Ontario Court of Appeal recognises domain names as personal property

Canada
In Tucows.Com Co v Lojas Renner SA (2011 ONCA 548), the Ontario Court of Appeal has followed the international trend of defining domain names as personal property. The implications of this new definition may provide a procedural advantage to Ontario holders of disputed domain names; however, the location of the domain name registrar, servers and end users may diminish this advantage. 
 
Tucows.Com Co, an accredited registrar of domain names, is incorporated under the laws of Nova Scotia with a principal office in Toronto, Ontario. Following the purchase of over 30,000 domain names from a third party, Tucows acquired, as both the registrar and registrant, the domain name 'renner.com'. Lojas Renner SA is a Brazilian retailer and the registered owner of the RENNER trademark. 
 
Renner engaged the Internet Corporation for Assigned Names and Numbers (ICANN) domain name dispute resolution process by alleging that:
  • the domain name 'renner.com' is identical to Renner’s trademark;
  • Tucows has no rights or legitimate interest in the domain name; and
  • the domain name was registered and being used in bad faith. 
Under the ICANN process, Renner selected the World Intellectual Property Organisation to administer the dispute resolution process. Renner sought an order to require Tucows to de-register the domain name to permit its transfer to Renner.
 
Rather than responding to the allegations under the ICANN dispute resolution process, Tucows commenced an action in the Ontario Superior Court of Justice seeking a declaration that:
  • it had rights or legitimate interests in the domain name;
  • the domain name had never been used in bad faith by Tucows; and
  • Renner was not entitled to the transfer of the domain name.
The statement of claim was served on Renner without leave.

In response, Renner brought a motion to set aside the service of Tucows' statement of claim and to stay Tucows' action for want of jurisdiction. Tucows relied upon Ontario Rule 17.02(a), which permits service ex juris without leave when the matter relates to real or personal property in Ontario. Renner was successful before the motions judge and Tucows appealed.
 
The primary issue before the Court of Appeal rested on a determination as to whether domain names are properly classified as personal property to satisfy the requirements of Rule 17.02(a). 
 
The appeal court surveyed international jurisprudence and found that there is a developing trend of accepting domain names as a new type of intangible property. For example, the US Court of Appeals for the Ninth Circuit found that domain names are intangible property because they meet a simple tripartite test for a property right. They are capable of precise definition, exclusive control and of giving rise to claims of exclusivity (see Kremen v Cohen (337 F3d 1024 (9th Cir 2003)), the tripartite test for whether property right exists).  

Further, India’s Supreme Court determined that, similar to trademarks, domain names are capable of distinguishing trades and services on the internet which can lead to the accrual of goodwill associated with a domain name (Satyam Infoway Ltd v Siffynet Solutions Pvt Ltd (AIR 2004 SC 3540, [2005] 2 LRC 97)). The Ontario Court of Appeal’s survey included academic discussions of property rights as a collection of intangible rights over things that are enforceable against others (2011 ONCA 548, supra at para 60). 
 
The Ontario Court of Appeal found that domain names satisfy the attributes of exclusivity, definability and a degree of stability and, therefore, domain names are now categorised as intangible personal property for the purposes of Rule 17.02(a). The court then proceeded to consider the 'location' of that property.
 
In order to determine whether the domain name was personal property “in Ontario”, the court engaged the 'real and substantial connection' test, wherein the situs of the intangible property right is determined by the jurisdiction of its strongest contacts. The court determined that the relevant factors for finding connecting factors relating to the internet include the location of the content provider, the host server, the intermediaries and the end user (the court of Appeal followed the guidance of the Supreme Court of Canada’s decision in Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers (2004 SCC 45)). The court found that the location of the registrant of the domain name, the registrar, and the locations of the servers as intermediaries established the situs of the domain name as being in Ontario.
 
The court placed particular emphasis on the location of the registrar given the practical implications of enforcing an Ontario court order upon that registrar. Within domain name disputes, the desired remedy is often an order directing the domain name registrar to effect transfer of the domain name from one party to the other.
 
The implications of this decision are numerous. From one perspective, this decision supports the widely held view that the definition of property is flexible. This flexibility allows domain name holders to protect the accrued value in their domain names. This may raise important issues in the context of bankruptcy and insolvency. Time will tell how trustees, courts and creditors will deal with this newly categorised property right. To date, trustees and receivers in bankruptcy have been dealing with domain names as if they were property of the debtor, and this decision supports that position.
 
Further, where does a secured creditor register a security interest in a domain name? Perhaps domain names will now be held to fall within the provisions of “all present and after acquired property” clauses of security agreements so that registration with the Ontario Personal Property Registry (and equivalent registries of other provinces) with be sufficient. This decision of the Ontario Court of Appeal, although not binding on courts of other provinces, should be persuasive.
 
From a procedural perspective, this decision provides a basis for Ontario domain name holders to ignore the ICANN dispute resolution process and, if necessary, engage the procedural 'home court' advantage of an Ontario court. However, the flexible application of the facts of each case to the multi-faceted situs test provides scope for an Ontario court to find an insufficient connection to Ontario so that the home court advantage may easily be lost, at considerable expense. Further, if the registrar of a disputed domain name is located outside of Ontario, that alone may be sufficient for an Ontario court to find that the personal property is not located in Ontario. Alternatively, courts may apply the doctrine of forum non conveniens where another jurisdiction may be more convenient for resolution of the dispute even though the registrar is located in the province.
 
This decision may, in the future, help provide guidance respecting jurisdiction and appropriate forum in disputes respecting other forms of intangible property.
 
Gordon Zimmerman and Timothy Bailey, Borden Ladner Gervais LLP, Toronto

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