Cyberproperty and Judicial Dissonance: The Trouble with Domain Name Classification

The nature of cyberspace continues to be woven into the fabric of our daily existence. Not surprisingly, cyberspace and the expansion of e-commerce pose challenges to existing law, particularly the legal definition of cyberproperty domain names. The nature of cyberspace allows many e-companies to possess no traditional assets such as buildings and inventories. Some e-companies own few computers, often using service providers to maintain their web sites. In the virtual space that e-companies inhabit, the primary assets that e-companies own are intangibles such as domain names, customer information, and intellectual property that includes business method patents, copyrights, and trademarks. Domain names have become the valuable intangible real estate of cyberspace. For example, the domain name sex.com was valued at $250 million; business.com at $7.5 million; and loan.com at $3.0 million. The monetary value of some domain names suggests that it would be proper to classify domain names as property. Yet both courts and legislatures are far more ambivalent in their treatment of domain names, leaving the lingering question: Are domain names property? The inquiry into whether domain names are property leads to other related questions. Do domain names exist apart from the value or goodwill added by the user? Or, are all domain names merely products of service contracts between a registrar and a registrant, and thus not treated as property for garnishment proceedings? Are the interests in domain names similar to license rights? Should some domain names be bestowed with property interests while other domain names are treated as lacking such interests? To most courts, these questions are, or will be, of first impression. Recent judicial decisions relating to legal classification of domain names failed to adequately appraise the nature of cyberproperty in general, and domain names in particular, and their role in the marketplace of e-commerce. Worse, the precedent established threatens to render meaningless the valuation of domain names as part of a bankrupt cyber-estate. Further, as the Internet economy matures, the case law threatens to hamper the use of domain names and other cyberproperty in secured transactions, as well as commercial transactions in general. Part I examines the rising value in domain names on the open market. The spectacular rise in the monetary value of some domain names in the marketplace does not qualify them as property entitled to some form of legal protection. Part II focuses on the bundle of rights property theory and examines whether domain names fit within that definition. If domain names are property, are they similar to trademarks? Part III discusses trademark law and analyzes the types of domain names protected under trademark law. The analysis reveals that forcing domain names into the existing trademark law framework results in inadequacies. Part IV analyzes judicial dissonance in classifying domain names as service contract rights based on the formation of domain names through service contract agreements between a registrar and registrant, and as intangible property that does not merge with a document. Part V focuses on the recent legislation relating to domain name disputes and subsequent judicial interpretations of the statute. While the new legislation cures cybersquatting problems, it creates a different problem, as the law now treats some domain names, but not others, as property. Part VI discusses the implications of judicial dissonance in commercial transactions and bankruptcy proceedings involving domain names. The Article concludes that the maturing process of e-commerce requires a clear classification of domain names as intangible property and appropriate legislative protection for the type of domain names not protected under trademark law.