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High Court Contract Dispute Focuses on Online Gambling Domain Name

Internet domain names often change hands for large sums of money and disputes in respect of their ownership are an increasing source of litigation. A High Court ruling in one such case concerned a domain name which had strategic potential in the online gaming industry.

The domain name, which was identical to the name of a popular card game played in casinos worldwide, was acquired for $465,000 and later came into the hands of an online gambling business based in the Cayman Islands. It entered into a written agreement with a Uruguayan company whose owner and sole director was a businessman who had expertise in the online gambling market, particularly in the UK. The agreement was governed by English law.

Under the agreement, the domain name was transferred to the Uruguayan company, together with the website, goodwill and customer data associated with it. It agreed to pay $250,000 to the Cayman Islands company together with a percentage of revenue generated by the ongoing business.

Although the $250,000 was paid, the Cayman Islands company claimed that the Uruguayan company had failed to pay commissions due to it. It gave written notice terminating the agreement and launched proceedings, seeking a declaration that it had lawfully resumed ownership of the domain name. The Uruguayan company had since been dissolved and the businessman, to whom the domain name had been transferred, was the sole effective defendant to the claim.

Ruling on the matter, the Court found that the Uruguayan company was in persistent, material and irremediable breach of the agreement in failing to keep financial records of the business which were sufficient to enable the commissions to be calculated. It had failed in its contractual obligation to provide the Cayman Islands company with details of transactions and income generated by the website.

On valid termination of the agreement, the Cayman Islands company had acquired an equitable interest in the domain name. No transaction since then had deprived it of that interest. On that basis, the Court found that the Cayman Islands company was entitled to call for the assignment to it of full ownership of the domain name and the goodwill attached to it. The precise terms of the relief to which the Cayman Islands company was entitled in the light of the Court's ruling would be considered at a further hearing, if not agreed.

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