Appeals court upholds Sex.com ruling

A federal appeals court last week may have written the final chapter to a sordid legal saga that helped establish Internet domain names as property.

The 9th U.S. Circuit Court of Appeals rejected Stephen Cohen's appeal of a 2001 federal court ruling that he pay businessman Gary Kremen $65 million for stealing the domain name Sex.com in 1995 and building it into a multimillion-dollar business.

Kremen regained Sex.com after the 2001 ruling and operates it as part of his San Francisco online company, Grant Media. Cohen left the USA shortly after the ruling and has not paid Kremen.

"In a single word, the appeals court said 'enough,' " says James Wagstaffe, one of several lawyers who has represented Kremen in the decade-long case." Cohen is a fugitive outside the country, and he doesn't have the right to appeal. I mean, there is a bench warrant for his arrest."

In an e-mail Tuesday, Cohen said he plans to appeal to the U.S. Supreme Court. In phone interviews a few months earlier, the international fugitive accused of pulling off one of the Internet's biggest heists was remarkably calm.

"I'm out of the (online) sex industry. It bored me, frankly," said the gravel-voiced Cohen, who says he makes a "very comfortable living" in the European casino and construction industries.

"This will get extremely messy," Cohen vowed during a 45-minute call.

In many ways, it already has. The case has served as a cautionary tale. Cohen, 57, who built a cyberporn empire in the late 1990s based on the Sex.com name, vows to clear his name. Kremen, 41, a boy wonder of e-commerce in the early 1990s, has bankrolled a phalanx of lawyers and private detectives in the hope of hunting down Cohen and collecting his judgment.

"There's never a dull moment. (Cohen) is a genius in the way he's orchestrated this," Kremen says, nervously tapping a pen at his small San Francisco office.

"Cohen and Kremen will be forever linked," Wagstaffe says. "These are a couple of characters who will be in each other's obituaries."

A sordid story

When Kremen obtained registration rights to Sex.com in May 1994, he envisioned online riches. The Stanford Business School graduate started to sketch a business plan for an adult-oriented business, and the millions of online visitors (and dollars) that would pour into it.

But it was just the start of a mind-numbing ordeal.

In 1995, domain name-registrar Network Solutions Inc. (NSI) turned over Sex.com to Cohen, who, according to court documents, claimed in a forged letter that Kremen's company had transferred rights to him.

Cohen controlled the domain name for five years. The far-flung enterprise repeatedly changed physical addresses, but its content — a den of sexually explicit sites billed as the "world's largest pornographic site" — was the cornerstone of an empire that raked in about $40 million in revenue and drew millions of visitors, court records show.

"The guy has chutzpah," Kremen says, laughing and shaking his head in bemusement.

Cohen steadfastly dismisses Kremen as a Johnny-come-lately opportunist who staked his claim to Sex.com more than a decade after Cohen says he secured trademark rights to the name in 1979 as part of an electronic bulletin board he operated for swingers and nudist camps. His claim was repeatedly dismissed by the courts.

"He's in his own world and of no concern to me," Cohen said flatly in an interview.

Stranger than fiction

If Stephen Michael Cohen wasn't flesh and bones, he might be the creation of a pulp-fiction writer. In 1992, he was convicted of bankruptcy fraud and served nearly four years in federal prison in Lompoc, Calif., according to criminal records. Cohen has used aliases, has been married at least four times and has created more than 20 companies, public documents show.

Cohen refuses to discuss his past or his business associates. "This diversionary, razzle-dazzle stuff about my personal life has nothing to do with my current appeal. It is not relevant," Cohen said in a phone interview.

Despite Cohen's colorful past, he is not a target of federal authorities. Neither the FBI nor Federal Trade Commission is after him. They say the matter was resolved in court.

Perhaps it is his elusive nature that makes Cohen so interesting to those following the Sex.com case. "This guy is classic 'Catch Me If You Can,' " says Margo Evashevski, a private investigator hired by Kremen.

She chuckles as she recalls an exchange between the rivals that sounds like something out of MAD magazine's Spy vs. Spy cartoon. Several years ago, Kremen sent Cohen a check under a different name, to a house in Mexico his private investigators suspected Cohen used, in hopes Cohen would cash it and surrender personal information. But Cohen didn't fall for the trick. Kremen says he returned the check in the mail with a note saying "Nice try" with an inflatable doll. Kremen still has the doll.

Kremen's quest

Were he not a successful entrepreneur, Gary Kremen might jump off the pages of a comic book. The Chicago native crackles with pinball-machine energy.

The self-described workaholic was forced out of Match.com, the popular online dating service he co-founded, when he objected to selling it for $7 million to consumer-services company Cendant in 1997. (Kremen's instincts were right: Cendant quickly hawked Match.com to Ticketmaster Online-CitySearch for $50 million.)

"Gary is good as anyone — including the Google guys — at Internet marketing," says Ron Posner, a longtime venture capitalist who helped fund Match.com.

Despite his legal odyssey to regain Sex.com — which he says cost him $4.5 million in legal fees — Kremen isn't crying poor. Last year, VeriSign, the Internet address keeper that acquired NSI, paid Kremen a settlement stemming from a 1998 lawsuit filed by Kremen. As part of the 2001 court ruling, Kremen received an 8,900-square-foot mansion near San Diego that was once owned by Cohen.

"I've done OK," says Kremen, who says he rakes in $8 million a year in advertising revenue from Sex.com, a hub of adult-entertainment Web sites offering products and services.

But, like Cohen, Kremen says he doesn't like porn and finds it dull. "It's just another commodity," he says. Given his druthers, he would rather be an investor. Like Cohen, he pines for success in another profession.