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Porsche revs up to become master of its domain

September 7, 1999
Web posted at: 11:42 p.m. EDT (1542 GMT)

by Andrew G. McCormick


(IDG) -- A court action filed in January by Porsche Cars North America Inc. in the Eastern District of Virginia was poised to alter the nature and location of domain name dispute resolution for the new millennium. But instead, Porsche may find out there is no substitute for traditional concepts of personal jurisdiction.

Porsche sued 128 domain names, all of which incorporate the Porsche or Boxster trademarks in their Web site addresses. Some of these domain names lead to hard-core pornography sites, while others, Porsche claims, are owned by cybersquatters hoping to make a quick buck or by vendors illegally trading off Porsche's name.
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But there was more to this case than fast cars and porn stars—Porsche conceivably had come up with an ingenious way to outwit its virtual adversaries. Many of the Web site owners, according to Porsche's complaint, filed domain name registrations containing false and fraudulent information about their names, addresses and identities, making litigation against such parties a nightmare. Porsche's strategy was to sue not the individuals who had registered the domain names but the domain names themselves.

Such legal action is called in rem (rather than in personam). It sounds bizarre at first, but it wasn't a bad idea. Porsche wasn't looking to recover trademark infringement damages, or at least the German automaker believed it didn't have any realistic chance of collecting against phantom individuals and entities with scant resources other than a few pictures of naked people and a PC. Porsche justifiably wants to protect its name, so an action against the allegedly offending property that gives Porsche control or ownership of the domain names achieves its purpose.

What's more, an in rem action, in theory at least, obviates the need to pursue Web site owners all over the world, assuming they could be located, or risk personal jurisdiction problems in any one convenient forum.

Instead, Porsche was hoping that the Eastern District of Virginia—home of Network Solutions Inc. (NSI), the current registrar of all domain names—would provide one-stop, convenient shopping for trademark owners to stop infringing domain names. This efficient package deal sounded great to trademark owners, especially famous mark owners like Porsche, and it may have even sounded good to struggling courts looking for some coherent, manageable solution to thorny Internet jurisdiction questions.

But once again, the ultimate "right-under-our-nose-all-along" solution proves too good to be true? On June 8, 1999, the court dismissed Porsche's complaint. Among other things, the court found that the Federal Trademark Dilution Act (FTDA), under which Porsche sued, did not specifically permit in rem actions and, in fact, by strong implication, seemed not to allow them. The court went on to say that even if it construed the FTDA to allow in rem actions, there were definite constitutional problems with the statute if it was interpreted to affect the property of absent owners.

Two issues immediately surfaced for the court—where is a domain name located for in rem purposes and is such "presence" in the jurisdiction sufficient to satisfy due process concerns? The garden-variety in rem case involves tangible, physical property uniquely located within a particular jurisdiction—that is, real property. But where exactly does a domain name exist? Does it have a tangible physical form? A paper representation? Can it exist in more than one place?

Ask computer experts, and they might well say that a domain name exists where the Web site it represents is located or, in other words, where the bundle of code comprising a Web site physically exists on that particular Web site's Internet service provider (ISP). That makes sense—a domain name is essentially an address, and if you ask people where their address is, they are likely to point to their home (or home page, whatever the case may be).

On the other hand, you could make the argument that a domain name travels with the Web site and can exist many places at once—for example, wherever someone's PC happens to link to that particular Web page. It's not that far-fetched: Several courts have based in personam jurisdiction over a Web site owner on the mere fact that someone can pull up that Web site at his computer, which happens to be within the particular state. This effectively subjects all potential Internet defendants to in personam jurisdiction everywhere in the world and, right or wrong, supports the argument that a Web site address exists everywhere it can be downloaded.

But minimum contacts for in personam jurisdiction is different from location for in rem purposes. Porsche's contention was that the domain name defendants (indeed all domain names) are located in Virginia in the form of a registry certificate maintained by NSI. This paper representation as an indication of location has some credibility in light of stock certificate and negotiable instrument in rem cases. But the compelling point here is that domain name registrants enter into an agreement with NSI that includes consent to NSI's dispute resolution policy. Their consent gives NSI certain rights and powers, such as putting domain names on hold and depositing domain names with the court.

Generally, once a lawsuit is filed, NSI has the power to deposit control of the domain name in the court pending resolution of the matter. It is this deposit power over domain names and the registrant's agreement to abide by such a system that makes it seem like the domain names' presence might actually be in some Virginia courtroom. A recent case, Umbro International v. Canada Inc., has held that Internet domain names are property subject to postjudgment garnishment under Virginia law. This ruling may have helped the Porsche court reach its rather perfunctory conclusions that the offending domain names in its case are actually in Virginia.

But even though the courts seem to agree that the proper fictionalized location of a domain name is Virginia, simple presence in the jurisdiction is not the end of the story. Shaffer v. Heitner, a 1977 case, held that the same test of minimum contacts and notions of fair play that govern in personam actions apply to in rem actions. Although Shaffer appears at first blush to completely eviscerate actions against property by requiring in-personam-type criteria, in rem actions survived because first, Shaffer was really a quasi-in-rem action about property unrelated to the action, which was attached to use as proceeds to cover any recovery by plaintiff, and second, Shaffer made clear that the presence of the subject property in the jurisdiction by itself would likely provide the necessary minimum contacts and fairness needed to pass constitutional muster, particularly if the cause of action arose out of the property.

What is less clear is whether minimum contacts and fairness issues are satisfied when the property in question, such as a domain name, is intangible, its presence is a fiction or it otherwise exists in uncertain or multiple locations. It was exactly these due process considerations that were the stumbling block for Porsche.

And, though not discussed in the court's opinion, what about practical realities? The Eastern District of Virginia may not have wanted a flood of litigation in its courts—clearly an incentive to closely scrutinize jurisdiction here. But on the other hand, Porsche may have come across an efficient, convenient forum to resolve all similar disputes, something many courts have been searching for. That has an immediate appeal, but any hopes for lasting precedent have been dashed by the introduction of competition in the domain name registration system.

The Internet Corp. for Assigned Names and Numbers (ICANN), the entity charged with the responsibility to coordinate the privatization of the domain name system, had plans to introduce five new competitors to the domain name registration process, originally scheduled for the end of April 1999, with an eye toward unlimited globalized competition in that area. Thus, there may be more than one location, fictional or real, in which domain names will exist, or at least a different location for domain names of a particular top-level domain, for example, .com, .org.

This undercuts any lasting convenience argument for why Virginia should hear this case. And ICANN will most certainly include a comprehensive, efficient dispute resolution mechanism in the new system, one that may include consent to jurisdiction, which will avoid all these issues.

One final point: Allowing this action to proceed would also have invited all claimants in copyright, trademark or patent disputes to attempt in rem actions in various jurisdictions, most likely in the Eastern District of Virginia, posing difficult practical and theoretical questions. The Virginia federal courts could have become the nation's intellectual property adjudication center—a difficult can of worms for the district to open without careful consideration. So while Porsche may have had a good idea, it needs to find another way to get to the merits of its case.

Andrew G. McCormick specializes in intellectual property law at Thacher Proffitt & Wood in New York. Lisa E. Funk, an associate at TPW, assisted with the research for this article.

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Porsche Cars North America, Inc.
Internet Corporation for Assigned Names and Numbers (ICANN)
Network Solutions, Inc.
Thacher Proffitt & Wood
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