Law Times

Law Times • sepTember 12, 2011 NEWS PAGE 5 Ruling on domain names a game-changer Decision comes as ICANN set to expand Internet registry space BY JULIUS MELNITZER For Law Times C ourts are often criticized for delay, but sometimes their timing is excellent. Take the Ontario Court of Appeal's August 2011 decision in Tucows.Com Co. v. Lojas Renner S.A., in which it ruled that a do- main name is personal property and a business asset with a de- cided situs. "Before Tucows, there was little guidance in Canadian law on the issue of whether a domain name constitutes property," says Lisa Abe of Fasken Martineau Du- Moulin LLP. Happily, for some, the rul- ing came just five months before the Internet Corporation for Assigned Names and Numbers (ICANN) begins its generic top- level domain program to expand the Internet registry space. It would, for the first time, allow organizations to create, own, and operate their own generic top- level domains. ICANN observers expect between 300 and 1,000 new applications when the pro- gram starts this January. "The implications of this case are huge, not just from an IT perspective but also in terms of jurisdictional questions, corpo- rate ownership of assets, family law, estates, accounting, tax, and commercial transactions involv- ing domain names," Abe says of Tucows. "Domain-name regis- trants doing business in Ontario would be able to enforce their rights in respect of the domain name in Ontario and show the domain name as an asset on their balance sheet." What will be available, then, is a glorious business opportu- nity. For the first time, companies can match their top-level domain names (the portion to the right of the dot) to their brands. Apart from the dot, everything else in the name is fully customizable, allowing an organization to fashion a unique domain inextricably tied to its good- will. In other words, it's a valuable asset now recog- nized as such by Ontario's highest court. Tucows arose when the company, a technology con- cern incorporated in Nova Scotia with its principal of- fice in Toronto, sought to protect its domain name, renner.com, that it had pur- chased from a third party in 2006. The difficulty was that Renner, a Brazilian de- partment store operation, had registered a trademark under that name. At issue on appeal was whether the dispute should be heard in Ontario. Rule 17.02 of the Ontario Rules of Civil Procedure gives Ontar- io courts jurisdiction over claims against personal property located in this province. Tucows, represented by P. As such, it was a category of intangible property that quali- fied as personal property under Rule 17.02. "Before Tucows, the general thinking in Ontario was that a domain name was no more than a locator and no differ- ent from the lease of a tele- phone line unless the owner had trademark rights in the words or mark that made up the name," says Abe. Weiler also found that the domain name was property situated in Ontario. "Simply because a domain name is intangible property does not mean that it cannot have a location that allows a court to ground jurisdiction," she noted. The implications of Tucows 'are huge,' says Lisa Abe. John Brunner and Mario Del- gado of Toronto's Brunner and Lundy, argued that the domain name constituted personal prop- erty located in Ontario. Pat- rick Cotter of the related firms of Sim & McBurney and Sim Lowman Ashton & McKay LLP, acting for Renner, took the posi- tion that a domain name wasn't personal property within the meaning of the rule and that be- cause it was intangible, it wasn't located in Ontario. But Justice Karen Weiler, writ- ing for a unanimous panel com- posed also of justices Janet Sim- mons and Gloria Epstein, noted the Supreme Court of Canada's 1979 decision in Manitoba Fish- eries Ltd. v. the Queen. In that case, the top court ruled that intangible property — property that couldn't be moved, touched or felt but represented something of value — was as much a part of a business as tangible assets like buildings and equipment. Here, the domain name had a bundle of rights attached to it that gave it value. It also had the quality of permanence as Tucows had owned the name since 2006. property The location of tangible was determined by ascertaining where it had the strongest contacts. Here, the connecting factors were Tu- cows' presence in Ontario, the domain-name registrar, and the intermediary servers. Weiler cau- tioned, however, that the mere fact that a foreign corporation registered a domain with an On- tario registrar wouldn't suffice to give the name a physical pres- ence in Ontario. But Cotter, who at press time hadn't received instructions re- garding a leave application to the Supreme Court, is concerned about the decision's implica- tions. He notes that Rule 17.02 permits service outside Ontario without a court order with re- spect to real or personal property in the province. In such cases, a rebuttable presumption arises that a real and substantial con- nection to Ontario exists. "Now that the Court of Ap- peal has adopted the legal fic- tion that intangible property has a situs in Ontario, the dan- ger is that the presumption of a real and substantial connection could be applied mechanically without a proper analysis of whether there is actually such a connection," he says. But according to Brunner, in- tangible property must be located somewhere. 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