Buying and selling a domain name is just like buying and selling a piece of land. You want to make sure you are paying fair market value for the domain, and you should be using an escrow, preferably an attorney escrow.
Here's a situation that popped up last week. A guy had a domain to sell (call it goldbucks.com) he had a buyer that wanted to pay $40,000 for the domain. The parties reached a deal and the domain was transferred to the buyer “for inspection” (before the buyer sent the purchase price to the seller). The buyer liked the domain and got it registered, but when it came time to send over the $40,000 sales price, he only sent over $20,000 Saying the domain “wasn't worth forty thousand.”
If you buy a domain name you you use a law firm escrow?
In the scenario above, the parties did not utilize or have a written purchase and sale agreement. This is the first problem. The domain name purchase and sales agreement could have spelled out the terms of the deal, and could have provided for when the domain ownership would be transferred (i.e. after all the money had been received).
What happened in the above case is a true story. I got the call from another internet lawyer who basically asked me “what do I do not, the buyer is in another County?” I said well you could contact your malpractice insurance carrier – just kidding – what I told him is that:
1. You should have prepared a written agreement for the purchase and sale of the domain name
2. You should have served as lawyer escrow for your seller client (holding the domain and the money until certain conditions as set forth in the domain transfer agreement were met, for example once the buyer was satisfied and gave the okay, the seller would then be paid in full. Once the seller was paid in full, the domain name would be transferred through Godaddy, BlueHost, HostGator,etc.
3. Now that the buyer has the domain name and the seller has only part of the cash due under the contract, the Seller has a case for breach of contract (however, had the contract been in writing, the seller could have also sued for attorney fees as the Seller was in Arizona and in Arizona a seller can seek attorney fees for breach of written contract in AZ
4. However, since there was no written contract there was no attorney fees provision and no statutory basis for recovery.
5. Since the buyer was determined to live in another county outside the united states, this further complicated the situation.
So the seller's attorney informed me that he filed a lawsuit, and wanted my firm to help file a default judgement in Arizona (which I stated I could do, realizing your client might have problems collecting and enforcing on the judgment – not to mention the various issues he might raise which normally happens in an oral contract “he-said-she-said” case.
So this is the basic legal mess you can find your self, or worse yet, your client in when simply trying to sell a domain name. You have to be very careful. While people can come off as very professional and trustworthy, you have to protect yourself and your domain name for people who would seek to take advantage of you and snag up your valuable domain name for a fraction of its value.
How does the escrow process work?
There are also commercial third party websites out there that can help you with domain escrow services. The one I have used to sell two of my own domains (for approximately 6k – drunkdrivingattorney.com and drunkdrivinglawyer.com) since I was going through a website FLIPPA, I just went ahead and used their preferred vendor escrow.com
My transactions went very smoothly, and for the most part I was very happy with escrow.com (even though I could have used my law firm for the escrow).
TIP: When you are using the Flippa.com website make sure you review and agree to the Flippa website terms of service.
Attorney Steve's top five tips for buying a domain name
1. Have an intellectual property law firm like ours review your name to see what it is worth. There are various domain name appraisal websites you can use that can help you determine what the value of the domain name might be. Once site I like to look at because it shows recently sold domain names, in DNJournal.com. Seeing what domains recently sell for is like looking at “comps” in real estate to see which houses sold in your area so you can try to get an idea what your house is worth.
2. Perform a detailed trademark and tradename search before you commit to buying the domain. You do not want to pay a lot fo money for a domain name only to find out you just invested in a potential trademark or copyright lawsuit. Sometimes you are buying a website along with the domain name. What happens if your website has 1,000 pages of content and 200 of those pages contain Getty images that are not licensed and you get a cease and desist letter or federal copyright infringement letter from Getty Images? Your “great deal on your domain name” just started to sour. In this case, did your contract provide for indemnification for breach of warranties and representations in the agreement or that you had a right to force a buyback of the domain name? Most people don't think of this until it's too late.
3. Use a custom buy-sell contract that protects your rights and identifies the rights and duties of both parties to the domain transaction
4. Use an attorney domain name escrow service (or other commercial service)
5. Document in writing what transpires and if one party won't perform or if you suspect domain name fraud, contact our domain attorney fraud hotline number below.
Our Domain Name Legal Services
1. Domain name appraisals
3. Trademark and tradename search to make sure you are not buying a domain name that will get you into a trademark brand name issue (provoking a cease and desist letter, take-down notice, or letter threatening a federal trademark lawsuit)
4. We can prepare custom purchase and sale (buy-sell) agreements that have terms and conditions that protect you as a matter of contract law
5. We can help file or defend UDRP cybersquatter arbitrations with WIPO (World Intellectual Property Organization) or NAF (National Arbitration Forum)
6. We can help you manage and license your domain name portfolio. For companies or businesses with a large number of domain names, you would be wise to engage cyber-counsel or ip counsel to assist you in managing your domain names.
7. Domain name litigation in State and Federal Court, and International courts of law (ex. breach of contract litigation)
8. Corporate domain name consulting strategy sessions (hourly sessions where you need a intellectual property lawyer at your board meeting advising on the potential ramifications of using certain domain names.
9. We can help you register federal trademarks and copyrights
This is just a partial list of our digital property legal services.
Domain Name Resources
Contact a Domain Name Law FIrm
For questions about your digital risks involving domain names, we can be reached at (877) 276-5084. The initial consultation is no-charge. You may also reach us by filling out the contact form below to have one of our intellectual property attorneys contact you, usually within the hour.