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Sex.com Reaches Finish Line

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Apr 20, 2004 9:58 AM PDT    Text size: 
SAN FRANCISCO – Sex.com owner Gary Kremen reached a final settlement Monday following a prolonged six-year legal battle with registrar VeriSign, formerly Network Solutions Inc.

Kremen would not disclose the settlement amount due to a confidentiality agreement, although a source close to the litigation told XBiz that it was between $40-60 million.

Along with the settlement came a landmark decision by the 9th U.S. Circuit Court of Appeals that domain names are property and that registrars will hereafter be held accountable for their mishandling of the Internet domain name system.

"There are several people being sued by Acacia in our industry and some countersuits going on," Kremen told XBiz. "But people are going to have to realize that it takes years for these things to resolve themselves if people want to really fight it out."

The court found that VeriSign was subject to the "tort of conversion" by not returning property that was owned by another party, in this case Kremen, and despite Kremen's attempts to regain ownership of his rightful domain property, Verisign did not correct the error.

“It was already damaging that VeriSign had taken my domain name away from me without my permission, and refused to give it back when shown proof that it was stolen,” said Kremen, CEO of Sex.Com. “I’m ecstatic that we have reached a settlement so we can put the case behind us and find peace in knowing that the 9th Circuit’s opinion in the Sex.Com case will have an influential role in holding Internet registrars responsible for mishandling their customer’s domain name properties.”

The Sex.com domain name was stolen by ex-con Stephen Cohen in 1995 after Cohen convinced Network Solutions to transfer ownership of the domain based on a bogus letter. Although it was later revealed in court proceedings that the letter never existed and that Cohen had managed to transfer ownership simply by calling the registrar.

VeriSign allegedly made no attempt at the time to verify Cohen’s relation to Sex.Com.

Kremen won a $65 million judgment against Cohen and then went after Network Solutions for further damages. The judgment won again Cohen was never paid in full but included property seizure of one of Cohen's homes in the affluent suburb of Rancho Santa Fe, Calif.

Cohen is officially a fugitive and can no longer return to the U.S. Kremen put out a bounty of $50,000 last year for anyone who brings him back legally.

“Gary’s Sex.Com victory is likely to influence legal developments in important areas beyond domain names," said Douglas Masters, a partner with Loeb & Loeb LLP in Chicago. "In this digital age, the handling of intangible property has taken on enormous importance. The 9th Circuit’s decision is an important step in applying settled principles to this new realm.”

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