Dumb Domain Name Dispute Du Jour–Korb v. Maxmedia

By Eric Goldman

Korb v. Maxmedia, Inc., 2007 WL 734423 (E.D. Mich. Mar. 9, 2007)

I rarely blog on domain name disputes for two reasons. First, there are too many of them, and each one tends to look like the others. Second, most of them are completely stupid in that the parties spend way too much money to fight over an asset worth far less than the litigation costs.

With those principles in mind, this domain name dispute nevertheless caught my eye because of the omigod mistakes by both parties. Here’s the background: Both Korb and Maxmedia are in the “interactive media” business and both (apparently independently) adopted the “maxmedia” trademark in 1996. Korb scored the domain name maxmedia.com in Nov. 1996. The opinion doesn’t say what kinds of interactions the parties had from 1996 to 2005, but in April 2005, Maxmedia approaches Korb, first to buy the domain name and then to propose an employment relationship. On May 19, 2005, the parties sign a 1 year employment agreement that includes a $10,000 “signing bonus” that was conditioned on Korb’s transfer of the domain name. The check is cut and Korb apparently changes the domain name’s IP address, and Maxmedia launches a website under its new domain name. However, Korb didn’t change the domain name’s registrant information.

Not surprisingly, the relationship doesn’t work out, and Maxmedia fires Korb on Sept. 1, 2005. But surprise! Maxmedia can’t control the domain name, and suddenly Korb is nowhere to be found. Litigation ensues, with both parties suing each other. In this March 9 ruling, the court addresses Korb’s effort to dismiss Maxmedia’s claim that Korb is infringing Maxmedia’s trademark. The court says that the trademark issue is a fact issue that can’t be dismissed on summary judgment.

OK, but let’s rewind. How many mistakes can we find in this scenario? Based on the court’s description of the facts, some obvious mistakes on Maxmedia’s part:

1) Bundling the employment and domain name acquisition. This leaves open the question of whether the signing bonus was just a signing bonus, or was it an acquisition payment for the domain name? It would have been better to use separate agreements to keep the domain name acquisition independent of the employment arrangement. Otherwise, the documentation appears to leave open the possibility that the domain name transfer will fail if Maxmedia ended the employment relationship early (as it did).

2) Not buying the trademarks as part of the domain name. A domain name buyer should always acquire any trademark rights of the seller–especially in a case like this, where the parties apparently co-existed/competed for 9 years.

3) Not completing the domain name transfer ASAP. This is an easy one. A domain name buyer should require the seller to fill out the transfer paperwork as part of the transaction documents–and DEFINITELY before the check is cut.

4) Not doing housekeeping before terminating Korb. Another obvious one. Before you can an employee, you make sure you’ve identified all of the assets in the employee’s control and taken as many steps as possible to get those assets back in your possession. Because, as we know, a canned employee typically isn’t a cooperative former employee.

And how about Korb’s mistakes? Based on the court’s writeup of the facts, there’s no way that Korb is going to keep the domain name (probably based on breach of contract, but maybe other theories too). So this looks like a doomed-to-fail attempt to extract some extra cash for a domain name that he already sold once. Or, if he can find a way to keep the domain name, it seems pretty likely that he’s going to have to cough up the $10,000 bonus. Either way, what a waste of time and money.