March 2010 Issue

Civil Cases

Office Depot Inc. v. Zuccarini,
2010 WL 669263 (9th Cir. Feb. 26, 2010)

ABSTRACT
Office Depot obtained a judgment that the defendant’s use of the domain name offic-depot.com constituted cybersquatting and subsequently assigned the judgment to DSH.  DSH attempted to collect on the judgment by levying upon a large number of other .com domain names owned by the defendant that were not at issue in the case and that were registered with multiple registrars in Germany, Israel, and the United States.  Defendant argued that DSH had to bring actions where each domain name registrar was located.  The Ninth Circuit held, however, that DSH could proceed against all of the domains in the Northern District of California where VeriSign, the registry for all .com and .net domain names, is located.

CASE SUMMARY

FACTS
Office Depot Inc. (“Office Depot”) obtained a judgment for cybersquatting under the Anticybersquatting Consumer Protection Act (“ACPA”) in 2000 against noted cybersquatter John Zuccarini’s use of the domain name offic-depot.com.  Office Depot was unable to collect on the judgment and assigned the judgment to DS Holdings, LLC (“DSH”).  DSH attempted to levy upon the offic-depot.com domain name and 190 other .com domains owned by Zuccarini in the Northern District of California, where the registry for all “.com” and “.net” domains, VeriSign, is located.  During discovery, DSH learned that the registrars for Zuccarini’s various .com domain names were located in Germany, Israel, and the United States.  DSH filed a motion for a turnover order to compel the registrars of these domain names to transfer them from Zuccarini to DSH.  The district court denied the motion, holding that it could not order third parties to turn over property under California law.  DSH then moved to appoint a receiver who would obtain and sell the .com domain names and use the proceeds to satisfy the judgment.  The district court granted DSH’s motion to appoint a receiver, and Zuccarini appealed.

ANALYSIS
The Ninth Circuit Court of Appeals affirmed the district court’s appointment of a receiver, holding that the Northern District of California was a proper place to levy upon all of Zuccarini’s .com domain names at issue.  It noted that the jurisdictional question at issue here was “type two quasi in rem” jurisdiction (also called “attachment jurisdiction”), which establishes the ownership of property in a dispute unrelated to the property in the underlying action.  Here, the 190 .com domain names that DSH sought to levy upon were not involved in the underlying cybersquatting litigation against Zuccarini.

The Ninth Circuit examined Federal Rule of Civil Procedure 69, which directs district courts to look to state rules regarding the execution of judgments unless a federal statute applies.  Federal Rule of Civil Procedure 66 governs the appointment of a receiver in federal court, so it would prevail over any state law.  However, because Rule 66 does not provide for the proper location for the appointment of a receiver to enforce a judgment, the court looked to California state law.  The Ninth Circuit reviewed several sections of the California Civil Procedure Code and concluded that together they made the Northern District of California the appropriate location to execute judgment on Zuccarini’s domain names through the appointment of a receiver if the domain names (1) were property subject to execution, and (2) were located in the Northern District of California.  First, because the Ninth Circuit had previously held that domain names are intangible property under California law, they were thus subject to a writ of execution.  Second, the court noted that the location of intangible property depends on the purpose to be served.  Although California law does not discuss the location of domain names, Congress did address this question in the ACPA.  In rem jurisdiction over allegedly infringing domain names for purposes of the ACPA, which is different from the “quasi in rem” jurisdiction at issue here, is “in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located.”  15 U.S.C. § 1125(d)(2)(A).  The Ninth Circuit stated that the ACPA was “authority” for the proposition that “domain names are personal property located wherever the registry or the registrar are located.”

Zuccarini argued that because domain name registrars tell the registries who owns domain names, any attachment of the domains can be directed only at the registrars.  He further argued that if the domain names under VeriSign’s control as the registry were deemed to be located in the district where VeriSign was headquartered, then every .com and .net domain name would be located there.  In response, DSH argued that registrars are essentially “intermediaries” because the domain name registries control the database of all domain names, and ultimately any changes in ownership are reflected in the registry’s database.  DSH also argued that the ability of judgment collectors to levy upon domain names would be greatly impeded if they had to bring suits in every jurisdiction where the domain name registrars are located.

The Ninth Circuit agreed with DSH and held that, “[g]iven the persuasive but not controlling language of the ACPA, and the practicalities involved in bringing suit to execute judgments against owners of domain names,” under California law, domain names are located where the registry is located for purposes of asserting quasi in rem jurisdiction.  It further noted that, although the question was not directly before the court, “it saw no reason why . . . domain names are not also located where the relevant registrar is located.”

CONCLUSION
This decision confirms that domain names are property subject to creditors, and expands the jurisdictional boundaries where a judgment creditor may levy upon domain names to collect on a judgment.  At least under California law, a party may bring such actions where the domain name registry is located.  This will make the collection of judgments against .com and .net domain names far easier for creditors because VeriSign, the registry for all such names, is located in the United States.  This is especially true as to cybersquatters that use multiple registrars and/or that are located outside of the United States.  As a result, trademark owners may have more incentive to attempt to collect on a cybersquatting judgment by levying upon any other .com and .net domains owned by the cybersquatter.