In a summary judgment that carries important lessons for small businesses, the Ontario Superior Court recently confirmed that registering a domain name does not always equal ownership, says Toronto IP lawyer John Simpson, who successfully represented the plaintiff in the case.
In Mold.ca Inc. v. Moldservices.ca, the plaintiff, Gregg Dalrymple, and the defendant, Ross Sullivan, co-founded a mold inspection and removal business. While Dalrymple was responsible for startup costs and managing the business, Sullivan handled information technology and purchased a number of domain names using the company credit card, registering the sites under his own name. When he left the company, Sullivan took the registrations and passwords with him and subsequently transferred them to a third party.
“The issue before the court was somewhat novel: can someone other than the registrant of a domain name be its lawful owner – own title in it – where there is no evidence that the domain name was registered in bad faith or that it infringes a trademark? Courts are typically reluctant to decide novel issues like this on a summary judgment motion, without the benefit of the full evidentiary record that it would have at trial,” Simpson tells AdvocateDaily.com.
In this case, says Simpson, the plaintiff had already tried unsuccessfully to have the domain names transferred through the usual domain name dispute resolution process.
While the 2011 Ontario Court of Appeal decision in Tucows v. Renner confirmed that domain names can be considered personal property for certain procedural purposes, Simpson says the question remained as to whether they could also be stolen, seized for the payment debts, or whether title in a domain name could exist independently of a registration.
Simpson tells Law Times that there was some concern that the court would take a very rigid view as to what ownership of a domain name actually means.
“Ownership is a very nebulous legal concept, and with respect to a domain name, the obvious owner would be the person who registered it. We’re pleased the judge was bold enough to look past the easy answer. Here the person who registered it wasn’t the person who, under the classic principles of property law, had been possessing it. That was the company that was using it for its business," he says.
“The decision in the Mold.ca case says that domain names are, indeed, like any other form of personal property that can be ‘owned,’ like a car, a computer or a photocopier,” he explains.
While the company was ultimately able to recover the domain names in this case, one of the lessons it provides is the importance for small businesses to manage their intangible assets, such as domain names, trademarks and copyright, says Simpson.
“Intangible assets can be very valuable and need to be protected in the same way as your physical inventory. They may well be much more valuable than your physical assets. If you’re relying on [search engine optimization], your domain name could be the No. 1 asset. The other thing is that wherever you have people doing business together, there need to be very clear agreements in place between the parties as to who owns what," he tells Law Times.
As relationships between the principles in a small business often break down, Simpson tells AdvocateDaily.com that it is important that "all key intangible assets are secured by the company in the company’s name and not in the name of an individual who may not always be with the company."