For the last several days, the most actively discussed domain industry topic is related to GoDaddy locking some of Brent Oxley’s valuable domain names, including Create.com. This was done as a result of a legal dispute filed in India. If you have not been following, you can read the NamePros thread or the original article on JamesNames.com to catch up on what reportedly happened.
GoDaddy VP Paul Nicks posted an update last night on NamePros, writing in part:
“As we’ve started to have these conversations, we’ve identified a couple of things that could have gone better in Brent’s case. First, we erroneously told Brent that a court order was issued when, in fact, we were served with a legal complaint, starting a lawsuit. This doesn’t change how we would have or did act, but it was inaccurate to describe it as a court order. Second, we needed to do a better job in proactively notifying Brent of the domain locks on his domains. We’re taking these learnings and applying them to our procedures going forward.
In my opinion, domain names should almost never be locked at the registrar level unless there is a court order or other legal obligation to lock them. From what I have read, that does not appear to be the case with the current situation.
Domain names aren’t a physical asset that can be hidden. Domain names are essentially entries in a database maintained by various domain registries. For instance, Verisign is the company that operates the .com registry. There is nothing a domain registrant can do with a domain name that could prevent it from being locked if a court orders that to happen.
In legal disputes, there are often legal issues at hand that could be interpreted differently by courts in different jurisdictions. Taking the rule of law out of it, there are also issues that may be interpreted differently by people of different backgrounds or cultures. Something may appear clear cut to me, but someone else may see it totally differently. One job of the court system is to figure out what happened and rule how things should be resolved. I don’t think a registrar should make a judgment on this when the result will harm its customer who is in the business of selling domain names.
If business person 1 sues business person 2 and domain names are involved, my feeling is the court system should ultimately decide what happens to the domain names. If person 2 is aware of the litigation and sells or deletes the domain names that are in dispute before the case is resolved, person 1 would have legal recourse to recover the domain names or recover adequate compensation should litigation end favorably for person 1. Person 2 would be on the hook with person 1 and whomever holds the disputed domain names if they were sold. That is a legal risk person 2 would need to manage.
My assumption is the legal language in GoDaddy’s Terms & Conditions that allows the company to lock domain names is both to protect GoDaddy and also to protect registrants to an extent. It gives the company the option to make a judgment call in the event something egregious happens to a domain name that is indisputable. For instance, if a small business customer has a domain name stolen and the theft is obvious, GoDaddy can lock the name and point to this clause to prevent it from being sold or transferred while the registrant takes the actions necessary to regain control of the domain name.
Getting back to this particular case, I am not a lawyer or a legal expert, but I don’t understand why GoDaddy needs to lock the Oxley domain names without a court order or other legal obligation. I don’t think the registrar should be tasked with evaluating the merits of a business dispute and lock the domain names while litigation is pending unless the company is legally obligated.
One of the results from this now public dispute is that it seems evident that GoDaddy will lock up domain names that are subject to litigation. This opens the door for others to do the same or threaten this action knowing it could cause harm to an investor. This may be a relatively small risk, but it could pose massive problems if an investor has valuable domain names locked up for an extended period of time.
In my opinion, I think GoDaddy and other registrars should keep the language that allows them to make a judgment call, but they should only do so when the situation is very obvious. I have read the various threads and articles about this case, and while I understand there is a business dispute, I think the legal system, which has already been engaged, should determine how this is resolved. I also think GoDaddy could have done a better job of communicating with its customer, but that is a different story and already acknowledged by the company.