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Small Business
Sex.com's sordid story
March 6, 2001: 6:53 a.m. ET

Case puts most bizarre domain name back in the spotlight
By David Lawlor
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NEW YORK (Business2.com) - The story of Sex.com reads like a Hollywood movie script.

Boy gets domain name, boy loses domain name, boy gets domain name back. Add in millions of dollars flying about, a possible run-in with Mexican authorities and, naturally, a climactic courtroom finale.

But real life is always stranger than fiction, and the case of Gary Kremen versus Stephen Michael Cohen et alia is no different. No movie could fully reveal the oddities and quirks of the case of the disputed Sex.com domain name.

A trial in a San Francisco court Thursday will bring the two men together, both hoping for very different endings to the tale.

The story begins in 1994 when Gary Kremen registered the name Sex.com with domain name registrar Network Solutions (NSOL), for free and without any official contract -- the way things were often done in the early days of the Web. At the time, the Internet was in its infancy -- Amazon.com (AMZN: Research, Estimates) was still a year away.

graphicAfter successfully launching the online dating service Match.com, Kremen turned his entrepreneurial attention to Sex.com. He hadn't developed a Web site to accompany the Sex.com nomenclature immediately after registering it. The domain name had sat empty.

While Kremen was busy developing his online dating service and registering Sex.com, Stephen Michael Cohen sat in federal prison serving a 42-month sentence for bankruptcy fraud. The prior felon had orchestrated a number of impersonation and deception schemes in the past. Cohen finished his bankruptcy fraud term in February 1995, and left federal prison.

Then the tale's first plot twist began. In October 1995, Network Solutions received a letter from a company called Online Classifieds Inc. stating that control of the Sex.com domain name was to be turned over to Cohen. The writer of the letter is listed as Sharyn Dimmick.

Dimmick, who was Kremen's roommate until April 1995, did not know Cohen, says Kremen's lawyer Pamela Urueta of San Francisco-based Kerr & Wagstaffe LLP.

Network Solutions obliged and transferred control of the domain name to Cohen.

Following the transfer, Online Classifieds Inc. informed Network Solutions that all correspondence would have to take place via mail or telephone -- because Online Classifieds Inc. did not have Internet access, Urueta says. Online company, no Internet access.

Following the transfer, Cohen developed the Sex.com Website and turned it in to a multimillion dollar venture. How many millions? It's hard to tell, because Cohen has refused to supply the court with accounting information for the Web site.

But the online pornography sector averaged $2.7 million per day in earnings in 1999, according to a U.S. House of Representatives report. The Internet pornography industry also represents the most consistently successful e-commerce product on the Web.

However, despite the huge amount of cash the Web site was generating, something was rotten in the land of online titillation. Kremen learned from a friend that Sex.com was operating as a pornographic Web site, he says. Attorneys were called, a lawsuit was filed, and the most bizarre domain name battle in the Internet's short history began.

The first item in question was the letter written to Network Solutions with Dimmick listed as the author. Urueta believes Cohen saw the Internet was becoming a global phenomenon after his release from prison and decided Sex.com could be a lucrative domain name on which to base a business. After finding the name was already taken, Urueta says, Cohen decided to deceptively gain control of the Web property.

graphicShe contends that Cohen forged the letter after learning who Dimmick was, as the first step in his plot to take over the domain name. Cohen's lawyer, Robert Dorband of the law firm DuBoff Dorband Cushing and King in Portland, Ore., says Cohen did not forge the letter.

In the end it didn't matter who authored the transfer memo, because in November 2000, the U.S. District Court in San Jose found the letter was fraudulent and therefore the transfer of Sex.com from Kremen to Cohen was void. Sex.com was Kremen's again.

But Cohen argued that the letter and the court's view was irrelevant. He now claimed Sex.com was his before Network Solutions received the letter from Dimmick. In fact, Cohen said he had been using the Sex.com name as long ago as 1979.

Before heading to federal prison, Cohen had run a bulletin board for swingers and operated it from 1979 into the 1980s. One of the areas on the bulletin board used the three-letter file extension ".com" and was preceded by the word "sex," Dorband says.

Trademark law does not require one to register a name to own it, but simply to use the name for a period of time. Citing that law, Cohen claimed that since he had used the term Sex.com since 1979, the moniker was his.

The judge didn't buy it.

For Kremen, the only matter remaining now was the amount of money he should be rewarded from the Web site's earnings while under Cohen's leadership. At the November 2000 hearing, Judge James Ware ordered Cohen, along with two other corporate defendants, to place $25 million in the court's control, pending final judgment and assessment of damages. The judge also ordered Cohen not to transfer any assets.

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  It's a very strange case.  
     
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  Robert Dorband  
In defiance of those two orders, Cohen did not place $25 million in the court's bank and did transfer money to accounts outside of the United States, says Urueta. She adds that Cohen has been sending money to banks in Luxembourg and other such countries for some time in order to avoid seizure of his assets. Cohen's lawyer confirms that the $25 million was not placed, and that money was transferred after the court order.

Cohen was held in contempt on March 5 for violating the court's orders and for failing to appear in court on another date. The judge's decision steming from those violations will disallow Cohen to present evidence at the trial scheduled Thursday. The judge also issued a warrant for Cohen's arrest for failing to comply with court orders.

Cohen could not be reached for comment. Network Solutions declined requests for an interview.

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  I still need to figure out exactly what's going on with the Web site. But I don't really want it to be a porno site.  
     
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  Gary Kremen  
"It's a very strange case," says Dorband. "It has some unusual characters, who really are more alike than they are different. I think if they [Kremen and Cohen] had met each other in some different forum they would actually be friends."

Since Kremen has regained control of Sex.com, he says he has toned down the nature of the content and may eventually shift the Web site's focus away from pornography and make it an educational property.

"I still need to figure out exactly what's going on with it [the Web site]," Kremen says. "But I don't really want it to be a porno site."

Dorband says the case sets no real precedent for future domain name battles.

"This whole case is really an anomaly," Dorband says. "Everything happened when, for a brief time, Network Solutions had no written agreement with its customers. Now, with contracts, you also have property rights to your domain name. If that would have been the case to start with, then who knows what might have happened in this situation."      graphic





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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.