A recent domain name dispute
Author: Tal Williams, Partner
26 June 2012
A recent decision in the Federal Magistrates Court highlights the fact that apparently simple and relatively unimportant commercial arrangements concerning the registration of internet domain names can lead to extensive and complex litigation.
The case involved a business known as Staples Waste Removals Pty Limited (“Staples”) and the relationship that that company had with a computer consultant who provided services to Staples. In 2002 the computer consultant, Mr Bjornsson suggested Staples should register a domain name ‘staples.com.au’. Staples agreed and asked Mr Bjornsson to make the appropriate arrangements.
To get the domain name required a word association with the registered owner. Staples Waste Removals Pty Limited and its owner, Mr Staples, obviously had an association with the word “staples”. Mr Bjornsson clearly did not.
Throughout the relevant period the registered licensee of the domain name was Staples Waster Removals Pty Limited however the owner, contact details, email and address were all registered to Mr Bjornsson. He attended to payment of all license fees throughout the period.
Staples Waste Removals did not actually use the domain name.
In 2010 an international stationery company approached Mr Bjornsson (as the registered contact person) with a view to acquiring the domain name.
Mr Bjornsson notified Mr Staples of the negotiations (which commenced at $1,500 and ended up at $82,500). Mr Staples advised Mr Bjornsson that he, Mr Staples, would allow the sale provided he received 50% of the proceeds. Bjornsson was not keen on sharing or providing Mr Staples with a percentage that high, or he was fearful that Mr Staples would keep everything.
In cahoots with a friend, Mr Bjornsson then created a new business called “Staples Photography” and transferred the domain name from Staples Waste Removals Pty Limited to Staples Photography. He then sold the domain name for $82,500. Mr Bjornsson’s solicitors deposited the money into his trust account and then released all bar about $3,000 to Mr Bjornsson. After that occurred Mr Bjornsson advised Mr Staples that he had sold the name and he was prepared to negotiate about how much Mr Staples would receive.
Mr Staples then sued all parties involved. A settlement was reached with the overseas stationery company (who paid Mr Staple’s company $33,000) however, all other matters went to Court.
The Court found in favour of Staples and held that Mr Bjornsson had acted as a fiduciary agent and had breached the duty he owed to Staples. He had no authority to do what he did with the domain name.
The Court ordered that Mr Bjornsson pay Staples Waste Removals $55,000 plus he was ordered to pay costs of $74,878. The amount ordered took into account the fact that Mr Bjornsson had paid ongoing licence fees and legal fees in relation to the domain name.
Lesson
This would not have happened it Staples had taken care in the first place to ensure the registration details were correct.
In securing your intellectual property it is essential that you take advice and be aware of the rights that you have in relation to that property. A system of checks and balances should also be put in place and to ensure that your ownership of that intellectual property cannot be exploited by unscrupulous parties.
Please contact Tal Williams if you have any questions relating to intellectual property rights or this specific case.
Tal Williams
Partner
T: +61 2 9390 8331
E: tal.williams@holmanwebb.com.au