more valuable than telephone numbers, they are nevertheless simply entries on an electronic register, and changes to those entries must also be made electronically. There is nothing tangible or physical which denotes a domain name.

Indeed, domain name registrars generally do not view domain names as items of property which are capable of being ‘owned’, as they are merely entries on an electronic register (possessed and controlled by the registrar). Instead they view domain name registration as a contractual right which confers permission on the registrant of the domain name to use the registration.

To date, the UK courts have yet to give any detailed consideration as to the precise legal status of domain names. The issue arose in Pitman Training v Nominet [1997] but remained ultimately unresolved as the parties agreed domain names were not property rights and the court made no further observations on the issue.

It would seem, therefore, that the Court of Appeal will be making new law if it holds that a cause of action for interference with domain names can exist.

In support of the appeal, the courts’ attention will no doubt be drawn to the Californian decision of the US Court of Appeals for the Ninth Circuit in Kremen v Cohen [2003], which held that a domain name registrant had an intangible property right susceptible to a claim for conversion.

Lord Justice May in Plant observed that whilst a Californian decision does not (and could not) address the 1977 Act and its definition of ‘goods’, it does address what May called "a question in the modern world of what happens in law in a particular jurisdiction if someone interferes electronically with a domain name that is the possession of some individual".

Also, in 1999 the US Congress enacted the Anticybersquatting Consumer Protection Act (ACPA), allowing in rem actions against a domain name. By way of example, in Caesars World v Caesars-Palace.com [2000] the defendants in that action tried to argue that a domain name registration was not property because it was merely data that forms part of an internet protocol.

However, the US court rejected that argument and applied the ACPA, holding that even if a domain name is no more than data, Congress had the power to make data property.

Given the manner in which the law on domain names may be developing in the US, it is perhaps not surprising that the Court of Appeal here feels the time may be right to review the position in the UK.

However, any changes in the law in this area would be likely to have major practical consequences for the internet industry — something the court will no doubt take into the account, as the law cannot be viewed in a commercial vacuum.

By way of example, if the register entry came to be viewed as a document which can be ‘owned’ by the registrant, it may become very difficult for registrars to control their customer data bases.

Secondly, if a domain name is regarded as property and is then cancelled and reissued — which currently happens on a regular basis — then the new registrant could possibly face claims from the former registrant, even though their use of the domain name is unobjectionable in terms of trademark law.

This problem is particularly acute because there is a large secondary market in selling domain names. Likewise, if domain names are property, they could potentially be mortgaged, which may give rise to future disputes as to security over domain names.

Additionally, the implications of extending the law of conversion to wider categories of intangibles may reach beyond the operations of the internet — they might equally apply to analogous technologies, such as the allocation of telephone numbers.

With such wide-ranging potential commercial consequences, the development of the law on domain names will be a fascinating area to watch in the future.

Clare Bellis, associate

This article was first published in Legal Week.