Opinion: The Sex.com saga

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 US$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 defence 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 percent 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.

Eric J. Sinrod is a partner at the San Francisco office of Duane, Morris and Heckscher LLP. He can be reached at ejsinrod@duanemorris.com.