What’s in a (Domain) Name? Ontario Courts, International Administrators, and Intangible Property in Tucows.Com Co. v. Lojas Renner S.A.

The legal concept of property is fluid and dynamic. It evolves over time in relation to “changes in the purposes which society or the dominant classes in society expect the institution of property to serve” [CB Macpherson in Mary Jane Mossman & William F Flanagan, eds, Property Law Cases and Commentary (Toronto: Edmond Montgomery Publications) at 2].

Recently, the Ontario Court of Appeal (“OCA”) contributed to this very evolution in Tucows Com Co v Lojas Renner SA, 2011 ONCA 548 [Tucows], a decision that deemed a company’s domain name to constitute intangible property within the meaning of rule 17.02(a) of the Rules of Civil Procedure, RRO 1990, Reg 194.

This finding, in turn, grounded the jurisdiction of Ontario courts to hear disputes relating to the use of domain names as an alternative forum to international administrative tribunals specifically set up for that purpose. Tucows is significant in that it highlights the ways in which domestic law adapts itself to changes in technology and, a logical corollary, to the greater internationalization of commercial activity that comes with it.

Facts and Judicial History

Tucows, a Canadian company incorporated in Nova Scotia with its principal office in Toronto, uses <Renner.com> to provide personalized e-mail service to clients. It is a registrant with the Internet Corporation for Assigned Names and Numbers (“ICANN”), an internationally recognized non-profit organization which oversees the central domain name registry system.

In order to become an accredited registrar under this system, Tucows was required to submit to ICANN’s Uniform Domain Name Dispute Resolution Policy (“UDRP”) and related Rules. Under these rules, a trademark owner that believes a domain name registration infringes on their trademark may initiate a dispute resolution proceeding by selecting a forum from a list approved by ICANN. Once a dispute is commenced, the domain name holder is required to submit to mandatory administrative proceedings.

Renner, a company that operates department stores in Brazil, commenced dispute resolution proceedings at the World Intellectual Property Organization (“WIPO”) Arbitration and Mediation Centre (one of the forums approved by ICANN), alleging that the domain name <Renner.com> is identical to its trademark, “Renner.”  The WIPO administrative panel has the authority to order Tucows to de-register the domain name, allowing Renner to register it.

Rather than responding to the complaint, however, Tucows commenced an action in Ontario, requiring the Superior Court to address the preliminary question of whether service of Tucows’ statement of claim on Renner outside of Ontario was valid.

Tucows relied on rule 17.02(a) which entitles a party to serve a statement of claim outside of Ontario without leave “in respect of” real or personal property located in Ontario. In such cases, a rebuttable presumption arises that a real and substantial connection to Ontario exists between the party being served and the courts exercising jurisdiction (see: Van Breda v Village Resorts Limited, 2010 ONCA 232; SCC heard the appeal earlier this year).

The motions judge set aside the service of the statement of claim on the grounds that a domain name is not ‘personal property’ within the meaning of rule 17.02(a) and “being intangible property, it is not property located in Ontario.” In line with the framework for judicial review of domestic administrative decision-makers, the motions judge found that WIPO was a specialized tribunal with expertise in the relevant subject area, requiring courts to exercise deference. Thus, the jurisdiction of the court should only be engaged to review a WIPO decision after one has been rendered.

Decision and Implications

The Court of Appeal reversed the Superior Court’s deferential posture on the basis that the UDRP rules, despite the requirement of a mandatory administrative process, “contemplate the possibility of litigation before domestic courts” and thus are to be perceived as an alternative mode of dispute resolution, not a viable substitute.

The Court of Appeal pointed out that WIPO’s area of expertise is in the realm of “abusive” registrations and thus standard practice is to refer “legitimate” registration cases to domestic courts. Further, the tribunal’s online procedure does not allow for discovery or, in the vast majority of cases, live testimony and thus constitutes a process of “adjudication lite.”

Turning to approaches towards domain names in the United States, Britain, and India, the court concluded that domain names constitute personal property for purposes of rule 17.02(a). This approach appears to be the logical extension of jurisprudence which deems other types of intellectual property, such as patents, to constitute property under rule 17.

Given that domain names are easy to remember and to associate with a particular business, they contribute to the forging of identities in the commercial context; these identities, in turn, begin to hold real value on the market.

Although a domain name is a form of contractual license, the extension of a property rights paradigm nonetheless captures—and protects—the way that domain names are used and valued in the real world. This reasoning is in line with the Supreme Court of Canada’s approach to the ‘bundle of rights’ associated with certain licensing arrangements in Saulnier v Royal Bank of Canada, [2008] 3 SCR 166. In that case, the majority found that since a fishing license entails rights of exclusive fishing under certain conditions and “a proprietary right in the fish harvested and the earnings from sale…the license unlocked the value in the fisherman’s other marine assets.”

By analogy, a domain name similarly entails rights of exclusive use and a proprietary entitlement to the value of a business identity. Thus, the Court of Appeal noted that “if the domain name were to be transferred to Renner, it would undoubtedly assist in unlocking the value of Renner’s business.”

The final stage of the rule 17.02(a) analysis was to determine whether domain names are personal property located in Ontario. Applying the “connection factors” test laid out by the Supreme Court in Williams v Canada, [1992] 1 SCR 877, the Court of Appeal found that <renner.com> had its maximum contacts within Ontario because the registrar of the domain name was located in the province.

The emphasis placed on the location of the registrar/administrator is logical given the issue of enforceability; historically, the jurisprudence concerning extraterritorial service was undermined by a disjuncture between assumptions of jurisdiction by the courts and their ability to ensure compliance with their judgments. Finally, since the presumption of a real and substantial connection to Ontario had not been rebutted by Renner, Tucows’ service ex juris was validated by the Court of Appeal.

The effect of the case, then, was to expand the scope of the legal conception of property while simultaneously trimming the role of specialized international administrators. The circumvention of the UDRP arbitration and mediation process is troubling both because it is tailored to deal with disputes relating to domain names and because of its inherent international nature. First, the WIPO administrative mechanism involves experts in intellectual property and a less-costly, streamlined process. Second, its international nature and reach may, in certain cases, align more closely with the extraterritorial nature of domain name disputes.

Further, to the degree that a shrinking of international administrative jurisdiction necessitated the expansion of domestic jurisdiction over such matters (ie. by invoking a nuanced conception of personal property) in order to ensure disputes over domain names do not go unheard and unresolved, the Court of Appeal’s expansion of the property concept may have spillover effects into other areas of the law. This is not to say that such expansion is discordant with the economic reality of domain names in today’s society, but simply that the exact implications and ramifications of the finding will still need to be worked out.

The challenge for courts when dealing with such international administrative tribunals—the legitimacy of which is underpinned by individual contractual relations and not the principle of legislative supremacy, as is the case with domestic administrative decision-makers—is to strike a balance between the need for deference to expertise and international capacity while ensuring that inadequate processes are not insulated from domestic jurisdiction.

Perhaps most importantly, this case highlights the troubling schism that may arise between the international dimension of technological disputes and the international legal infrastructure that exists to resolve them; in such cases, it falls on domestic courts to calibrate old legal concepts, such as those of property, to better accord with new circumstances. Or, in other words, to better accord with “the purposes which society or the dominant classes in society expect the institution of property to serve.”