Silas Brown

When online gaming companies and their developers work on projects to develop gaming applications and set up their hosting facilities, they are sensible to seek sound legal advice on the implications relating to location of hosting, jurisdiction and domain names. A recent High Court judgment in the case of Pocket Kings Ltd v. Safenames Ltd and Commonwealth of Kentucky, highlights the crucial importance of such issues to online gaming companies and the implications for their business.

In the Pocket Kings case, the online gaming company Pocket Kings Ltd developed and licensed online poker and other online computer games together with their related domain names for operation by licensees as separate licensed online gaming businesses. One of these licensed online gaming businesses was operated through the domain name fultiltpoker.com. A court in the US state of Kentucky ordered that a large number of online gaming websites (including http://www.fultiltpoker.com/contravened Kentucky state laws prohibiting gambling) and, therefore, ordered that the relevant domain names must be transferred to the Commonwealth of Kentucky.

Pocket Kings Ltd’s domain name registrar and hosting provider for the fulltiltpoker.com domain name, Safenames Ltd received e-mailed correspondence from the Commonwealth of Kentucky demanding compliance with the Kentucky court order which lead to the High Court claim by Pocket Kings Ltd for an order that the Kentucky ruling was not enforceable in the UK. For Safenames Ltd’s part, it had a contract with Pocket Kings Ltd under which it was not permitted to transfer domain names without Pocket King Ltd’s express permission and Safenames Ltd agreed not to comply with the Kentucky court order if the High Court made the order sought by Pocket Kings Ltd.

Firstly, the High Court had to consider the English legislation on immunity (including the State Immunity Act 1978) which states that nation states cannot have English judgments made against them and found that because the Kentucky court judgment was based on local state law and that the Commonwealth of Kentucky was not a nation state for the purposes of the immunity legislation, there was nothing to stop the High Court from ruling in favour of Pocket Kings Ltd against the Commonwealth of Kentucky.

Secondly, the High Court had to consider the substantive aspects of whether or not the domain name transfer order of the Kentucky court would be enforceable in the UK against an English hosting provider and an English domain name owner. The High Court took into account that foreign penal laws cannot be enforced in the UK and also the importance of the particular domain name to the developer’s business in general (not just in Kentucky), in ruling that the Kentucky court action was not enforceable in the UK. The High Court issued an injunction against Safenames Ltd restraining it from complying with the Kentucky court order to transfer the domain name to the Commonwealth of Kentucky as requested by Pocket Kings Ltd.

This case clearly outlines the importance of the issues software and web developers need to bear in mind when developing and choosing hosting for any online software development project for Internet businesses and even more so when the aim of the underlying business may in some parts of the world be either prohibited or subject to penal laws. Gambling is a good example, but there may be others such as competitions, lotteries, database and file sharing applications, restricted publications etc. It is important for all software and web developers, as well as clients of such developers, to carefully consider as a minimum the following issues before embarking on such development projects: 

• Is ownership of the relevant domain names properly secured?

• Is there a robust software development or web development agreement in place which provides for ownership of intellectual property in the relevant software/ web applications?

• Is there a robust hosting service provider agreement in place with clear provisions relating to disputes over domain names hosted in favour of the domain name owner?

• If software and domain names are to be licensed to third parties, is there a robust licence agreement in place governing and restricting the licensee’s use of the software and domain names?

• Have jurisdictional issues been considered in relation to hosting? There may well be clear protective reasons for hosting domain names and related websites in the UK rather than say the US or other jurisdictions where penal laws may make the domain names and websites vulnerable to forfeiture.

It is important to obtain sound legal advice on such issues and ensure that the relevant agreements are legally drafted so that the intellectual property and commercial operations of software and web developers and their clients are adequately protected.

About the author

Silas Brown is a solicitor at Briffa, an award winning firm of lawyers based in London, specialising in the business and law concerning a wide variety of industry sectors and in particular those who value their intangible assets – their intellectual property – in the business of design, technology, entertainment, software development, publishing and Internet.