KENTUCKY SEIZURES HAVE ALL THE MARKINGS OF A FARCE (Update)

3 October 2008

Already defunct websites and a dead operator seem to have escaped the attention of lawyers working on a contingency basis

With more information coming in on the incredible spectacle of the Democrat governor of the US state of Kentucky trying to confiscate domain names from international operators, the Kentucky seizures are increasingly taking on the appearance of a farce.

US media are reporting that the lawyers who put together the domain list and legal argument for Governor Steve Beshear were engaged on outsourced contingency agreements - no win, no pay.

And those same lawyers seem to know little if anything of the online gambling industry, with some reports claiming that as much as 30 percent of the seized domains are out of action and have been for some time. In two cases - High Rollers Lounge.com and Lucky Pyramid Casino.com - the seized domains have been offline for months following the death of the owner-operator, Warren Cloud who's group has since been taken over and re-branded by the Virtual Casino group.

Kentucky's Justice Cabinet Secretary J. Michael Brown showed his lack of knowledge when he said the state did not shut down the sites. "At this point in time, I don't know why they are shut down, but it's not pursuant to our actions," he said. The most inexperienced online player-detective could have sussed the position out with a little elementary digging.

This afternoon's (Eastern Time) hearing when Judge Wingate will decide whether the seizures are to be made permanent is likely to be a crowded affair, as a number of interested parties are sending high-powered legal teams to object to the Kentucky action.

The freedom of the Internet pressure group iMEGA has already announced that it is sending a top legal team to object, as has Go Daddy - a domain registrar impacted by the Kentucky moves. GoDaddy.com has been contacted by companies that registered some of the domain names in question, and they plan to file an objection to the court order, Christine Jones, GoDaddy.com general counsel, said in the statement.

The non-profit Internet Commerce Association, which represents domain-name investors and developers, has called the move a "dangerous precedent" in a statement on its Web site. "It appears that there may be no statutory basis for this unprecedented action, that Kentucky may lack sufficient jurisdictional grounds and that it also may violate the commerce clause of the U.S. Constitution," association President Jeremiah Johnston said in a statement.

Justice Cabinet Secretary J. Michael Brown expects some heavy opposition, and revealed overnight that the hearing, which was originally set for Thursday but postponed a further 24 hours, was rescheduled to allow defendants more time to find local attorneys.

If Judge Wingate orders the domain names to be forfeited to the state on Friday afternoon, Kentucky will notify registrars of the order and take control of the at present only temporarily seized domain names, "subject to anybody filing some sort of objection."

Brown said the state of Kentucky's strategy in seizing the domains is to force online gambling operators into settlement talks, compelling them to block Kentucky users from their websites and pay damages in exchange for the state returning control of the sites to them. If they refuse, Kentucky could block access to the sites by users across the world, Brown claimed.

But that strategy could backfire and lead to extensive litigation. Andrew Allemann, a domain-name industry expert from Texas said that opposition could come from freedom of speech and Internet protagonists and not just the online gambling industry.

"I'd say (the governor) has underestimated the expense of this battle, and he's also underestimated the backlash," he said. Allemann expressed serious doubts that Governor Beshear will ultimately be successful in his lawsuit, although he acknowledged that serious damage to business could be inflicted if websites are shut down even temporarily or have to be re-branded and re-marketed..

In another surprising revelation, Governor Beshear's spokesman Jay Blanton said private attorneys were engaged to work the case for the state on a contingency basis of no win, no pay.

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