Appeals Court to hear suit against VeriSign

In what could turn out to be a landmark case in Internet law, the U.S. Court of Appeals in San Francisco was slated today to hear arguments over whether VeriSign is liable for damages after transferring the sex.com domain name to someone who forged a letter claiming ownership.

This is a case with potentially broad implications for anyone who registers a domain name, according to groups siding with Gary Kremen, the owner of sex.com.

Kremen has spent some seven years and US$3.4 million in legal fees for the right to keep a domain name he says he should have never lost.

Two years ago, he won a partial victory when the U.S. District Court in San Jose ordered sex.com returned to him. He also won $65 million, uncollected so far, against the forger.

But Kremen failed to convince the court that the former Network Solutions was liable for its actions. The court ruled that the company's role was limited under law.

The basic facts are clear enough. Kremen registered the sex.com name in 1994. A year later, Network Solutions Inc. received a letter claiming to represent Kremen's company and authorizing the transfer of the domain name. NSI transferred the name, according to court records.

VeriSign "just can't hold up their hands and say we have no liability for mistakes," said Kremen. "Their argument is: 'We can turn off anyone's domain at any time.' Imagine if they did that to IBM. It's ridiculous."

Kremen's argument has found support from the American Internet Registrants Association (AIRA) here and the Electronic Frontier Foundation (EEF) in San Francisco. Both have filed supporting briefs.

The stakes in this case "are very substantial," said William Bode, the Washington attorney representing AIRA. If Kremen reverses the lower court and finds VeriSign liable for managing domain names "then I expect to see dozens and dozens of lawsuits filed" against the company, and possible a class action lawsuit.

In its brief, EFF said that if the lower court decision stands, domain name registries would be immunized from liability "for even gross misconduct in [the] handling of domain names generally."

VeriSign officials could not be reached immediately for comment.

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