Domain Masters Radio Show

What is personal liability protection and how can it protect domainers?

Monte: Okay, great. Well, before we move onto the next point, I want to answer some of the questions that are popping up on the--

Ari: Sure.

Monte: --chat. One, I think it was Topnames was asking, have you ever been involved in a case where, and I’m sure you have, that the trademark holder filed, you know, and won financial damages based off of a trademark violation in a domain name case?

Ari: Financial damages, yeah, I mean, it happens. In a federal--you know, that would happen in a court case, not--never in a UDRP case, but, you know, generally these cases have been settled.

Monte: Right, a lot of [inaudible] settled. I mean, going back into the case that we were involved in, there was financial damages, or financial settlement in that case, without going into--

Ari: Exactly.

Monte: --details. But--

Ari: Right.

Monte: --the--

Ari: I’m not aware of any case where--well, there are cases where damages have been awarded, particularly under the Anti Cyber-Squatting Consumer Protection Act. I think that’s a greater worry than any type of actual damages, are the statuary damages, which provide up to $100,000.

Monte: Now, explain how one would win that particular, up to that amount of damage, just so we educate the community.

Ari: Well, the judge has the discretion to award as a penalty up to $100,000 per domain name, simple as that. It doesn’t have to be actual damages. The statute simply provides for up to $100,000 in damages.

Monte: Wow, okay. So the judge can just come on and say, hey, and on top of, you know, losing the domain name, you’re gonna be hit with, you know, this penalty?

Ari: Exactly, and that’s a real good reason for why domain name owners should not be so brazen when they’re sued in federal court, and it’s also a reason why if you lose a domain case at [inaudible], not to jump and file a case in court, thinking, for example, that you’re gonna buy time.

Monte: Oh, I see.

Ari: You know, this name is making me 100 bucks a day, I’m just gonna file a case in federal court, because what do I got to lose, I’m only gonna lose a domain name. You know, if I can drag this out for another year, I’m gonna make $100 a day, that’s good money to me. Well, the problem is is that you run the risk of, you know, getting a $100,000 judgment against you--

Monte: Right, right.

Ari: --under the ACBA [ph].

Monte: Okay. The other thing that we want to cover is when I had Steven Lieberman on, he gave some really good ideas on how to--you know, some key things about incorporating yourself to protect you from, you know, just basic legal advice about how to form the best type of corporation when you’re involved with domain names and your own domain names. I mean, as we know, a lot of the big domain name holders have offshore companies and hold their domain names outside the United States, and perhaps you can give some insight and some legal advice about the best way to protect yourself or to establish yourself with a domain portfolio, you know, that gives you the best legal protection if anything arises.

Ari: Well, you know, to tell you the truth, I’m not--I never advise for people to find of run and hide, because one of the things that that does is it immediately creates the impression that you’re illegitimate. There are a lot of big domain holders--

Monte: Or that you don’t want to pay taxes.

Ari: --well, no, I mean, if you’re a--listen, if you’re a domain holder in the US, you can’t avoid taxes by setting up a corporation overseas.

Monte: Right, right.

Ari: That’s gonna be a tough thing to do. If you are overseas, though, then, you know, it certainly makes sense, you know, why should you set up in the US, there’s no real good reason for doing that. But let me just say that I’m not a tax attorney, so I’m not gonna give any advice that would have--you know, no one should rely on my advice with respect to tax, as far as setting up overseas. I don’t have expertise there, best to speak to a tax attorney or an accountant. But like I said, I think there’s something to be said for being set up in the US, it looks legitimate, it looks like you having nothing to hide if you are a US business. It does make sense to set up as a corporation so you don’t have personal liability, no question about it, and it may also make sense to set up your domain names under different corporations, so if you get hit on one domain name, you’re not hit on the other domain names.

Monte: Right, right. So they can’t say hey--

Ari: But I really don’t recommend, you know, setting yourself up in a foreign land for no other reason than to hide, because ultimately, you will be subject to--if you’re doing business in the US, pay-per-click, for example, you will be subject to litigation here. Even if they can’t serve you overseas, they can always sue the domain name in Virginia. They can come against you where the registry is located, under the INRAM [ph] provisions of the Anti Cyber-Squatting Consumer Protection Act. But, you know, establishment of corporations is not really an area that I specialize in, I’m more of a litigator, as opposed to a transactional attorney.