Kentucky Domain Names Dispute Continues

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The state of Kentucky's attempted seizure of the domain names of selected gambling operators has now been referred to the Kentucky Supreme Court, while an English court has refused to enforce Kentucky's forfeiture and seizure orders in the UK.

In December 2008, we reported that Franklin County Circuit Court had ruled that the state of Kentucky could seize ownership of 141 domain names owned by gambling operators who refused to prevent Kentucky residents from gambling on their sites. The ruling was based on a statute allowing the state to seize ownership of "gambling devices".

In May 2009, we further reported that the Commonwealth of Kentucky Court of Appeals had issued an order prohibiting the seizure. The Court of Appeals stated that to include domain names in the definition of gambling devices "stretches credulity".

The initial action had received support from Kentucky Governor Steve Beshear (based, according to reports, primarily on his concern that online gambling websites causing profits from the Kentucky horse racing industry to fall). Governor Beshear has now taken his case to the Kentucky Supreme Court, which heard oral arguments on 23 October 2009.

The outcome remains uncertain. One Supreme Court justice is reported to have expressed doubt as to whether a thirty-year-old statute that deals with tangible property could be extended into the internet gambling field. Another justice is reported to have questioned how effective such seizure would be, since companies could simply create another domain name. Judgment is expected in the next few months.

Meanwhile, Pocket Kings, the company whose domain name fulltiltpoker.com was targeted by a seizure and forfeiture order, brought an action in the English courts against both the state of Kentucky and the company's own registrar, Safenames Ltd, which is based in England. A seizure order had been served on Safenames, requiring it to transfer fulltiltpoker.com to the state of Kentucky.

Pocket Kings asked Safenames to confirm that it would not do anything that interfered with its use of the domain name and when Safenames failed to give such confirmation, Pocket Kings sued both Safenames and the state of Kentucky and asked the court for a declaration that it would not enforce the seizure and forfeiture order. The state of Kentucky failed to acknowledge service of the proceedings and Pocket Kings asked for summary judgment, which was granted on the basis that (a) Kentucky was not a state within the meaning of the State Immunity Act 1978 (but rather a constituent territory of a federal state) and (b) Kentucky was not exercising "sovereign authority" and so Kentucky's proceedings were not enforceable under English law. This ruling may be helpful to other UK registrars, giving them grounds to refuse to hand over the domain names which are subject to orders. For an analysis of the case see the IPKat blog here.