Commercial Law Collides with Cyberspace: The Trouble with Perfection - Insecurity Interests in the New Corporate Asset

Abstract

The recent downturn in the economy, particularly in the e-commerce sector, reveals many e-companies heading toward bankruptcy with cyberassets, such as domain names, as their most valuable corporate assets. Lending institutions and other creditors that have extended loans to such e-companies obviously want to get their hands on these bankrupt estates. Which creditor will have priority in the new cybercollateral of domain names? The answer to creditor priority questions may depend on whether domain names are intangible property for purposes of secured transactions. If so, should security interests in domain names be perfected under the Uniform Commercial Code or under federal law? This Article asserts that domain names are a form of intangible property, and that although they are not subject to the tort of conversion, they can be used as collateral in secured transactions. This Article proposes and evaluates two perfection schemes for security interests in domain names. The first proposal follows the existing state-regulated scheme through which creditors perfect their security interests in domain names by filing a financing statement with the applicable state filing office. The second proposal is a federal-based scheme through which creditors perfect their security interests in domain names by electronically filing a financing statement with a domain name registrar who will record the security interest information within the WHOIS database.

Keywords: trademarks, domain name, creditors, debtors, assets, intangibles, collateral, security, classification of collateral, WHOIS database, financing statements, UCC, article 9, registrar, priority, preemption