British Court Rejects Kentucky Decree on Internet Gambling "Domain Names"

In late October, the Chancery Division of the England and Wales High Court enjoined the enforcement in Britain of a Kentucky decree that purported to seize 141 domain names associated with Internet gambling sites. (Pocket Kings Ltd v. Safenames Ltd, [2009] EWHC 2529 (Ch).) The British court entered its order even though the Kentucky decree was vacated last January by the Kentucky Court of Appeals. (Interactive Media Entertainment and Gaming Association v. Wingate, No. 2008-CA-0020000-OA (KY. Ct. App.).) The Kentucky Supreme Court heard oral argument on that appellate ruling on October 22, 2009.

Brought by the parent company of the Full Tilt Poker Web site, the British lawsuit complained that the Commonwealth of Kentucky served the Kentucky trial court's seizure order on Safenames, a domain registration firm that manages the Full Tilt Poker domain names. The plaintiff argued that Kentucky was attempting to impose its law within the United Kingdom. Although Kentucky's lawyers received a copy of the British lawsuit, the state neither acknowledged service nor entered the case.

Judge Michael Furness of the British court rejected the suggestion that the Kentucky decree was not "penal" and thus could be enforced in his country. The Kentucky decree, he wrote, was "distinctly penal in nature, requiring as it does the confiscation without compensation of an asset, on the ground that the owner, or at least the user of it, has been guilty of a criminal offense."

The judge also concluded that his power to enjoin the decree was not limited by the British State Immunity Act of 1978, because the Commonwealth of Kentucky is not a "sovereign state," but rather is "a constituent part" of a sovereign, the United States. He found no need to decide the plaintiff's alternative claim that the Kentucky decree "breached all known principles of natural justice."

The British ruling illustrates the wealth of novel legal issues unleashed by Kentucky's attempt to use its forfeiture law to seize domain names of overseas entities. The Kentucky Court of Appeals found that the domain names could not be deemed "gaming devices" under the state's forfeiture statute, while one judge argued that the state's forfeiture statute did not authorize the civil in rem proceeding filed by the state. Other issues argued to the Kentucky Supreme Court are:

• That Kentucky lacks jurisdiction over domain names registered in foreign countries;
• That the initial court decree violated the First Amendment rights of the domain name holders;
• That seizing the domain names violates the Commerce Clause of the Constitution.