Sprinkler Warehouse, Inc. v. Systematic Rain, Inc., A14–1121.

• Decision Date: 02 February 2015
• Docket Number: No. A14–1121.,A14–1121.
• Citation: 859 N.W.2d 527
• Parties: SPRINKLER WAREHOUSE, INC., Appellant, v. SYSTEMATIC RAIN, INC., d/b/a GPLAWN.com, et al., Respondents.
• Court: Minnesota Court of Appeals

859 N.W.2d 527

SPRINKLER WAREHOUSE, INC., Appellant
v.
SYSTEMATIC RAIN, INC., d/b/a GPLAWN.com, et al., Respondents.

No. A14–1121.

Court of Appeals of Minnesota.

Feb. 2, 2015.

Clarence J. Kuhn, The Kuhn Law Firm, P.L.L.C., Edina, MN, for appellant.

Bryan R. Battina, William K. Forbes, Trepanier MacGillis Battina P.A., Minneapolis, MN, for respondents.

Considered and decided by LARKIN, Presiding Judge; CLEARY, Chief Judge; and HUDSON, Judge.

OPINION

CLEARY, Chief Judge.

Appellant Sprinkler Warehouse, Inc. (Sprinkler) appeals from the district court's determination that a website and domain name, registered to respondent James R. Palm and used by respondent Systematic Rain, Inc., d/b/a GPLAWN.com (Systematic Rain), are not subject to garnishment under Minn.Stat. § 571.73, subd. 3. The website at issue was used by respondent Systematic Rain for its online business, and can be located at the domain name . Because websites and domain names constitute property and are subject to garnishment under Minn.Stat. § 571.73, subd. 3, we reverse and remand.

FACTS

In 2012, Sprinkler initiated a lawsuit in Texas against Systematic Rain, alleging that Systematic Rain had infringed on Sprinkler's copyrighted material by using the material without authorization on Systematic Rain's website. At that time, both Sprinkler and respondent Systematic Rain operated online sprinkler parts distribution businesses. A default judgment was entered against Systematic Rain in Texas. A $156,000 judgment was subsequently docketed against Systematic Rain in Scott County, Minnesota.

In January 2014, Sprinkler served a garnishment summons on Palm, the chief executive officer of Systematic Rain. On Palm's garnishment disclosure forms, Palm stated that he did not have any of Systematic Rain's non-earnings property to garnish. Sprinkler filed an objection to Palm's garnishment disclosure, arguing

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that the website and domain name were Systematic Rain's property under Palm's control and subject to garnishment. On May 7, 2014, the district court held that the website and domain name did not constitute property subject to garnishment under Minn.Stat. § 571.73, subd. 3. This appeal followed.

ISSUES

I. Is a registered domain name subject to garnishment?

II. Is a website subject to garnishment?

III. What is the appropriate procedure for garnishment of a website and domain name?

IV. What factual determinations must be made on remand?

ANALYSIS

The questions of whether websites and domain names are subject to garnishment under Minn.Stat. § 571.73, subd. 3 are issues of first impression in Minnesota. The application of a statute to undisputed facts is a legal conclusion, which this court reviews de novo. Weston v. McWilliams & Assocs., 716 N.W.2d 634, 638 (Minn.2006). “No deference is given to a lower court on questions of law.” Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn.2003).

Under Minnesota law, the types of property that are attachable by garnishment include:

(2) all other nonexempt indebtedness, money, or other property due or belonging to the debtor and owing by the garnishee or in the possession or under the control of the garnishee at the time of the service of the garnishment summons, whether or not the same has become payable....

(3) all other nonexempt intangible or tangible personal property of the debtor in the possession or under the control of the garnishee at the time of service of the garnishment summons, including property of any kind due from or in the hands of an executor, administrator, personal representative, receiver, or trustee....

Minn.Stat. § 571.73, subd. 3(2), (3). Minnesota cases interpreting section 571.73, subdivision 3 and its predecessor statutes have concluded that the following types of intangible property are subject to garnishment: a certificate of indebtedness given by the United States for personal services;¹ shares of corporate stock, even if not yet delivered to the shareholder;² state railroad bonds;³ documents, including bearer bonds;⁴ and interest of a creditor in property conveyed to trustees, the proceeds to be distributed to creditors.⁵

Because websites and domain names are conceptually distinct, we consider separately the questions of whether domain names and websites are subject to garnishment. A website is made up of all of the visual and audio elements that a person experiences while using the Internet. A domain name is the alphanumeric designation that allows a person to reach a particular website. A website and domain name can be analogized to a house and its address,

859 N.W.2d 530

for the purpose of understanding how both the website and domain name can share the same “name,” but are conceptually distinct. Therefore, although the district court applied the same analysis to both websites and domain names, we analyze them separately here.

We note that the district court did not decide whether the domain name or website were property “belonging to the debtor” Systematic Rain, as required by Minn.Stat. § 571.73, subd. 3(2), (3). The district court did not have the benefit of a fully developed record as to ownership at the hearing, nor did the court make specific findings as to ownership in its order. The court treated the question of ownership as the second of two steps of its garnishment analysis, to be determined only after the court determined whether a domain name and website could be garnished. As a result, the court only considered the issue of “whether or not the domain name ‘GPLAWN.com’ and the related website are property that is subject to garnishment.” Accordingly, we review here only the court's conclusion that domain names and websites are not property subject to garnishment under Minn.Stat. § 571.73, subd. 3(2), (3). It is left to the district court to make findings as to ownership of the domain name and website.

I.

Sprinkler argues that the district court erred by determining that domain names are not subject to garnishment under Minn.Stat. § 571.73, subd. 3. The following sections discuss the nature and function of domain names, whether domain names constitute property, and the application of Minn.Stat. § 571.73, subd. 3 to domain names.

A. Domain Names

A domain name is part of the alphanumeric address used to reach a website. The full address used to reach a website is its uniform resource locator (URL). Steven Blackerby, Flat Broke and Busted, but Can I Keep My Domain Name? Domain Name Property Interests in the First, Fifth, and Eleventh Circuits, 11 J. Intell. Prop. L. 117, 121 (Fall 2003). A URL is made up of (1) a scheme or transfer protocol (usually “http://”) and (2) a domain name. Id. The “top level” domain is the last part of the domain name, such as .com, .gov, .edu, . org, or .net. Id. at 122. The “second level” domain precedes the top level domain in the address, and is the individual identifier for each website. Id. at 121–22.

Each domain name corresponds to a specific numeric address called the “Internet protocol (IP) address.” Id. at 121. IP addresses contain the true information that networked computers use to locate specific websites, because each IP address corresponds to a specific server storing the information that will be displayed on the website. Id. The additional step of using domain names is for the convenience of users, for whom names and words are more memorable and meaningful than numeric IP addresses. Lockheed Martin Corp. v. Network Solutions, Inc., 985 F.Supp. 949, 952 (C.D.Cal.1997).

Second-level domain names are unique and exclusionary, in that only one entity can register and use a specific second-level domain name at any given time. Blackerby, supra, at 122. Additionally, most domain names are available on a first-come, first-served basis. Internet Corporation for Assigned Names and Numbers, Beginner's Guide to Domain Names 3–4 (2010). These attributes of domain names have led to a lucrative market in buying and selling the rights to use “certain generic or clever domain names that do not violate a trademark or other right or interest, but are

859 N.W.2d 531

otherwise extremely valuable to Internet entrepreneurs.” Dorer v. Arel, 60 F.Supp.2d 558, 561 (E.D.Va.1999).

Domain names must be registered for a period of years with accredited registrars. Beginner's Guide, supra, at 3–4. The domain name registration process involves a contract between the registrar and the registering individual or business. Id. at 6. This contract “sets forth the terms under which [the] registration is accepted and will be maintained.” Id. Registrants pay for domain name registration services which include, at a minimum, ensuring that a particular domain name is available and linking the registered domain name to its IP-numbered server. Blackerby, supra, at 125–26. In return, the registrant obtains the exclusive right to use the domain name for the registration term. Beginner's Guide, supra,...