Law firm Russell McVeagh has shone a spotlight on the conflicted ways in which different legal jurisdictions treat rights to intangible property such as software and domain names, and suggests that the growing use of blockchain technologies to establish ownership of valuable intangibles will soon force lawmakers to deal with the issue.
The law firm has produced a report Cryptocurrency and Property Rights with some fascinating examples highlighting these inter-jurisdiction conflicts in the ways intangible property is treated.
The first is the case of the domain name sex.com. It was registered in 1994 by entrepreneur Gary Kremen with the then .com registrar Network Solutions Inc. It was then stolen from Kremen by Stephen Cohen who forged letters to NSI to get the name transfered to himself.
Kremen successfully sued Cohen and secured a multimillion dollar judgement in his favour but when Cohen absconded Kremen turned his attentions to NSI. The US Federal Court of Appeals ruled the domain name was intangible property that Kremen owned, and that NSI was liable for its unauthorised transfer.
In the second case a Dutch teenager ruled the roost in the online Runescape universe because he owned a mask and amulet that gave him great powers. He was kidnapped, forced to sit down in front a computer, log in to Runescape and transfer these digital artefacts to his kidnappers.
The case went all the way to the Dutch Supreme Court because it was questionable whether these virtual artefacts could be classified as goods and therefore whether theft had occurred. The court ruled that, yes, they were goods that “had value by reason of the time and effort invested in obtaining them.”
The report then goes on to discuss a case in the UK where the court ruled that intangible property (domain names and online amulets) cannot be possessed, are not goods, and therefore cannot be stolen.
“Lord Hoffmann, who gave the leading judgment, spoke somewhat disparagingly of the American domain name case (an example of what he called the jurisdiction’s ‘profligate extension of tort law’),” the report says.
It goes on to say: “Whenever it has been tested, the distinction has been relied upon and reinforced (despite some of the difficulties it gives rise to in the modern world).”
It notes one such ruling, in the UK in 1996, that software could only be considered ‘goods’ under UK’s Sale of Goods Act 1979 or the Supply of Goods and Services Act 1982 if delivered on physical media: the same software delivered by download would not be considered goods.
Given these conflicts and contradictions, Russel McVeagh says Bitcoin or other cryptocurrency may be the catalyst for significant developments in New Zealand law. “The treatment of 'intangible property' is an area ripe for clarification, and cryptocurrency may well give rise to the case to test the boundaries.”
Litigation partner Chris Curran said: "As the Blockchain is increasingly used to store things of value, this legal area seems likely to be tested at some point. We will watch with interest to see where New Zealand lands regarding the protection of property rights in this emerging and disruptive FinTech field."