Law & Technology

The legal battle over the sex.com case may be over, but it seems that there is no end to the hanky-panky when it comes to online domain names.

In Kremen v. Cohen, the 9th U.S. Circuit Court of Appeals recently rejected the latest appeal by pornography king Stephen Michael Cohen of a $65 million award to sex.com’s original registrant, Gary Kremen. Kremen alleged that Cohen misappropriated that domain name.

Kremen has settled his conversion claim — alleging that the domain name was improperly transferred to Cohen — with the one immediately available deep pocket, Network Solutions Inc.

Herndon, Va.-based NSI was the registrar of the sex.com domain. It allegedly allowed the domain name to be transferred to Cohen without Kremen’s consent. The confidential settlement reportedly was for somewhere around $15 million.

In the course of this decade long legal adventure, Kremen helped blazed new trails in the field of registrar liability and domain name law.

The sex.com case began in 1994, before the explosion of the Internet as a medium for selling goods, services and pornography. When Kremen first registered sex.com, only one company, NSI, was registering names, and it was giving them away for free.

Kremen and the courts have been forced to grapple with the thorny question of whether a domain name is capable of being converted — a legal theory normally requiring that some tangible property be misappropriated to another person without consent. The legal confusion was compounded by the fact that there was no enforceable contract between Kremen and NSI since Kremen had paid no consideration for the domain.

But the method by which control of the domain was wrested away from Kremen was quite old-fashioned. It was accomplished by simple forgery and fraud.

Cohen sent a letter to NSI purporting to have come from Kremen’s company, disclaiming any interest in sex.com — which Kremen had let sit idle — and asking Cohen to so inform NSI. The letter purportedly was signed by Kremen’s then-housemate, though the court subsequently noted her signature was misspelled.

NSI did nothing to verify the authenticity of the letter and, accepting the letter at face value, transferred the registration of sex.com to Cohen. He then built a multimillion-dollar porn empire around the domain, much to the chagrin of Kremen, who by then recognized the tremendous value of a generic, second-level domain name such as “sex” in the dot-com world.

Millions of dollars and several court battles later, Kremen succeeded in procuring the return of the sex.com domain registration. To boot, he obtained a $40 million compensatory and a $25 million punitive damages award from the U.S. District Court in San Francisco against Cohen, who apparently took all his assets and fled the United States to an undisclosed location where even bounty hunters hired by Kremen cannot find him.

Important issues remain

Whether Kremen ever collects this judgment, and whether the case is finally over, important legal issues remain.

In 2003, in Kremen v. Cohen, the 9th Circuit reversed the trial court and held that an Internet domain name is property subject to being improperly taken or converted by another. The ruling allowed tort claims to be brought when a domain name is wrongfully transferred even though no enforceable contract exists or when contract remedies may be too limited. Still, the issue remains open.

The 9th Circuit based its ruling on its self-described “grudging reading” of California law as to whether a domain name fell within an exception allowing intangible property not merged into some document — like a stock certificate — to be the subject of a conversion claim. The question of whether something is property subject to conversion is not a federal legal question, but one of state law.

The federal appellate court in this case had offered the opportunity to clarify California law, by means of certified question, to the California Supreme Court. But that high court demurred. When forced to make the determination of California law itself, the 9th Circuit interpreted California case law from the late 1800s to permit such a claim despite the argument that the domain name was no more than a routing protocol and thus not tangible property.

The 9th Circuit held that the domain name system was in fact a document or collection of documents stored in electronic form. The court found that the domain name is similar to a stock certificate, which is associated with the intangible property, and that the intangible value of a domain name is associated with the domain name system records. Such records associate word-based domain names with particular computers networked on the Internet.

But the 9th Circuit went further. It noted that if it were necessary for it to do so, it would hold all property, tangible or intangible, as being capable of conversion — and would reject the approach set forth in “Restatement (Second) of the Law of Torts” permitting conversion only where there is a merger of intangible property in some document.

However, because this decision is based on a federal court’s interpretation of one state’s law, it does not set strong precedent for other courts applying the property laws of different states. In fact, other federal decisions, most notably from the Eastern District of Virginia where NSI was based, hold to the contrary. It remains to be seen where the other circuits or states will come down on this debate.

Dilemma remains

The Kremen victory and the eventual settlement by NSI have not deterred continued shenanigans or carelessness with domain names, as was recently experienced by one of New York’s oldest commercial Internet service providers, Panix.com.

In mid-January of this year, ownership of the Panix.com domain name was moved to Australia, the company’s domain name server records were moved to the United Kingdom, and the company’s e-mail was redirected to a company in Canada, all without Panix.com’s knowledge or consent.

The fiasco resulted in Panix.com’s customers, many of whom are in New York City, Long Island and New Jersey, being deprived of Internet and e-mail access for a few days, and in the potential compromise of customers’ private e-mail and passwords.

Two well-known domain registrars were involved in the Panix.com incident, but proper verification of the transfer request was not obtained. The receiving registrar in Australia, responsible for obtaining the validation, had delegated the responsibility to its reseller, which failed to obtain the validation.

In its investigation of the Panix.com incident, the Internet Corporation for Assigned Names and Numbers (ICANN, a private, nonprofit corporation that currently governs the domain name system), expressed concern that the recipient registrar had delegated the verification to a third-party reseller. But a proposed rule that would have required the recipient registrar to have sole responsibility for verification of the transfer request was rejected when ICANN recently adopted new procedures to regulate transfers of domain names from one registrar to another.

Panix.com was able to regain its domain name rather quickly. It took a determined Kremen a number of years and a lot of legal fees to do so. Others may not fare as well. Owners of domain names must exercise vigilance and diligence. The courts will have to continue to address the inevitable claims and disputes.

We will see where other courts wind up in determining whether a domain name is property and how they will deal with the continuing, thorny legal issues in this area.

Jose I. Rojas is a partner at the Rojas Law Firm in Miami. He is a past chair of The Florida Bar’s computer law committee and is a member of the International Trademark Association’s Internet Committee.

Breathing New Life Into A Law Firm’s Aging Receivables

When it comes to managing their receivables, many firms tend to regard this as an aspect of financial management. It is, after all, about money; you can touch and feel the dollars.

However, receivables management is just as much a function of practice management. It is not just about numbers. Behind most receivables more than 90 days past due is a story about why the account has not been paid – cash flow problems, complicated transactions, and many more. Understand those stories, get to the bottom of them – and you will have a better understanding of how to get paid.

Firms find themselves facing a dilemma. On one hand, they truly want to embrace institutional thinking and run as a business, putting structures and procedures in place and holding people accountable. On the other, they are reluctant to hold the individual attorneys accountable and deprive them of their autonomy because of the different circumstances that may exist that impact payment from clients.The two attitudes create an uneasy balance. It is hard to have clear-cut procedures while poking holes in them with plenty of exceptions.The truth, though, is that your firm must. Everything is not black and white.You need to make it clear to your attorneys and staff – as well as your clients! – what your policies and your expectations are.Yet, there needs to be a fair amount of latitude for decisions based on individual client relationships.

It will be important to layer your firmwide efforts, to take into account both formal collection procedures and practices and the informal, individual efforts that exist in practice to service clients. Mid-year is an appropriate time to focus on these issues, before getting into the mad rush of year-end.

To ensure that your receivables are not enjoying a ripe old age, take these steps:

1. Step back and start dissecting the older, harder-to-collect backlog of receivables. It may be necessary to dig deep to understand just how old they are. Many firms do not differentiate between receivables that are 90 days past due and those that are much older. Understand the dates on the aging report to discover how old the receivables really are. Look to see if there is any recent billing activity on the account, when the last payment was received and for how much. It is surprising to us how firms continue to do work for clients without considering whether they are paying their bills.

2. When managing the backlog of receivables, look first at your oldest receivables and work your way back to those that are newer. It may seem harder, but it will be productive to spend time first with the oldest receivables, moving forward to determine their collectibility.

3. Ask all attorneys to review their clients with outstanding balances. Tell them up front that you are looking for the truth from them.The point is for them to take decisive action: make the collection themselves, get help from the firm’s accounts receivable management team or clear the books. The attorneys are in the best position to assess whether a receivable should be kept on the active list or written off. However, they are often reluctant to follow through with the write-off process.

Evaluate each account and determine the likelihood of payment if the firm invests more time and effort to collect. Don’t kid yourself about the reality of collecting an account. When a receivable exceeds 180 days past due, there is only a 50% chance that it will be collected, and the likelihood drops off dramatically after that point.There may be a logical reason why it has not been paid. Perhaps the client does not have the ability to pay. Maybe the attorney has worked out an arrangement with the client whereby he can pay after the matter has been completed. Make sure the responsible attorney communicates to the firm what arrangements have been made with each client.

4. Urge firm leadership to be decisive and step in to take action. Management must work through receivable issues and not just accept attorney statements like: “I’m working on it” or “I’m in contact with my client about this.” For firms that are mid-size or larger, if you don’t yet have a committee, give serious thought to forming one. If yours is a smaller firm, this responsibility will rest squarely with firm leadership. Collections typically can’t be handled adequately by one person. Get your arms around the problem by creating – and empowering – a committee.

5. Evaluate the firm’s overall collection efforts. Ask yourselves: Did we do the job right, or did our processes and procedures allow receivables to age far longer than they should have? Review the firm’s policies and procedures concerning receivables that go beyond 90 days. Determine if policies exist only on paper. Implementation is the key. Do you have the right people in place to move the ball forward, and are they empowered to do so? Many firms review their older receivables with the goal of determining why accounts have not paid and if they have collection problems.When doing this, they frequently learn they have long had problems, but did not detect them earlier in the aging process.

6. Make the most of your dedicated collections staff, those whose job is to focus exclusively on receivables. Evaluate the ability of your staff to help in accounts receivable management. Ensure they have the skills and talents that can help attorneys reduce the backlog of receivables. Also, measure the staff ‘s performance to ensure progress is being made and sufficient time is being devoted to working directly with accounts receivable, as opposed to other administrative duties.At the same time, recognize when attorney involvement is essential.

7. Make the decision to write off the account after all efforts have been exhausted. Admittedly, that is far easier said than done. Nevertheless, if efforts have been made to collect that do not bear fruit, accept the fact that there is little chance of getting paid and write it off. If the attorney continues to hold up the write-off process, firm leadership needs to step in and get the account written off.

8. Consider enlisting the services of experts in managing law firm receivables, like Client Connection, to help you tackle difficult receivables In many cases, the more time you take to deal with your receivables, the more they age, and the harder it becomes to collect. Not only can consultants deal with problem situations, but they can help give collection efforts the focus they require, as well as recommendations for preventing these problems from happening again.

Mid-Size Companies Beginning to Implement Wellness Programs on a Large Scale

It is a well-documented fact that a majority of large companies (businesses with over 8,000 employees) offer health & wellness programs to their employees to keep their employees healthy, motivated, and productive while also lowering their healthcare costs. Employees at mid-sized firms (businesses with anywhere from 1,000 to 8,000 employees) can also benefit from effective wellness programs, but such programs at mid-sized firms haven’t been as ubiquitous, until recently.

Small and mid-size businesses may be wary of corporate wellness programs as healthcare costs at such firms may be smaller than at larger firms, and, thusly, the initial costs of such a program may be seen as too large. Indeed, mid-size companies that do offer programs often offer smaller incentives to their employees than large companies in order to keep down costs, a factor that could limit the effectiveness of their programs.

The lower incentives offered by mid-sized companies can make sense if the business does not have the same amount of capital to invest in a program that a large company may have. However, the benefits of implementing comprehensive programs can justify the expense of corporate wellness consulting, as the rate of return on investment in such programs can be two-fold or higher.

It is with this in mind that Colorado healthcare providers have created a new health plan specifically for small to mid-size companies that rewards them with lower premiums and employee incentives for effective implementation and enrollment in wellness programs. While this new healthcare plan was launched in response to a Colorado state law that encourages mid-size companies to offer such programs, there are also similar incentives offered in the national healthcare reform law that passed earlier this year.

Mid-size companies need programs that are designed to match up with the company’s development cycle. While this may mean a smaller program due to the company’s financial situation, in reality, every company needs a program tailored to that company’s specific needs. Appropriate corporate wellness consulting, consisting of executive and employee consulting, company assessments, and measured implementation, should provide a program that fits well for any company no matter its size.

How to Hire Law Firms With Ease

Legal matters are something that strike the fear of God in most people’s hearts, because of the complications involved, not to mention the astronomical legal fees one can incur. Legal matters, however, can happen anytime, anywhere and while people know that they must be prepared for anything, it doesn’t erase the fact that it can be quite a daunting prospect and as such, something to be avoided as much as possible.

However, fears of anything new and unfamiliar can be conquered with a proper understanding and learning of the matter. Once you understand the ins and outs of hiring law firms you’ll find that there was actually nothing to be apprehensive about. You need to hire lawyers who are well-versed in the language of litigation.

First of all, determine all the possible reasons why you need to hire a law firm. Of course in addition to wanting your tough legal problem solved, you may also want to hire a law firm because you want to augment the legal team you already have in place to increase your chances of winning your case and at the same time let your adversary know that you are determined to win it. Hiring the best law firm also increases your confidence about winning the case because you have a lot of legal experts behind you. And more importantly, you want to be able to win your case without causing too much of a dent in your bank account.

The next thing you need to do is research. Start with legal directories that will help you shortlist the best lawyers within your area complete with phone numbers and background information. You can also try researching online for law firm rankings, that rank the best law firms according to practice, diversity and region. Of course this will all depend on what type of case you have and the details involved.

A law firm’s expertise is based mostly on the fact that they hire the best graduates from top law schools. Since a lawyer’s core worth is based on his intelligence, knowledge and experience, you will increase your chances of winning your case since they will be updated on all the latest nuances of the law and be able to keep up their end of the defense with facts and figures relevant to your case.

While price is a major consideration, remember that the costs you incur will depend on the size of the law firm you need and want to hire. Solo practitioners usually entail lower costs and fees, small firms usually entail lower costs and more personal interaction, mid-size firms usually have more legal resources and therefore the ability to address your legal issues more effectively and large firms are what you need for larger and more complex legal concerns. When you go online, the best legal websites will have all the necessary information posted.

You will also need to check if the websites have posted their accreditation and certification and have very thorough information about their lawyers’ specialties. There are law firms that allow you to download reports and white papers on very popular legal topics, ones that their previous clients have been through so you can get more insights on your particular case and how it could turn out. The more information you have, the more empowered you feel so go for sites that also offer tips and advice on going through difficult legal matters and how to deal after the smoke clears.

And lastly, go for law firms that are able to explain things in a language you’ll understand. Forget about law firms that go technical, it is important to find one that provides personalized service and are very responsive – one who will actually return your calls because they understand time constraints and value your time as much as they value theirs. While most law firms put on an impersonal fa├žade that they mistake as professionalism, a true indication of a competent and able law firm is one that shows the human side of the legal profession. Clear cut and straightforward about the law but at the same time, showing a sympathetic side.

It is easy to feel daunted or intimidated when you enter a legal situation where you need to hire law firms to get you out of it. As long as you know what you need and want and what to expect, hiring lawyers to champion your cause won’t feel so challenging.