Designer Skin LLC v. S & L Vitamins, Inc., et al.
Network Solutions Inc. v. Umbro International, Inc., et al.
529 S.E.2d 80 (Sup. Ct. Va., April 21, 2000)
Reversing the Circuit court, the Virginia Supreme Court, by a vote of 5-2, held that domain names are not subject to garnishment under Virginia state law.
According to the court, under Virginia Code 8.01-511, a judgment creditor may garnish "a liability on any person other than the judgment debtor ...". Once garnished, this asset may be sold (or collected) by the Sheriff to satisfy the indebtedness owed by the judgment debtor to the judgment creditor.
The question the court faced was whether a domain name registered by Network Solutions Inc. ("NSI") was a "liability" within the meaning of this statute that could be subject to garnishment. The Virginia Supreme Court held that as used in the code, "liability" meant "a financial or pecuniary obligation" or a "debt" or a "legal obligation enforceable by civil remedy." A domain name is not that, held the court. Instead, it is a short-hand vernacular which describes the registration services that NSI promises to deliver to the registrant under its domain name registration agreement for a defined period of time. These services include taking such steps as are necessary to cause the Internet to associate a particular domain name with a particular IP number. By rendering these services, the registrant receives the right to the exclusive association of the registered domain name with a given IP number for a designated period of time.
As such, concluded the court, "a domain name registration is the product of a contract for services between the registrar and registrant. A contract for services is not 'a liability' as that term is used in 8.01-511 and hence is not subject to garnishment." To hold to the contrary, warned the court, would be to subject practically any service to garnishment. Said the court:
If we allow the garnishment of NSI's services in this case because those services create a contractual right to use a domain name, we believe that practically any service would be garnishable. For example, if a satellite television customer prepaid the fee for a particular channel subscription, Umbro's position would allow garnishment of the subscription service. We also are concerned that a decision to uphold the garnishment at issue would be opening the door to garnishment of corporate names by serving a garnishment summons on the State Corporation Commission since the Commission registers corporate names and, in doing so, does not allow the use of indistinguishable corporate names.
This decision was subject to a strong dissent by Senior Justice Compton. Justice Compton opined that a domain name was a form of intangible personable property. Under Virginia law, such property is subject to garnishment to the extent the debtor has a possessory interest therein. The dissent opined that "the judgment debtor, by virtue of the domain name registration agreements with NSI, has a current possessory interest in the use of the domain names, that is, a contractual right to the exclusive use of the names it has registered with NSI." Accordingly, the dissent would affirm the ruling of the lower court, and hold that the domain name at issue was subject to garnishment.
The full text of this decision can be found on a web site maintained by the State of Virginia Judicial System.