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WebFuel welcomes back James Katz, Ottawa Lawyer with BrazeauSellers as our guest blogger. This is his sixth blog post in a regular series related to legal search issues in Canada. WebFuel deals with domain names issues as it relates to search, but this topic is related to domain registrars from a legal perspective – for Canadians businesses.

Guest Post by: James Katz

The first step most businesses take when deciding to take their business online is registering the domain name(s) that will (hopefully) lead customers to their website. For brand-savvy business owners, this will include giving proper and detailed consideration to protecting their trade-marks and trade-name, as well as making sure that any domain name(s) that they do intend to register do not infringe another business’ trade-mark. Once this step is taken, most start-up businesses will then choose the domain name registrar that a) offers all of the required domain name and ancillary web hosting services that the business will need, and b) offers those services at the cheapest price.  The business will then retain a domain name registrar, register its domain names, and then move towards launching their website. Herein lies the issue: In choosing their domain name registrar, many Canadian business owners don’t even bother to consider that many of the most popular domain name registrars are based in the United States or other foreign countries, and that there are significant legal pitfalls associated with dealing with such foreign entities.

Having your domain name registrar based in the United States is not a trivial matter when your business’s legal rights are concerned. And although the Internet has created some novel issues with regard to multinational contracting, many of the issues that a Canadian business owner must consider before using a US based domain registrar are the same that any company that wants to contract with a service provider outside of Canada has to consider, so that the risks associated with such a venture can be fully appreciated. Here are some of the issues that a typical Canadian Business owner should consider before using a US based domain name registrar:

In the Event of a dispute with your registrar, you will be subject to US law and jurisdiction.

Generally speaking, when you contract with a US based domain registrar and you click “I agree” to their contractual terms and conditions, you will be agreeing that the contract you just entered into will be subject to US state and federal laws only. Therefore, any Canadian legal remedies that you are accustomed to in dealing with disputes with Canadian service providers will not apply.  Granted, because Canada and the US have legal systems that are based largely on the British Common Law, many US and Canadian legal concepts are similar. However, there are also radical differences between the two systems that govern the range of damages and the remedies available for breach of contract and related claims.

Further, by contracting with a US based registrar you are giving up the right to sue them in your home jurisdiction should you suffer damages due to their conduct. Case in point: in 2010 the Chinese based search engine Baidu suffered a cyber-attack that was allegedly the result of gross negligence on the part of their domain name registrar. This cyber-attack saw Baidu’s Internet traffic re-directed to a third party’s website for about five hours, and Baidu sued their registrar for the resulting damages. However, because the terms of use governing the contract between Baidu and its registrar fixed the State of New York as the jurisdiction for the hearing of any legal disputes between the parties, Baidu was forced to sue in New York, thereby having to a) incur significant legal fees to retain US legal counsel, and b) give up its “home field advantage” by not being able to sue in China.

Beyond contractual or other disputes that may erupt with a US based registrar, Canadian businesses should also consider that, in the event of a domain name dispute with another business, the location of the domain name registrar is paramount in determining whether or not such a dispute can be properly brought before a Canadian Court. As recently decided by Ontario’s Court of Appeal, disputes as to ownership of a domain name can be brought outside of the various domain name dispute resolution processes (such as ICANN’s UDRP) to a Court of competent jurisdiction, but only if the subject matter of the dispute has a real and substantial connection to Ontario. To this end, the presence of the domain’s registrar in Ontario would be sufficient for an Ontario Court to take jurisdiction over such a dispute, and this procedural advantage should not be overlooked.

Any presence in the US subjects you to US law.

Given the propensity of the US government to seize domain names that are linked to online activities that may be contrary to US law, using a Canadian, as opposed to a US based registrar, has always been the recommended approach for many businesses. But, as the online gaming site bodog.com recently found out, any connection between a business’ online presence and the United States may subject that business to the long arm of US law. Back in March of this year, the United States Department of Homeland Security was able to effectively seize Bodog’s domain name, even though the owner’s of Bodog were Canadian and the business was physically located outside of the US.  Even Bodog’s domain name was registered with a Canadian registrar. So how did the US government do it? Because Bodog’s domain was registered in the dot-com registry system, the US government was able to force Verisign, the US based company that essentially operates the entire dot-com registry system, to cease operating Bodog’s domain name.

Certainly, had Bodog’s registrar also been located in the US, then the US government would have had an even easier time shutting them down by seizing the domain directly from the registrar. So, although using a Canadian based registrar still affords another layer of protection from US laws (because a Canadian based registrar is not bound by a US Court Order), it is no longer a complete shield. To this end, Canadian businesses should perhaps consider whether or not it is wise to register their domain name in registry systems, such a dot-com or dot-info, that are operated in the US, when registering in Canada’s own (and very popular) dot-ca system is just as effective (see the blog post Reaching Canadians Online by David Fowler, Director of Marketing and Communications at the Canadian Internet Registration Authority (CIRA) for more details).

A business should also keep in mind that, besides online gaming, which the US is doing its best to eradicate, the US government has also seized domains in the past simply because they promote doing business with Cuba. As well, having a US based domain registrar (who may also be acting as your web hosting company) also subjects you to the “notice and take down” provisions of US copyright law. In other words, you could go to work one day and find out that someone has filed a US copyright complaint concerning content on your website that, unless dealt with promptly, will see your website taken down and domain suspended by your US based registrar.

In sum, although using one of the larger US based domain name registrars may seem attractive to Canadian businesses for economic reasons, business owners should understand that in retaining the services of a US based entity they will be subjecting themselves to a foreign legal system and perhaps also giving up their legal rights, which could end up costing them a lot of money in the long run. Therefore, Canadian business owners should have a clear understanding of these issues before entrusting their domain names to a US based company.

Related Blog Posts:
Trade-Mark Infringement on the Internet: From a Canadian Perspective

The Shifting Legal Landscape of Google AdWords: From a Canadian Perspective
Legal Issues with Google Places: From a Canadian Perspective
Domain Name Disputes: From a Canadian Perspective
Domain Name Dispute Resolution Set to Change for dot-Ca Domains

James Katz is a Lawyer and Trade-mark Agent with the Ottawa law firm BrazeauSeller LLP. James’ practice focuses primarily on Internet related legal issues and litigation, including trade-mark and copyright infringement, defamation and online privacy issues.

Disclaimer: The contents of this Blog post, and associated opinions are those of its Author, and do not necessarily represent the opinions of WebFuel, or its employees.