Franz Hultgren Evenson, Attorneys at Law

Is your company domain name and website safe from creditors? According to the Minnesota Court of Appeals, that answer may be “no.”

A domain name and website can be the lifeblood of the business.  Losing an online presence can be detrimental to that company.  On the other hand, liquidating a debtor’s website can be an important source of collection for a creditor. 

In a published opinion issued on February 2, 2015, the Minnesota Court of Appeals held that a creditor may garnish a debtor’s domain name and the copyright-protected material contained on the debtor’s website.  See Sprinkler Warehouse, Inc. v. Systematic Rain, Inc. (A14-1121) (click here for the opinion).  In that case, the creditor obtained a judgment from the debtor in Texas, then docketed and attempted to collect on the judgment in Minnesota.  Specifically, the creditor went after the debtor’s domain name (gplawn.com) and website.   

The legal issue was whether domain names and websites are garnishable property under Minn. Stat. 571.73, subd. 3.  In a matter of first impression, the appeals court concluded that domain names have characteristics of “property” because they can be bought and sold, may contain intellectual property, and are well-defined interests.  The court also concluded that websites, which often contain copyright-protected material, have attributes of personal property such as the right to exclude others from using it.  The court observed that some parts of websites may not be copyright-protected and may not be garnishable. 

The court stated that the appropriate procedure for garnishing a website is to appoint a receiver; compel the debtor to transfer ownership of the domain name and website to the receiver; and for the receiver to liquidate the assets for the creditor.

The case is an important example of courts applying traditional statutes to modern technology.

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Drew Hultgren
2014-01-30T17:54:32+00:00
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