Execution of Judgments into Domain Names

by Clemens Kochinke

A recent German decision casts a new cloud on the outlook for execution efforts into domain names. On Februar 12, 2001, the Munich I Civil Court found that a creditor may not place a lien on a debtor's domain name to satisfy a judgment. The new decision contrasts with decisions both in Germany and the United States which held domain names suitable targets for collection efforts.

Two years ago, courts in Fairfax County, Virginia, and in Gladbeck, Germany, declared liens and garnishments of domain names permissible. In Umbro International, Inc. v. 3263851 Canada, Inc. and Network Solutions, Inc., Judge M. Langhorne Keith of the Fairfax court decided on February 3, 1999 that judgment creditor Umbro could enforce a judgment into the domain names which the Canadian defendant had registered with Network Solutions because the defendant had a possessory interest in the domain names, Virginia law considers intangible property suitable targets of liens and garnishments, and that type of property comprises domain names. See Kamps and Reiche, Zur Pfändung und Überweisung von Internet-Domain-Namen in den USA.

At about the same time, the German civil court in the city of Gladbeck in the matter AG Gladbeck (Az. 13 M 56/99) arrived at the same conclusion and allowed the execution into domain names. See discussion and appellate confirmation at Netlaw.de. Like Virginia law and that of various other states, German law permits liens on, and garnishments of, intangible property, a principle confirmed by the new Munich decision, §857 Zivilprozessordnung (Civil Procedure Code, ZPO).

In June 2000, the Munich court found that an execution could not be permitted if the domain name was a family name. It reasoned that the personal rights protected by the Civil Code (Bürgerliches Gesetzbuch, BGB) and guaranteeing the sanctity of one's family name would be violated by a forced transfer of the family domain name to a creditor. Read the decision at Netlaw.de.

In February 2001, the court went a step further. It declared that domain names registered under the German domain registration system for the TLD .de, DENIC, are not "rights independently subject to liens into which can be executed through the cooperation of the judicial organs for the execution" of judgments. Read the ruling.

The court argued that it had to consider not only the protection of debtors and the rights of creditors but also the legitimate interests of the average internet user in the reliability of the internet naming system. Arbitrary transfers of domain names could cause confusion even if there is a legitimate trade in domain names. The average internet user would associate a domain name with its owner, the owner's activities, products and services, the court explained. An involuntary transfer through the involvement of the judicial system could lead to confusion if the creditor would begin to use the domain name for activities that a visitor would not associate with the debtor's.

The court also argued that such a transfer could mislead the average internet user about the identity of the domain.

Interestingly, the court contrasts the domain name registration process of DENIC, which excludes an obligation on DENIC's part for testing the legality of a domain name, with the examination conducted in the registration process for a trademark and with the independent rights of domain name owners in domain names. While the trademark examination process guarantees to the courts that a valid right would be transferred during the execution of a judgment, the courts do not have that assurance in the case of a domain name. The court also finds that the DENIC agreement with its registrants allows for the transfer of domain names subject to an extensive exclusion of liability on the part of DENIC and the assignment of the burden of legality to the registrant. It argues that DENIC's promise to transfer a domain name upon the instructions of a current registrant or a third party claiming better rights does not establish domain names as rights that are generally independent of registrants and as rights subject to the judicial execution process. The court recognizes that its findings seem to conflict with the fact that a market for domain names exist and that this market exists only because of their factual transferability. The court notes that the market is merely a result, not the purpose of the domain registration system and the statutes and case law developed in relation to that system.

In its conclusion, the Munich court argues that any other determination would improperly shift the burden of determining the legality of particular domain names from the parties to the courts during proceedings for the execution of judgments.

The author thanks attorneys Tobias H. Strömer at NetLaw.de and Boris Hoeller at BonnAnwalt.de for their kind permission to link to materials on their sites.
For a general discussion under German law, see also Harald v. Herget, Sind Domains Pfändbar?