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NZ Domain Commission successful appeal in lawsuit against US company

24 July 2019 - By Tracey Cormack

New Zealand’s Domain Name Commission (DNCL) has had its preliminary injunction order against a US company affirmed by the Court of Appeal for the Ninth Circuit .

The first decision in favour of DNCL was made in September 2018. DNCL sued for breach of contract against the company DomainTools and successfully applied for a preliminary injunction in the District Court Western District of Washington at Seattle.

Domain Name Commission Limited (DNCL) is a non-profit New Zealand corporation which administers New Zealand’s top-level internet domain registry. DomainTools is a Washington based digital intelligence-gathering company in the US which has been scraping registration data from New Zealand’s Domain Name Commission for many years.

DNCL makes such information publicly available subject to certain terms of use, which DNCL alleged that DomainTools violated. After the September 2018 decision, DomainTools filed an interlocutory appeal in the Court of Appeal, claiming the District Court had abused its discretion in its application of the preliminary injunction standard.

US Court of Appeal

After discussing the standard for preliminary and mandatory injunctions and examining case law (Winter v Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008), Garcia v Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015)), the Court of Appeal found that the District Court did not abuse its discretion in finding that the facts and law clearly favoured DNCL’s position that there was mutual assent between DNCL and DomainTools to form a contract on DNCL’s terms of use.

Terms of use

DNCL had conspicuously displayed its terms of use in response to each of the hundreds of thousands of information requests DomainTools submitted.

The Court of Appeal said that the evidence before the District Court suggested that someone at Domain Tools must have had actual knowledge of DNCL’s terms of use, because DomainTools had excised the terms of use appended to the information it received from DNCL before adding it to DomainTools’ own database.

Additionally, DomainTools did not deny knowledge of the terms of use in response to DNCL’s cease-and-desist letters. The Court of Appeal said that “it was not illogical, implausible, or without support in the record for the district court to have concluded that the facts and law clearly supported a finding of mutual assent.”

Breach of contract

The Court of Appeal found that the District Court did not abuse its discretion in finding that the terms of use were clear enough to form the basis of a breach of contract claim.

A plain reading of both versions of DNCL’s terms of use showed that they clearly prohibited the bulk downloading of 94% of DNCL’s information registry. “It was therefore not illogical, implausible, or without support in the record for the District Court to have concluded that the facts and law clearly supported a finding that DomainTools breached the terms of use.”

Irreparable harm findings

The District Court found that DNCL was likely to suffer irreparable harm in the absence of a preliminary injunction. The DC was presented with evidence that DNCL’s customers “care deeply about the privacy of information about themselves; that some DNCL customers ended their relationship with DNCL because of the publication of the very type of information that DomainTools obtained from DNCL (and republished in violation of DNCL’s terms of use); and, that DNCL has taken steps to address its customers’ demand for increased privacy.” Accordingly, the Court of Appeal held “it was not illogical, implausible, or without support in the record for the district court to conclude that DNCL was likely to suffer irreparable harm if it was not able to enforce its terms of use designed to safeguard user privacy.”

Public interest

The Court of Appeal agreed with the District Court that the public interest supported an injunction. DomainTools presented evidence that showed cybersecurity professionals used its services to safeguard the public, but there was also evidence that those professionals could access that information through alternative channels. The District Court said that the public interest was benefitted by safeguarding the privacy of DNCL’s users and there for “it was not illogical, implausible, or without support in the record for the district court to conclude that the public interest favoured issuance of a preliminary injunction.”

The Domain Name Commissioner, Brent Carey says that the decision sends a message to all companies dealing with registrants’ personal information online to be compliant with privacy requirements.

Last updated on the 16th September 2019