A. INTRODUCTION
On August 5, 2011, the Ontario Court of Appeal released
its judgment in Tucows.Com Co. v. Lojas Renner S. A., in which Weiler J.A., writing for the Court, held that a domain name
constituted “personal property in Ontario.” For the purposes of the case, the
ruling meant that the dispute was within the jurisdiction of the Ontario
Superior Court. However, the decision may have further implications which may
affect charities and not-for-profit organizations. The recognition of a domain
name as personal property, to which various rights attach, means that domain
names may now be regarded as valuable assets belonging to an organization which
must be treated accordingly. In particular, directors of charities should take
notice, as the responsibility of directors to identify, protect and apply the
assets of a charity to its charitable objects may now be extended to a
charity’s domain names.
B. BACKGROUND
The Tucows case arose out of a dispute over the
domain name Renner.com. Tucows.Com Co. (“Tucows”) is a technology corporation
whose principal office is located in Toronto. Tucows is the registrant of
Renner.com with the Internet Corporation for Assigned Names and Numbers (ICANN).
Loljas Renner S. A. (“Renner”) is a Brazilian company which operates retail
department stores, and owns the registered trade-mark RENNER in Brazil and
several other countries.
To resolve disputes where a trade-mark holder believes
that a domain name registration infringes on its trade-mark, ICANN has adopted the
Uniform Domain Name Dispute Resolution Policy (the “UDRP”). Under the UDRP, a
complaint against a domain name will give rise to mandatory administrative
proceedings in which the domain name owner must answer the complaint or else
lose its domain name registration. Renner brought a complaint against Tucows under
the UDRP rules, alleging that Tucows had no right or legitimate interests in
respect of the domain name Renner.com, and that the domain was registered and
is being used in bad faith.
Rather than responding to the allegations set out in
Renner’s complaint, Tucows commenced an action against Renner in the Ontario
Superior Court of Justice. After the statement of claim had been issued, Tucows
asked the dispute resolution panel acting pursuant to the UDRP to exercise its
discretion to suspend or terminate the proceeding to allow the issues to be
resolved by the Ontario Superior Court of Justice. The panel granted this
request and terminated the proceedings. On a motion before the Ontario Superior
Court of Justice, Renner argued that Tucows’ service of the statement of claim
should be set aside and that the Court did not have jurisdiction to hear the
case.
C. THE ONTARIO SUPERIOR COURT DECISION
Tucows argued that it was entitled to serve the statement
of claim outside Ontario without leave pursuant to rule 17.02(a) of the Rules
of Civil Procedure, which states:
17.02
A party to a proceeding may, without a court order, be served outside Ontario
with an originating process or notice of a reference where the proceeding
against the party consists of a claim or claims,
(a)
in respect of ... personal property in Ontario[.]
The motions judge of the Ontario Superior Court held that
a domain name was not “personal property” within the meaning of the rule and that
it was not “located in Ontario” Therefore, she concluded, there was no
presumption of a “real and substantial connection” to Ontario. On these
grounds, she set aside the service of Tucows’ statement of claim and stayed the
action. The motions judge further pointed out that the acceptance of
jurisdiction by the Ontario Superior Court would have allowed Tucows to
undermine the administrative process under the UDRP.
D. THE ONTARIO COURT OF APPEAL DECISION
In the Court of Appeal’s decision, Weiler J.A. dismissed
the motions judge’s concerns about undermining the UDRP process, concluding
that “the UDRP and the UDRP Rules contemplate the possibility of litigation
before domestic courts and ... the assumption of jurisdiction by the Ontario
courts would therefore not undermine the administrative process.” The Court
continued in its reasons to allow Tucows’ appeal, ruling that a domain name is personal
property within the definition of rule 17.02(a), and that because the
presumption of a real and substantial connection to Ontario therefore exists,
the dispute is within the jurisdiction of the Ontario Superior Court.
In determining that a domain name meets the definition of
personal property, the Court of Appeal considered the nature of a domain name
as compared to other forms of so-called “intangible property”, such as a
copyright or trade-mark. Key to the determination that a domain name
constituted property, was the finding that registration of a domain name
confers upon the registrant a “bundle of rights” enforceable against others. With
a domain name, those rights include the right to direct traffic to the domain
name’s corresponding website and to exclude anyone else from using the same
name. The Court also determined that the domain name was personal property “in
Ontario”, such that the definition in rule 17.02(a) was met. Weiler J.A.
commented that “Simply because a domain name is intangible property does not
mean that it cannot have a location that allows a court to ground jurisdiction
... in Williams v. Canada, [1992] 1 S.C.R. 877, at pp. 891-93, the
Supreme Court developed what is now referred to as the ‘connecting factors’
test, in which the situs of intangible property is determined by where it has
the strongest contacts.” The Court went on to conclude that the domain name
Renner.com, as a business asset of Tucows, has its maximum contacts with
Ontario. In this case, the connecting factors which favoured the determination
that the domain was located in Ontario were “the location of the registrant of
the domain name, as well as the location of the registrar and the servers as
intermediaries.” Particular emphasis was given to the fact that the registrar,
being in Ontario, was subject to the court’s jurisdiction. As Weiler J.A.
pointed out, if the registrar were not in Ontario, questions of the
enforceability of the order could arise.
E. DISCUSSION
With respect to future disputes over the rights to domain
names, the Tucows decision confirms that there is an alternative to
ICANN’s UDRP process. Benefits of proceeding by way of a court proceeding as
opposed to an administrative proceeding under the UDRP rules include the advantage
of discovery process, greater opportunity to challenge the testimony of live
witnesses, and a deeper exploration of the facts of a case. However, a
significant downside to bringing a court action rather than an administrative
proceeding is that a court proceeding may be prohibitively expensive for some
complainants. In this regard, some complainants who would have a reasonable
chance of succeeding at a UDRP dispute resolution panel may be unwilling or
unable to pay for their case to be heard in court. The Court’s finding that the
location of the registrar was a key factor in determining whether a domain was
personal property “in Ontario” may encourage some organizations to register
their domains with an Ontario registrar, in order to strengthen the connection
between their domain name and the jurisdiction of the Ontario Courts.
Aside from dispute resolution implications, the decision
of the Ontario Court of Appeal that a domain name is personal property is
likely to impact other areas of law as well. For instance, it is arguable that
a creditor could enforce its security against a domain name under Ontario’s Personal
Property Security Act. Further, some domain names may be considered to be
valuable assets for the purposes of bankruptcy, tax, corporate or even family law,
and would need to be dealt with appropriately. As mentioned above, directors of
charities have an obligation to identify, protect and apply the assets of a
charity to its charitable objects. In this regard, steps should be taken to
protect and maintain a charity’s domain names. This should include ensuring
that the organization is monitoring domain name renewals, and registering
confusing domain names which may otherwise be used by third parties in a way
that diminishes the good will associated with the domain names belonging to the
charity. Charities and not-for-profits should also carefully monitor further
developments in the law pertaining to the treatment of domain names, as well as
the policies and guidance documents of provincial and federal authorities.