Greener pastures for Tucows

Author: Emir Aly Crowne (Associate Professor, University of Windsor, Faculty of Law; Barrister & Solicitor, Law Society of Upper Canada)

Tucows.Com Co. v Lojas Renner S.A., 2011 ONCA 548, Ontario Court of Appeal, Canada, 5 August 2011

Journal of Intellectual Property Law & Practice (2011), doi: 10.1093/jiplp/jpr165, first published online: October 12, 2011

The Ontario Court of Appeal has ruled that domain names constitute ‘personal property’ in Ontario, which therefore creates a real and substantial connection with the Province, allowing it to assume jurisdiction.

Legal context

Rule 17.02(a) of Ontario's Rules of Civil Procedure, R.R.O. 1990, Reg. 194 permits service outside Ontario without a court order with respect to real or personal property in Ontario. The rule states:

17.02 A party to a proceeding may, without a court order, be served outside Ontario with an originating process or notice of a reference where the proceeding against the party consists of a claim or claims,
Property in Ontario
(a) in respect of real or personal property in Ontario …

At first instance, the respondent, Renner, brought a motion under rule 17.06(1) of the Rules to set aside Tucows' statement of claim, and permanently stay Tucows' action for lack of jurisdiction. In turn, that rule states:

17.06(1) A party who has been served with an originating process outside Ontario may move, before delivering a defence, notice of intent to defend or notice of appearance,
(a) for an order setting aside the service and any order that authorized the service; or
(b) for an order staying the proceeding. R.R.O. 1990, Reg. 194, r. 17.06 (1).

Facts

Tucows purchased over 30,000 domain names from Mailbank Inc., including renner.com. The respondent held a registered trade mark for the word Renner and disputed Tucows' ownership of the domain name in the face of the registration.

Procedural history


Under the Uniform Domain Name Dispute Resolution Policy (‘UDRP’) adopted by Internet Corporation for Assigned Names and Numbers (ICANN, which assigns and manages domain names), Renner initiated dispute resolution proceedings against Tucows. Among the list of dispute resolution service providers under the UDRP, Renner selected the World Intellectual Property Organization (‘WIPO’) Arbitration and Mediation Center and initiated proceedings on 12 May 2009. In turn, Tucows was notified of the complaint on 22 May 2009.

On 10 June 2009, Tucows initiated an action in the Ontario Superior Court of Justice seeking the following declarations:

• that Tucows has rights or legitimate interests in respect of the domain name \renner.com;
  
• that the domain name renner.com has neither been registered nor is it being used in bad faith by Tucows; and
  
• that Renner is not entitled to the transfer of the domain name renner.com.

A day later, on 11 June 2009, Tucows asked WIPO to suspend or terminate the proceedings initiated by Renner in accordance with 18(a) of the UDRP Rules. Namely,

18. Effect of Court Proceedings
(a) In the event of any legal proceedings initiated prior to or during an administrative proceeding in respect of a domain-name dispute that is the subject of the complaint, the Panel shall have the discretion to decide whether to suspend or terminate the administrative proceeding, or to proceed to a decision. [Emphasis added by Ontario Court of Appeal]

In the Ontario Superior Court of Justice (2010 ONSC 5851), the motions judge set aside Tucows' statement of claim on the basis that there was no real and substantial connection between Renner and Ontario and as such rule 17.02 (permitting service outside Ontario without leave where ‘real or personal property in Ontario’ is involved) was not engaged.

Analysis

A unanimous Court of Appeal ruled that a domain name does constitute ‘personal property’ that is located ‘in Ontario’. According to the Court of Appeal:

[50] The dominant view emerging from international jurisprudence and academic commentary appears to be that domain names are a new type of intangible property. American jurisprudence treating domain names as intangible property includes Kremen v Cohen, 337 F.3d 1024 (9th Cir. 2003) … 

[52] Outside the United States, other common law jurisdictions have also treated domain names as intangible property. In OBG Ltd v Allan [2008] 1 A.C. 1 (H.L.), Lord Hoffmann for the majority observed at para. 101, ‘I have no difficulty with the proposition that a domain name may be intangible property, like a copyright or trademark’. In Satyam Infoway, the principal question raised on appeal before India's Supreme Court was whether, in the absence of specific legislation, internet domain names were subject to the legal norms applicable to other intellectual properties such as trademarks. It answered this question in the affirmative. In doing so the court held, at paras. 11–12, that a domain name can be said to be a word or name which is capable of distinguishing the subject of trade or service made available to potential users of the internet. Goodwill can be built up in connection with a domain name: para. 31. See also Hoath v Connect Internet Services Pty Ltd (2006), 229 A.L.R. 566 (N.S.W.S.C.), at pp. 594–95, where the court presumed a domain name was intangible property. 

[53] For the most part, academic commentators also agree that domain names should be considered a form of property. As an example, in ‘Bad Faith in Cyberspace: Grounding Domain Name Theory in Trademark, Property, and Restitution’ (2010) 23 Harv. J.L. & Tech. 447, Jacqueline D. Lipton comments at p. 473, ‘The attraction of the property theory is that it fits the way people routinely think about domain names.’ She suggests at p. 474 that a property model may be the preferable basis on which to ground domain name theory: 

[A property model] best accords with the way market participants relate to domain names. Even though a domain name is a form of contractual license from a registrar to a registrant, it results in a valuable asset that is freely traded on the open market and that is occasionally stolen by a bad faith actor. Even though a transfer of a domain name is, in reality, a de-registration from the original registrant and re-registration to the new registrant, it is now treated routinely as a seamless transfer, as if the name was being handed directly from the original registrant to the new registrant. Further, the acceptance of a property rights rationale for regulating generic domain names could take advantage of existing property-based laws such as theft and conversion, and simply extend them judicially to virtual property. 

See also Hancock, at pp. 191 and 205, in which the author acknowledges that in the United States domain names are generally treated as intangible property, but argues that domain names, although incorporeal, should be treated as tangible property with which they have more in common. (paras. 50, 52 and 53 footnotes omitted)

The Court acknowledged that most of the jurisprudence did not consider the issue in any depth (para. 55) and therefore sought to outline the elements of the property right in question. The Courts distils several elements that define ‘property’:

1. A bundle of rights (paras. 57–60);
   
2. Which affords the owner the right to exclude others (i.e. exclusivity) (para. 63); and
   
3. ‘must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.’ (quoting Lord Wilberforce in National Provincial Bank Ltd. v Ainsworth [1965] A.C. 1175 (H.L.)) (para. 64).

A domain name, according to the Court, satisfies all of these elements and is therefore personal property. It is located ‘in Ontario’ because the registrant (Tucows) is located in Ontario, as are its servers. There is thus a real and substantial connection with the Province of Ontario, such that it is appropriate for its courts to assume jurisdiction in the matter.

Practical significance

Tucows is a fairly well-known player in the domain name market. The decision effectively gives the Ontario courts jurisdiction over all domain names held by Tucows, on its servers in Toronto, in the event of a dispute. The decision follows on the heels of an earlier ruling by the Ontario Superior of Justice in South Simcoe Railway Heritage Corporation v Wakeford, 2011 ONSC 1234, 18 April 2011, that domain names possess proprietary rights. In an earlier Current Intelligence (‘Ontario Superior Court rules on ways to recover domain names’, Journal of Intellectual Property Law & Practice (2011) 6 (9): 612–613). I argued that this was a hasty approach that ignored the Supreme Court of Canada's guidance in R. v Stewart [1988] 1 S.C.R. 963 discussing theft of confidential information under the Criminal Code (as it stood at the time):

… that property must be capable of being taken or converted in a manner that results in the deprivation of the victim. Tangible things present no difficulty in this regard, as it is easy to conceive how they can be both taken and converted. On the other hand, pure intangibles, as they have no physical existence, can obviously only be converted, not taken. The ‘taking’ of an intangible could only occur where such intangible is embodied in a tangible object, for example a cheque, a share certificate or a list containing information. However, that would not result in the taking of the intangible per se, but rather of the physical object evidencing it.

Even by the Ontario Court of Appeal's own definition of ‘property’, it is debatable whether a domain name can be considered a form of property. Consider the requirement that property have some degree of permanence or stability. By tying the requirement of the property to the location of Tucows and its servers, the property rights in the domain name are far from permanent or stable. One need only copy the data on to a remote server and suddenly the permanence or stability of the right diminishes (or is destroyed completely). Even intangible forms of property like copyright, patents, and trade marks enjoy some measure of permanence or stability because they are territorially limited rights. A valid IP right in Canada cannot be enforced against persons in foreign jurisdictions without something ‘more’ (ie a corresponding territorial right in that foreign jurisdiction). Then there is the potential duplication ad infinitum of the alleged property rights in domain names if those servers are backed-up in a dozen or so jurisdictions, are property rights created in all of those jurisdictions, each with seemingly valid competing claims of jurisdiction.

Without a thorough analysis of the issue by the Supreme Court of Canada, everything becomes a property right—including email addresses, telephone numbers, and commonplace, descriptive domain names (like steamtrain.com in South Simcoe Railway)—and all of the attendant privileges, rights, and burdens that accompany that designation. Without something more, like parallel trade mark rights, domain names are merely contractual rights to use a given address for a limited period of time.