Key Takeaways:
In 1994, Gary Kremen registered sex.com, only for it to be stolen the very next year by a fraudster using a forged fax. What followed was more than a decade of legal battles, tens of millions of dollars in damages, and a record-breaking auction, all of which fundamentally shaped domain name law as we know it today.
Stolen in 1995 and sold at auction for $13 million in 2010, the notorious domain name sex.com is back on the market. This latest listing is the perfect occasion to revisit the extraordinary and turbulent story of one of the most discussed and coveted domain names in internet history, first told by Stéphane Van Gelder in his Journal du Net column in 2010.
This article traces the key stages of the affair, the legal lessons it forced into existence, and what it reveals about the strategic value of domain names today. If you want to take control of your organisation’s domain name strategy right now, discover our domain management and protection solutions.
THE EARLY INTERNET: A LANDSCAPE WITHOUT RULES OR PROTECTION
This story begins in the early days of the internet. Barely 30 years ago, you needed a modem to establish a painfully slow 56 baud connection and browse Netscape, the only web browser available before Internet Explorer arrived. In 1993, the French Minitel service equipped 6.5 million households, and social networks existed only in the most imaginative of minds. Their web precursor, the instant messaging system ICQ (“I seek you”), did not appear until 1996.
On 9 May 1994, Gary Kremen, an American in his thirties with degrees in electrical engineering and computer science, registered the domain name sex.com with the registrar Network Solutions International (NSI). Fool or visionary? Kremen understood the potential of the internet and the financial stakes it would one day represent. Already busy developing match.com, he left sex.com sitting dormant with no website attached.
A DOMAIN NAME CAN BE STOLEN
In 1995, protecting domain names was not yet a concern anyone had. On 18 October of that year, Network Solutions transferred sex.com to a man named Stephen Michael Cohen, without the knowledge of the legitimate owner. Cohen, who had already served time in prison for fraud, submitted a forged fax to a registrar employee who made no attempt to verify the request with Kremen. That single manoeuvre allowed Cohen to seize the domain name, build the corresponding website, and exploit it entirely for his own benefit.
The profits were staggering. Estimates suggest this fraudulent operation earned Cohen $100 million over five years, driven by advertising and a pay-per-click system on a site that attracted up to 25 million visits per day.
AN EXTRAORDINARY LEGAL BATTLE
Kremen filed suit on 16 October 1998 against both Stephen Cohen and Network Solutions in the California courts. The federal court ruling of November 2000 allowed him to recover the domain name. Then, on 3 April 2001, Cohen was ordered to pay $40 million in compensatory damages plus $25 million in punitive damages.
Cohen refused to comply. He declared bankruptcy and fled to Mexico, filing a series of appeals that were all rejected. On 28 October 2005, he was arrested in Tijuana for immigration violations and deported to the United States. Without sufficient evidence of hidden assets, he was ultimately released on 5 December 2006.
Kremen took control of two properties belonging to Cohen, including a mansion in San Diego, and brought a fresh lawsuit against Network Solutions. That case was settled out of court in April 2004 for a figure rumoured to be between $15 and $20 million.
TOWARDS RECOGNITION OF THE DOMAIN NAME AS PROPERTY
The sex.com affair forced American courts to confront a fundamental question: was contract law adequate to handle the buying, selling, and theft of domain names in a rapidly expanding web?
On 13 August 2002, the United States Court of Appeals for the Ninth Circuit ruled, drawing on an 1880 precedent, that Kremen’s claim was valid and that contract law offered a remedy: Network Solutions had violated that law by transferring Kremen’s property on the basis of Cohen’s fraudulent representations. This appellate success established an important precedent: a domain name is an asset, just like any other form of property.
Meanwhile, in August 1999, the US Senate passed the Anticybersquatting Consumer Protection Act (ACPA), which gives trademark holders the right to have an infringing domain name transferred or cancelled, provided the cybersquatter acted in bad faith.
The full story of these events was published in a 2007 book by internet journalist Kieren McCarthy, titled “Sex.com: One Domain, Two Men, Twelve Years and the Brutal Battle for the Jewel in the Internet’s Crown.”
SEX.COM BREAKS RECORDS
In 2006, Kremen sold sex.com to Boston-based Escom LLC for an amount confirmed at $11.5 million, at the time the highest price ever paid for a domain name.
In 2010, the bankruptcy of Escom put sex.com back on the market through an auction run by Sedo. Clover Holdings won the bid for $13 million, a price Sedo confirmed on 18 November 2010. That figure earned sex.com a Guinness World Record on 23 February 2011 in the Arts and Media category.
The domain name is now on the market again with an asking price of $20 million. Sellers claim the site receives more than one million unique visitors per day. Kevin Murphy at Domain Observer urges caution, however, pointing out that this sale covers the entire site including its user database, which changes the picture considerably compared to the 2010 transaction. He also notes that Twitter considers the site potentially dangerous and does not permit links to sex.com.
PROTECTING YOUR DOMAIN NAMES: THE SOLUTIONS AVAILABLE TODAY
An affair like this would be far less likely to occur today. The procedures put in place by ICANN, registries, and legislators have made it possible to secure domain names and the transactions linked to them, including buying, selling, and transferring.
For brands operating in sensitive sectors, preventive blocking solutions now exist, including AdultBlock and other mechanisms such as DPML and Global Block. These tools prevent third parties from registering domain names that match your brand in high-risk extensions, before anyone can act against you. Find out more about TMCH, DPML and Global Block solutions.
A domain name is unique by definition and, like a trademark, represents an asset that can be passed on. For any organisation, it is a rare resource with three core functions:
Marketing: the domain name is your distinctive online presence, whether for a company, a shop, or an e-commerce site.
Technical: it routes customers to your website and drives traffic to it.
Legal: it forms part of your organisation’s distinctive signs, like a trademark, and must be monitored and protected accordingly.
EXPERT ADVICE
The sex.com affair had at least one lasting merit: it drew attention to the value a domain name can hold, something Kremen had sensed as early as 1994. By taking the case to court, he opened the door to a major legal debate and created a precedent that established the domain name as a fully fledged asset.
The question this story raises for every organisation remains just as relevant today: do you know exactly which domain names to register, monitor, and defend to protect your brand? Request a free demo and take control of your domain name strategy.
