The Ontario Court of Appeal rules that a domain name is “personal property”

August, 2011

In a decision delivered on August 5, 2011, the Ontario Court of Appeal ruled on whether a domain name constitutes personal property under the Rules of Civil Procedure and how a domain name may establish a real and substantial connection to Ontario.

Facts

In this case, a dispute arose between the ownership of a .com domain name called renner.com.  Renner.com is owned by Twocows Co. which is incorporated in Nova Scotia and has its head office in Toronto.  Twocows became the owner of the domain name after it purchased it from Mailbank Inc. on June 15, 2006.  Lojas Renner S.A. is a Brazilian company and the owner of the registered trademark “Renner” in Brazil and other countries.

At the Court of Appeal the main issue was whether the service of Twocows’ statement of claim on Lojas Renner outside of Ontario is valid or should be validated.  In going through that analysis, the court had to determine whether a domain name is personal property in Ontario, as Rule 17.02(a) of the Rules of Civil Procedure permits service outside of Ontario without a court order in respect of real or personal property in Ontario.

Is a Domain Name “personal property” within the meaning of Rule 17.02(a)

In making its determination concerning whether a domain name is personal property, the court considered judgments and approaches to that question from several other common law jurisdictions.  The court concludes from its analysis that there is an emerging consensus that domain names are a form of property.  The court also finds that property is best defined as a collection of rights over things that can be enforced against others and that such approach has been adopted in the jurisprudence as well.

In applying its conclusions on property law to the issue of the domain name, the court says that the bundle of rights owned by Twocows, as purchaser and registrant, in respect of the domain name renner.com satisfies the legal definition of property which requires that the owner of these rights can enforce them against all others.

For example, Twocows derives income from being the holder of the rights in the domain name, has fourteen (14) clients who subscribe to personal e-mail services using the domain name, and that if the domain name were ever transferred to Lojas Renner, then its use would provide a commercial benefit to Renner’s business.

Also, Twocows as the registered owner of the domain name has the right to exclusively direct traffic to the domain name’s corresponding website and exclude anyone else from using the same name.  The ability to exclude others from the enjoyment of, interference with, or appropriation of a specific legal right was held as a necessary incident of property.  The domain name may be renewed at the end of its term and such renewal is not subject to any unfettered discretion to refuse such renewal.                                                                                                    

The court even goes a step further and states that a domain name also satisfies higher requirements for a finding of a property right, namely, that the property right in a domain name is definable, identifiable by third parties, capable in its nature of assumption by third parties, and has some degree of permanence or stability.

The rights that Twocows has in the domain name renner.com have been identified by Lojas Renner and are the reason Lojas Renner wants the domain name transferred to it.  Twocows’ ownership of the domain name has a degree of permanency as it has owned the domain name since 2006.

Therefore the court concludes that Twocows has a bundle of rights in the domain name renner.com that constitutes “personal property” within the meaning of Rule 17.02(a).

Can a domain name be considered property in Ontario for the purposes of 17.02(a)?

The court applies the “connecting factors” test from Williams v. Canada, [1992] 1 S.C.R. 877, at pp. 891-93, in which the situs of intangible property is determined by where it has the strongest contacts.  In this case, the court rules that the domain name renner.com as a business asset of Twocows in the form of intangible property has its maximum contacts with Ontario.  The reasons for that determination are that the registrant of the domain name, Twocows, has its head office in Toronto.  The location of the registrar is important because without the domain name registrar being subject to the court’s jurisdiction, questions of the enforceability of the order could arise.  Therefore, the court holds that for the purpose of Rule 17.02(a) the domain name renner.com is intangible personal property located in Ontario.

Commentary

This is an important case in which a prominent and influential court in Canada has conducted analysis and ruled on the question of whether a domain name constitutes personal property.  It remains to be seen about whether this ruling will apply only to the definition of personal property in Rule 17.02(a) of the Rules of Civil Procedure or whether property in other legal contexts will also be held to include domain names.  In any event, I do think that this judgment will have influence on other courts when they consider whether a domain name is property in different contexts and under different statutes.

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Ryan K. Smith is a lawyer and trade-mark agent at Feltmate Delibato Heagle LLP. He specializes in corporate and commercial law with expertise in intellectual property matters including trade-marks, copyrights, privacy, information technology, and confidential information.  You can reach Ryan at rsmith@fdhlawyers.com and (905) 287-2215.