© 2000, Deeth Williams Wall LLP. All Rights Reserved. By: Amy-Lynne Williams and Ailbe Flynn (June 21, 2000)

Background

Domain names are now an important part of acquisitions, product launches, trade-mark policing and new businesses. Although domain names are registered for as little as $70.00 (or free in some cases), they are routinely sold for much more. Recent high profile sales include: 1

  • $3,000,000 for Loans.com
  • $1,000,000 for Beauty.com
  • $835,000 for forsalebyowner.com
  • $823,456 for Drugs.com
  • $700,000 for Cinema.com

A domain name purchase generally involves two components:

  1. A transfer of the domain name at the relevant domain name registry; and
  2. A private purchase and sale agreement.

Transfer of Domain Name at Relevant Domain Name Registry

One issue to consider with a domain name purchase is the relevant transfer rules for the registry which administers the registration of the domain name.

".ca" Domain Name Registry
In Canada, CDNet operated the ".ca" domain name registry since 1987, but responsibility for ".ca" domain names was transferred to the Canadian Internet Registration Authority (CIRA) on December 1, 2000.

  • Transfer Procedure. CIRA recognises the transfer of domain names. The Canadian Presence Requirements must be met.
  • Eligibility. To register a .ca domain name, an applicant must satisfy the Canadian Presence Requirements (CPR) for registrants. In the case of domain names registered in the UBC registry before November 8, 2000, the registrant will be deemed to satisfy CPR for the specific domain name already registered. On and after November 8, 2000 only the following individuals and entities will be permitted to apply to CIRA (through a CIRA certified registrar) for the registration of, and to hold and maintain the registration of, a .ca domain name:
    1. Canadian citizens
    2. Permanent residents
    3. Legal representatives
    4. Corporations
    5. Canadian citizens Trusts
    6. Partnerships
    7. Associations
    8. Trade unions
    9. Political partiesy
    10. Educational institutions
    11. Libraryies, Archives or Museums
    12. Hospitals
    13. Her Majesty the Queen
    14. Indian bands
    15. Aboriginal Peoples
    16. Governments
    17. Trade-marks registered in Canada; and
    18. Official marks

".com", ".net" and ".org" Domain Name Registry
Since deregulation, numerous registrars around the world now administer the ".com", ".net" and ".org" domain names. The original registrar, Network Solutions Inc. ("NSI"), continues to administer the transfer of registered domain names. To transfer the domain name, the Registrant must fill out a "Registrant Name Change Agreement Version 3.0 Transfers" and return it to Network Solutions. For fast, 2 day service, $199 must be included with the applicant's Agreement. Regular service is free and takes between 3 to 6 weeks.

  • Eligibility. Anyone can register a ".com", ".net" or ".org" domain name.

Purchase and Sale Agreement

Due Diligence
Trade-mark searching is recommended before a Purchaser uses a domain name. If the domain name to be acquired is similar or identical to the Purchaser's existing trade-mark, trade-mark searching may not be necessary. However, the Purchaser should, at the very least, canvas the other similar domain names that exist. For example, ABC Manufacturing Inc., a Canadian manufacturer of widgets, may be interested in buying the registered domain name, "abcwidgets.com". Value may be subtracted from "abcwidgets.com" if someone else is using "abc.com", "abcwidgets.net", "abcwidget.com", "abcmanufacturing.org", or a misspelling such as "abbcwidgets.com" or "abcwidjets.com". Where possible, the Purchaser should considering registering misspellings and variations on the domain name to prevent confusion or unscrupulous "copycat" websites. Domain names and registrant records can be found at:

Like any other asset, domain names may be pledged as collateral. Given the often high price tag for some domain name sales, the Purchaser should consider the advisability of conducting security searches, such as under the Personal Property Security Act (PPSA) or the Executions Act, or under the equivalent statutes of the Vendor's jurisdiction.

Acting for the Purchaser
When acting for the Purchaser in a domain name purchase, legal counsel should consider the following issues:

  • Eligibility. As discussed above, care should be taken that the Purchaser is eligible as a registrant for the domain name. For example, a U.S. citizen may be not eligible for a ".ca" domain name.
  • Transfer. In addition to a transfer of the domain name, the Purchaser should seek a transfer of all intellectual property in the domain name.
    Sample Wording
    Vendor hereby sells, assigns and transfers to Purchaser all Vendor's rights, title and interest in and to the Domain Name, including any trademarks, service marks, copyrights and other intellectual property rights, whether or not registered, which the Vendor has in the Domain Name and including any goodwill associated with the Domain Name (the "Rights").
  • Representations and Warranties. The Vendor should seek standard representations and warranties.
    Sample Wording
    1. the Vendor is a corporation duly organized and validly existing under the laws of [jurisdiction] and has the corporate power to own and sell the Domain Name in accordance with the terms of this Agreement;
    2. this Agreement has been duly executed and delivered by the Vendor and constitutes a legal, valid and binding obligation of the Vendor;
    3. the Vendor is the registrant and sole legal and beneficial owner of the Domain Name and the Domain Name is free and clear from all liens, charges, claims and encumbrances;
    4. the Vendor is transferring the Domain Name to the Purchaser free and clear from all liens, charges, claims and encumbrances whatsoever, with the intention that henceforth the Purchaser shall be the sole legal and beneficial owner of same;
    5. the Vendor does not owe any amount to NSI, or any other domain name registration authority, on account of the registration of the Domain Name; and
    6. the Vendor is not aware of any pending or threatened actions, suits, claims, litigation or proceedings relating to the Domain Name.
  • Additional Representations and Warranties. Specific to the facts of the deal, additional representations and warranties may be required. For example, representations as to ownership of the intellectual property in the Domain Name or the operation or non-operation of a website using the Domain Name may be appropriate.
    Sample Wording
    The Vendor has not used the Domain Name as a domain name for a website.
    or
    The Vendor has operated a website identified as "http ://www.[Domain Name]" ("Website"). The Vendor has operated the Website in compliance with all applicable domestic and foreign laws, rules and regulations. The Vendor has not received any notice that it is, or has at any time been in violation of any law or order applicable to the Website. [Also, an indemnity for claims which arise from the Vendor's operation of the Website may be appropriate].
  • Further Assurances. As discussed above, further documentation will likely be required to transfer the domain name at the relevant registry. Further assurances should be sought that all relevant documentation will be forthcoming.
    Vendor will promptly prepare and deliver to the appropriate parties, all forms and other documents necessary or advisable to transfer the Rights and the Domain Name to the Purchaser and any other documents reasonably requested by Purchaser, including without limitation all forms required to be filled out by [Domain Name registrar] in order to transfer the Rights to the Purchaser and any other documents reasonably requested by Purchaser for such purpose.
  • Payment. Given that transfer of the domain name requires the approval of the relevant registrar, payment should be conditional on the successful transfer of the domain name as evidenced by a change to the registrant (i.e. WHOIS) record.
  • Renewals. ".ca" domain names may be registered for a period of 1 to 10 years, thereafter being renewed for a period of 1 to 10 years at a charge of $20 per domain per year. ".com", ".net" and ".org" names are also renewable yearly (the first two years are prepaid). After the name has been transferred, the Purchaser should obtain the revised WHOIS record which will state the expiry date for the registration. This date should be diarized for renewal.

Acting for the Vendor
Specific issues relating to release of claims and limits on liability may be appropriate.

  • Release. The Vendor should seek the Purchaser's release for all claims arising out of or in connection with the Domain Name, including a release for all claims under the US anti-cybersquatting legislation.
  • Limitation of Liability. The Vendor will typically disclaim all explicit, implicit or statutory warranties with respect to the name and will generally offer the domain name on an "as is" basis. The Vendor will typically not indemnify for intellectual property infringement claims.
  • Escrow. Given the international nature of some domain name purchases, the Vendor should consider requiring the purchase funds to be held in escrow pending transfer of the Domain Name, with a time is of the essence clause and some form of timeframe added to ensure prompt efforts by the Purchaser to clear the transfer at the relevant registration authority.
 

Endnotes

  1. More information available at http://www.greatdomains.com.
 

Contact Amy-Lynne Williams or any other members of our Information Technology Group for more information on Domain Name Purchase Agreements.

Disclaimer: This Newsletter is intended to provide readers with general information on legal developments in the areas of e-commerce, information technology and intellectual property. It is not intended to be a complete statement of the law, nor is it intended to provide legal advice. No person should act or rely upon the information contained in this newsletter without seeking legal advice.

E-TIPS is a registered trade-mark of Deeth Williams Wall LLP.

By Editors
Deeth Williams Wall June 21, 2000 June 21, 2000 February 8, 2017
Domain Names