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Sunday, February 01, 2009

Law - Yet more on "Kentucky Tests State's Reach Against Online Gambling"

Updating this list of earlier ILB entries under the same heading, Marcia Coyle of The National Law Journal has this lengthy story, dated Feb. 2, headed: "Kentucky suit has Web world in tizzy; At issue: forfeiture of domain names of gambling sites." Some quotes:

WASHINGTON — What if China seized the domain names of U.S. Web sites promoting religions that China bans? Or what if (horrors of horrors!) Nebraska seized and shut down the domain name law.com because its cutting-edge legal content, that state believed, encourages frivolous litigation in violation of state law?

Preposterous, right? Well, not so incredible as to stop a battery of lawyers for Internet businesses, domain registrars, civil liberties groups and others from engaging the state of Kentucky in legal battle over that state's attempt to halt Internet gambling by seizing 141 domain names whose owners are located primarily out of state or overseas.

Kentucky, which prohibits online gambling, persuaded a state trial judge last fall that the domain names were illegal gambling devices under state law, and the judge issued the forfeiture order to registrars — not owners — of the domain names. An intermediate appellate court recently disagreed, 2-1, and the state government late last month filed its notice of appeal with the Kentucky Supreme Court. Vicsbingo.com and Interactive Gaming Council v. Wingate and Kentucky, No. 2008-CA-2036.

As it heads into the state high court, Kentucky sees even odds: Two judges have agreed with its approach and two have disagreed, said Michael Brown, secretary of the Kentucky Justice and Public Safety Cabinet, who, along with Governor Steve Beshear, is leading the state's effort.

But there is nothing "even" about the impact on Internet businesses if Kentucky's legal approach prevails, say its opponents.

"I think it would make the lay of the land very uncertain for Internet businesses," said John Krieger, a partner in the Las Vegas office of Phoenix-based Lewis and Roca, and counsel to the Poker Players Alliance, which filed an amicus brief opposing Kentucky.

The whole idea behind the law, he said, is to try to make it clear enough so businesses can structure their conduct accordingly and see the legal ramifications of their actions.

"If Kentucky were able to go ahead, it certainly would make it much more uncertain for Internet businesses as to what conduct they could engage in and what jurisdiction and laws they would be subject to," he added. "It opens up a Pandora's box."

And it is a box with national and international implications, said A. Jeff Ifrah, shareholder in the Washington office of Greenberg Traurig, who, along with Bruce Clark and Ian Ramsey, Kentucky partners at Stites & Harbison, is counsel to the Interactive Gaming Council, whose members include about 60 owners of the 141 domain names at issues.

"The long-term consequence is you could have any state official on a Web-site-by-Web-site basis making moral or other determinations as to whether they believe their residents should have access," he said. "That's a First Amendment issue, a dormant commerce clause issue and an anyone-in-the-Internet business issue."

More from the story:
The Kentucky litigation, according to Krieger and others, is the first of its kind. The state's move to get a court order demanding forfeiture of the domain names mobilized strong reaction from associations and trade groups that represent the registrars of those domain names as well as from civil liberties groups such as the Center for Democracy and Technology (CDT), the Electronic Frontier Foundation and the American Civil Liberties Union.

"No state that I know of has kind of gone down this path of trying to use domain names to control something on the Internet," said John Morris, general counsel of the CDT. "There are lots of problems, putting aside the really big picture of free speech and censorship. Although there are certainly areas like protecting privacy that state governments are well suited to help in the process of addressing content on the Internet, in most areas, the Internet is really like the interstate highway system. A particular state shouldn't require all trucks driving through the state to use a different size tire than other states."

Although the Kentucky litigation raises a number of constitutional and other legal questions, the core concern for Internet business owners is the jurisdictional issue.

Does a state court have the authority or power to seize domain names when none of the domain owners is present in the state and all of the names are registered outside of the state?

Posted by Marcia Oddi on February 1, 2009 01:29 PM
Posted to General Law Related