Domain Name DisputeThe claimant’s case is related to its claim of ownership in the domain name backjack.com. Blackjack is the most popular card game played in casinos worldwide. With the rapid recent growth in online gambling, this domain name has acquired considerable value.
In this High Court case, His Honour Judge Hacon gave his judgment in a case where he concluded that equitable interest exists in a domain name and related unregistered trademarks.
Hanger Holdings (“HH”) operated the domain name for its gambling business. HH was introduced to Mr. Croft (“Croft”) who had expertise in online gambling and was the sole director of Perlake Corporation (“Perlake”), a Uruguayan company.
In 2003, HH agreed to sell its domain name and its corresponding business to Perlake for $250,000 and a commission on future business done by Perlake using the domain name (“2003 Agreement”). It was agreed that if Perlake breached any terms of the 2003 Agreement, HH could terminate it after giving Perlake a chance to remedy the breach, and if Perlake failed, the domain name would revert to HH.
Meanwhile, Perlake was dissolved under Uruguayan law. Croft did not bother to inform HH when he learnt about it. In 2015, HH’s lawyers sent multiple notices of termination to Perlake, citing the latter’s failure to maintain operational records, provide audited statements and pay commission required under the 2003 Agreement.
Croft said that on 1 March 2005, he had advanced a loan to Perlake (“Loan Agreement”). Under the Loan Agreement, if Perlake failed to repay, all its assets would belong to Croft. As Perlake had indeed defaulted, the domain name stood transferred to Croft. So, HH could not use the 2003 Agreement to claim the domain name from Perlake or himself.
HH’s argued that Perlake had committed a material breach of the 2003 Agreement and had failed to remedy it, so the domain name had reverted to HH. On the Loan Agreement, HH argued that it was a sham created by Croft to deny HH their title to the domain name.
Croft said that he gave HH access to a “back office support service” which covered financial and operational information of the gambling business, which HH happily accepted. As regards commission, Croft said that soon after the 2003 Agreement, the US restricted online gambling, so business took a hit and made hardly any money to pay commission. Based on this, Croft argued that he had committed no breach.
The Court had to decide if Perlake had breached the 2003 Agreement and if yes, whether the breaches were material and gave HH the right to terminate. Moreover, as the Loan Agreement and the 2003 Agreement conflicted with each other, it was equally necessary to test which one would prevail over the other.
The Court declined Croft’s explanation of the “back door data” access as e-mail exchanges showed that HH was unhappy and repeatedly requested access to actual information. Although Perlake was under liquidation in Uruguay, Uruguayan law experts concluded that Perlake still existed as an entity and could have repaid HH from liquidation proceeds, which it failed to do. Thus, Perlake had committed a material breach.
On the Loan Agreement, forensic experts analysed the ‘metadata’ to reveal that the soft copy of the agreement could not have been created in 2005. Additionally, several flaws were discovered in the Loan Agreement which led the Court to conclude that it was created much later in order to circumvent the 2003 Agreement. Even if the Loan Agreement were valid, the 2003 Agreement required any future creditor of Perlake to obtain HH’s written consent before acquiring any of its assets, which was not taken. In any event, the 2003 Agreement prevailed over the Loan Agreement.
The Court noted the loopholes in Croft’s testimony to discover his foul play. It decided the case in HH’s favour.
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