Internet Library of Law
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Conversion - Internet Library of Law and Court Decisions - Updated March 11, 2008

Court finds defendant, who claimed to have purchased plaintiffs’ Express.com domain for $150,000 from someone who purported to be, but was not, the domain’s Administrative Contact, guilty of conversion and directs defendant to return the domain to plaintiffs.  Notably, the seller was contacted at the email address set forth for the domain’s Administrative Contact in the Whois Registry.  Because plaintiffs had never voluntarily transferred the domain, the seller was a thief who could not transfer good title to defendant.  As a result, defendant was not a good faith purchaser for value, but was instead, guilty of conversion.  Finally, the Court held that defendant could not defeat plaintiffs’ claim to title by relying on the data contained in the Whois registry, as this was simply an information database maintained by private parties, and not the equivalent of a statutorily created title registration system.  This data, and particularly the Administrative Contact’s email address, had been changed without plaintiffs’ knowledge or consent.

Court allows pro se litigant to proceed with breach of contract claims against the Internet Archive, operator of the Way Back Machine, arising out of the Internet Archive's reproduction and display of historical versions of defendant's website without her consent.  Defendant alleged that such copying of her site constituted an acceptance of the site's terms of use, which require the payment of exorbitant fees for such copying, and even greater amounts as liquidated damages should the copier fail to pay the required copying fees.  The court denied plaintiff's motion to dismiss this claim, holding the counterclaims stated a viable cause of action for breach of contract.  In reaching this result, the court noted it could not determine if the Internet Archive knew at the time it copied defendant's site that that act constituted an acceptance of the site's terms of use.  The court could not resolve that question on the instant motion because the record before it was unclear both as to the manner in which such terms of use were displayed on defendant's site, as well as to whether Internet Archive received any notice thereof, given  its claim to only have accessed the site via a web crawler, and not via an individual.

The Court did dismiss so much of defendant's counterclaims that advanced claims for conversion, civil theft and RICO arising out of the same copying activities.  The Court dismissed the conversion claims both because Internet Archive did not exercise sufficient dominion over defendant's property merely by copying her site and displaying it online, and because Internet Archive removed defendant's site, and thereby ceased exercising any dominion over it, promptly upon her request.

The Internet Archive did not move to dismiss copyright infringement claims defendant asserted arising out of its copying activities, which will also go forward.

Reversing, in part, the court below, the Ninth Circuit Court of Appeals holds that plaintiffs have stated a valid conversion claim against defendant Network Solutions Inc. ("NSI") as a result of NSI's involvement in the improper transfer of plaintiffs' domain name to a third party.  NSI transferred the domain name to this third party as a result of its receipt of a forged "facially suspect" letter purporting to authorize such a transfer, without validating the request with plaintiffs.  In reaching this result, the Ninth Circuit held that the registrant of a domain name has an intangible property interest therein capable of being converted.

Quick Hits

Apply Massachusetts law, a Federal District Court holds that conversion claims will not lie against defendants as a result of their mishandling of cardholder and account data maintained in electronic format.  To pursue such a claim in Massachusetts requires conversion of a tangible chattel, or intangible property rights that have merged into a document, such as a bank passbook or stock certificate.  As the electronic data in question was intangible property, a claim for conversion could not be stated, and the Court denied plaintiffs’ motion for leave to amend the complaint to assert such a claim.  Said the Court:

This Court follows the law as stated by the vast majority of courts that have addressed the issue and concludes that a claim for conversion based on the type of intangible property at issue here likely is not cognizable in Massachusetts.

In reaching this result, the Court declined to follow the holding of the New York Court of Appeals in Thyroff v. Nationwide Mutual Insurance Co., 864 N.E.2d 1272 (NY 2007), which allowed an employee to pursue conversion claims arising out of his employer’s retention of personal correspondence and business related information on company related equipment leased to him.  The New York Court of Appeals held that plaintiff could pursue conversion claims arising out of the alleged improper retention of such “electronic records.”

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The New York Court of Appeals extends New York’s common law tort of conversion to “intangible electronic records.”  Prior to the High Court’s decision, in the state of New York, the common law tort of conversion was limited to the conversion  of tangible personal property, or intangible personal property that had ‘merged’ into a tangible object, such as a stock certificate.  Finding that it was time for the tort of conversion to evolve to “keep pace with contemporary realities of widespread computer use,” the Court held that it extended to intangible electronic records stored on a company computer system.  Said the Court:

Computers and digital information are ubiquitous and pervade all aspects of business, financial and personal communication activities.  … We cannot conceive of any reason in law or logic why this process of virtual creation should be treated any differently form production by pen on paper or quill on parchment.  A document stored on a computer hard drive has the same value as a paper document kept in a file cabinet. … “It would be a curious jurisprudence that turned on the existence of a paper document rather than an electronic one.  Torching a company’s file room would then be conversion while hacking into its mainframe and deleting its data would not.” … It generally is not the physical nature of a document that determines its worth, it is the information memorialized in the document that has intrinsic value. … In the absence of a significant difference in the value of information, the protections of the law should apply equally to both forms – physical and virtual.

In light of these considerations, we believe that the tort of conversion must keep pace with the contemporary realities of widespread computer use.  We therefore answer the certified question in the affirmative and hold that the type of data that Nationwide allegedly took possession of – electronic records that were stored on a computer and were indistinguishable from printed documents – are subject to a claim of conversion in New York.

As a result of this decision, the plaintiff, formerly an insurance agent for defendant Nationwide Mutual Insurance, was allowed to pursue a conversion claim arising from defendant’s decision to deny plaintiff access to electronic personal and business records he stored on the company’s computer system.  Plaintiff used Nationwide’s computer system throughout the course of his business relationship with Nationwide.   

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