Dear Debtor, Pay Up or Lose Your Domain Name
On March 23, 2016, the state’s high court clarified that domain names are property subject to garnishment under Minnesota law. Sprinkler Warehouse, Inc. v. Systematic Rain, Inc., d/b/a GPLAWN.com, No. A14-1121 (Minn. March 23, 2016).
Systematic Warehouse, Inc. (Systematic) was a business located in Shakopee, Minnesota, that provided lawn care and sold sprinkler parts prior to its dissolution in April 2014. Systematic operated a website under the domain name GPLAWN.COM. Sprinkler Warehouse, Inc. (Sprinkler) is located in Houston, Texas, and is an online distributor of sprinkler parts. Sprinkler brought a copyright infringement action against Systematic based on material posted to Sprinkler’s website. In 2012, a federal district court in California entered a $156,000 judgment against Systematic.
Thereafter, Sprinkler sought to attach Systematic’s domain name, GPLAWN.COM, to its garnishment summons. Systematic argued that domain names are not subject to garnishment because “the contractual right to use the alphanumeric designation that comprises a domain name cannot exist apart from the contract for services performed by a domain name registrar.” Therefore, according to Systematic, a domain name is a contract for services and not property.
The sole issue before the court was whether a domain name is attachable by garnishment under Minnesota law. The crux of the dispute turned on the plain meaning of the phrase “intangible or tangible personal property” in Minn. Stat. § 571.73.
The court concluded that a domain name is intangible personal property within the meaning of the statute and is therefore subject to attachment by garnishment for three reasons.
- Logically, a domain name falls within the plain meaning of “intangible personal property.” A domain name has no physical presence and all combinations of top-level and second-level domain names are unique, and thus a registrant has the right to exclude others from using that name.
- The scope of the statute is broad and covers “all other” intangible personal property not subject to the exemptions in subdivision 3 and the exceptions in subdivision 4 (none of the exemptions or exceptions applied in this case).
- A majority of courts that have considered the question have concluded a domain name is personal property.
The court noted, however, an outer boundary to the scope of the statute does exist, and is inherent in the meaning of “intangible personal property,” but went on to state that it “need not determine the exact location of that boundary in this case, but we conclude that domain names fall within it.”
Judgment creditors should consider garnishing a debtor’s domain name as a means to satisfy a judgment. As a practical matter, an appropriate way to do so is for the court to compel the garnishee to transfer the domain name to a receiver for sale. The sale by a receiver allows the value of the domain name to be applied against the judgment debt.
If you have an intellectual property matter, the attorneys at Fredrikson & Byron P.A. can help you understand your rights and advocate for your interests.