This article has been written by Komal Mittal, pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.
What is a domain name?
Domain name refers to the address of a website forming part of the URL (Uniform Resource Locator). It is used to search a website; earlier IP addresses of the websites were used for this purpose. A domain name system was invented to make the process of searching a website user-friendly as it is easy to remember and recognise the domain names.
For example, the URL for the e-commerce website Flipkart is https://www.flipkart.com/ whereas its domain name is flipkart.com.
In India, the domain names are registered and transferred by these two organisations: ICANN (Internet Corporation for Assigned Names & Numbers) and NIXI (National Internet Exchange of India).
Domain names are governed by intellectual property rights laws. In the case of Rediff Communication v. Cyberbooth, the defendant had registered the domain name radiff.com which was similar to the domain name owned by the plaintiff i.e. rediff.com. The Court stated that domain names are important and can be a valuable corporate asset and such domain name is more than only an internet address and the domain names are entitled to protection equivalent to a trademark. The court in this case decided in favour of the plaintiff.
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What is meant by Domain Name Transfer Agreement?
There are two modes of the domain name transfer viz. assignment and license. Domain name transfer usually takes place by way of assignment where the rights are transferred absolutely to the assignee and in the case of a license, the transfer is for a fixed period of time and there exist certain conditions restricting the use of domain name by the licensee.
A domain name transfer agreement is an agreement between the assignor/licensor and assignee/licensee to transfer the domain name of a website from the assignor/licensor to the assignee/licensee as the case may be.
What are some of the situations in which a Domain Name Transfer Agreement is required?
- When a website is sold to another entity or person.
- When the domain name related to your business or organisation is purchased by another organisation or person or a shell company.
- When the company holding the domain name is acquired by another company or organisation and the merger and acquisition transaction/agreement does not include the transfer of the domain name.
Objectives of Domain Name Transfer Agreement
- To remove any sort of confusion from the mind of the users of the website. In Gulshan Khatri vs Google Inc. on 20 March, 2017, the respondent challenged the filling of the appellant’s domain name googlee.in as it was similar to the respondent company’s domain name google.in, the arbitral tribunal decided in favour of the Respondent. When the arbitral award was challenged in Delhi High Court, the court dismissed such a petition.
- To get the monetary benefit from such transfer by the parties. The assignee/licensee gets the benefit of the assignor’s/licensor’s business as the customer base of the assignee/licensee widens. Whereas, the assignor/licensor gets the monetary benefit by the assignment/license of its domain name as they can retain the Proprietary right of the domain name.
Important clauses of Domain Name Transfer Agreement
It is always preferable to define all the technical terms used in the domain name transfer agreement as these terms are used in the agreement to prevent the parties from any kind of potential disputes and to make the agreement in itself clear as it will be easy for parties to understand and undertake their activities in accordance with the agreement.
In this agreement, the definition of the terms, domain name, DNS (Domain Name Server) and encumbrance are very important and these definitions must be defined in this agreement.
Manner of Transfer
In this clause, the manner of transfer of domain name should be clearly stated. To avoid any kind of dispute or problem in future this clause should include all the rights related to the domain name and goodwill associated with it.
This clause must also state the exact date when the transfer of the domain name will take place. For example, from the date of the agreement or the date of its execution.
Undertaking of the transferor
This clause must state all the undertakings by the assignor/licensor to the assignee/licensee as the case may be. It generally states that the assignor/licensor is the holder of the domain name and the domain name is free from all encumbrances, there is no prior agreement contrary to the domain name transfer agreement.
Transfer requirements to be followed by the parties
Transfer requirements to be followed by assignor/licensor
It includes all the requirements which the assignor/licensor must fulfil in order to give effect to domain name transfer. In this clause, it is important to clearly specify the manner in which such information will be given to the registrar and communicated between the parties. State how the burden of the cost of formalities will be shared between the parties. Usually, the cost of formalities is paid by the assignee. It generally includes:
- The assignor/licensor will make changes in the name server and DNS (Domain Name Server) configuration and notify the same assignee.
- The assignor/licensor shall notify the concerned registry of such transfer along with all the documents required including NOC (No Objection Certificate) signed by both the parties and executed jointly by the parties by the way of an agreement.
- Assignor/licensor shall not have any right to view the source code of the domain name or operate the domain name.
- Assignee/licensee shall have all rights to make changes to the working of the transferred domain name.
Transfer Requirements to be followed by Assignee/Licensee:
This clause lists down the points which must be complied with by the assignee/licensee in order to give effect to the domain name transfer.
For example, the assignee/licensee agrees at Completion to deliver full particulars to the concerned registry for transfer of the domain name. Pay the consideration as per the terms of the domain name transfer agreement.
This clause states the amount of consideration to be paid by the assignee/licensee in exchange for the transfer of the domain name. Consideration is generally paid in tranches as an industry practice. The clause must clearly state the:
- The total amount which needs to be paid and whether it includes or excludes tax if any applicable.
- Mode of payment which can be through cash, cheque, bank transfer, etc.
- Whether the payment is to be done as a lump sum amount or in instalments. In the case of instalments, this clause must mention the time and amount to be paid at each instalment and the total number of instalments.
- Specifically, mention the consequences in case of any delay in the payment of consideration. For example, Interest can be imposed for late payment.
Representations and warranties
Representations are the confirmation or assurance by a party to another party that certain things are true on the date of execution of the agreement. Under the representations and warranties clause make sure that the standard of liability of both parties is clearly mentioned. Clearly state the monetary limit or the scope of warranties covered under this agreement so as to avoid unlimited liability of a party.
The clause must include:
- That any ensuing service mark/trademark associated with this domain name stands transferred or it will no longer be permitted to be used by the assignor/licensor as the case may be, which may create confusion in the mind of the users of the domain name.
- That the assignment/license also includes the transfer of goodwill and other aspects related to goodwill.
- The assurance from the assignor/licensor that they shall not register domain names that are the same or similar to the domain name being transferred as a domain name.
- Restriction on the assignor/licensor from acquiring similar websites, whether pertaining to similar-sounding domain names, or not.
- Restriction on the assignor/licensor from targeting a similar market segment as the buyer.
- A warranty to protect the interests of the purchaser in respect of third-party infringement, pending awards and future litigation in respect of the subject matter of this agreement.
- The assignee/licensee shall have all the right, powers and authority related to this domain name after the transfer of the domain name.
- The assignee/licensee shall take sole responsibility for all the future costs and charges under this agreement.
- This agreement shall form the sole basis of the transfer of the domain name.
Points to keep in mind while drafting a Domain Name Transfer Agreement
- Mention the type of TLD (Top Level Domain) used in brief in the agreement.
- State the date of expiration, renewal and breach of the domain name transfer agreement.
- ICANN requirements must be fulfilled.
- Ensure that under the confidentiality clause not only information related to a domain name is kept confidential but the fact that such a domain name transfer took place itself should also be kept confidential as companies generally want this type of information to be kept a secret.
The domain name is a very important intellectual property of the businesses needs to be transferred with great care and caution. While transferring the domain name all the terms and conditions must be stated carefully so as to avoid any dispute regarding the transfer of the domain name.
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