Civil Action No. 3:12-cv-00367-F (O)____________________________________________________________________________IN THE UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF TEXAS____________________________________________________________________________JEFF BARON,Appellant,v.CHAPTER 11 TRUSTEE DANIEL J. SHERMANAppellee____________________________________________________________________________Appeal from the United States Bankruptcy CourtFor the Northern District of Texas, Dallas DivisionBankruptcy Petition No. 09-34784-sgj11____________________________________________________________________________LETTER BRIEF IN RESPONSE TO MAY 16 2012 ORDER____________________________________________________________________________Respectfully submitted,/s/ Gary N. ScheppsGary N. ScheppsTexas State Bar No. 00791608Drawer 670804Dallas, Texas 75367(972) 200-0000 - Telephone(214) 347-4031 - FacsimileEmail: legal@schepps.netCOUNSEL FOR APPELLANTCase 3:12-cv-00367-F Document 19 Filed 05/25/12 Page 1 of 6 PageID 1547-1-GARY N. SCHEPPSATTORNEY & COUNSELORDRAWER 670804DALLAS, TEXAS 75367TELEPHONEFACSIMILE972-200-0000972-200-0535May 25, 2012VIA EMAIL(and PACER)Hon. Judge W. Royal Furgeson, Jr.United States District Judge1100 Commerce Street, Room 1359Dallas, Texas 75242-1001Re: Civil Action No. 3:12-cv-00367-F (O)Your Honor,This briefing addresses the issues relevant to the instant appeal. Accordingly, thescope of this briefing is limited to the record on appeal before the Court. The facts andissues relevant from the perspective of the Vogel receivership are not addressed here, and noattempt is made to respond or present a countervailing argument to the issues beyond thelimited matters at issue in thisappeal.Accordingly, the contents of this brief are as follows:ISSUES ADDRESSED ......................................................................................2ARGUMENT......................................................................................................2QUESTION 1. HOW ONDOVA LIMITED COMPANY OWNSTHE DOMAIN NAME SERVERS.COM?................................................2QUESTION 2. WHAT IT MEANS TO REGISTRAR A DOMAINNAME AND WHAT IT MEANS TO OWN IT?.......................................4CERTIFICATE OF SERVICE............................................................................5Case 3:12-cv-00367-F Document 19 Filed 05/25/12 Page 2 of 6 PageID 1548-2-ISSUES ADDRESSEDQUESTION 1. How Ondova Limited Company owns the domain nameservers.com?QUESTION 2. What it means to registrar a domain name and what it meansto own it?ARGUMENTQUESTION 1. How Ondova Limited Company owns the domain nameservers.com?ANSWER: The Court has requested that a theory be briefed to support a certainoutcome– Ondova owning the domain name servers.com. That theory, while not endorsedby Appellants, responsive to the Court’s briefing directive is as follows: If the bankruptcycode’s ‘ipso facto’ clause negation provision, that is expressly limited in application to rightslost by entities which themselves invoke bankruptcy protection, could be amended by theCourt and revised to also encompass entities in which a bankrupt debtor held stock; and theCourt were to proclaim a new law that overrules the substantive state law contract rights ofnon-bankruptcy entities when a debtor in bankruptcy holds stock in those entities, the Courtcould then declare void the substantive rights of Baron vesting under state law. The Courtcould then institute a second law that the assets of entities ordered into receivership by theBankruptcy Court are ‘transmuted’ into assets of the bankruptcy estate so that the domainname servers.com would be owned by Ondova.FURTHER BRIEFING: The Ondova Bankruptcy Judge entered an order placingServers, Inc. into receivership because it found Servers, Inc. was in default of its obligationsregarding the domain name Servers.com. R. 255. Accordingly, because of Servers, Inc.’sdefault and the imposition of a receiver, as a matter of Texas and Nevada state law, pursuantto the agreement between the parties the domain name servers.com reverted to Baron andCase 3:12-cv-00367-F Document 19 Filed 05/25/12 Page 3 of 6 PageID 1549-3-Emke and they became 50/50 owners of the domain name. The Ondova bankruptcy estateretains its 50% ownership interest in Servers, Inc., however, as a matter of Texas and Nevadastate law, Servers, Inc. no longer owners “servers.com”. Notably, the Emke settlementtransferred most of the rights to “servers.com” to a new entity (Servers, Inc., a Nevadacorporation). R. 246-9. Your Honor’s receiver, Peter Vogel, and his firm Gardere,should be able to provide insight on this as Gardere at some point represented Emke inhis suit against Baron and Ondova (a litigation which was active when Vogel wasappointed by Your Honor, without a conflicts affidavit as mandated by law, as special masterover the Ondova/Netsphere lawsuit).Ondova and Emke owned the new corporation’s stock 50/50. Id. No one disputesOndova’s right to ownership of the Servers, Inc. stock. However, the Emke settlementexpressly reserved an interest in the domain name for Emke and Baron personally. Id.Pursuant to the agreement, Baron and Emke reserved a security and reverter interest in thedomain name, reverting ownership on the condition that the corporation was ever placed intoreceivership. Id. Specifically the Emke settlement agreement provides:“In the event of insolvency, receivership and/or other default ofthe jointly owned company, the domain name <servers.com> shallrevert to Jeff Baron and Mike Emke, to be owned jointly and equally.To this degree, these two principals shall maintain a first lien andsecurity interest in the domain name superior to any other investor,equity holder or creditor.” R. 247.As stated above, on October 18, 2011, the Ondova Bankruptcy Court Judge entered an orderplacing Servers, Inc. into receivership because it found Servers, Inc. was in default of itsobligations regarding the domain name Servers.com. R. 255. Accordingly, because ofServers, Inc.’s default and the imposition of a receiver over the company, as a matter ofTexas and Nevada state law, pursuant to the agreement between the parties, the domain nameservers.com reverted to Baron and Emke and they became 50/50 owners of the domainname. The Ondova bankruptcy estate retains its 50% ownership interest in Servers, Inc.,however, as a matter of Texas and Nevada state law, Servers, Inc. no longer owns“servers.com”.Case 3:12-cv-00367-F Document 19 Filed 05/25/12 Page 4 of 6 PageID 1550-4-QUESTION 2. What it means to registrar a domain name and what it means toown it?ANSWER:(1) To register a domain name is to list an identity as the holder of a domain name foradministrative purposes within the private DNS system. Registration is the technical meansset up for administration of the global domain name structure and the DNS system is thetechnical structure for administering domain names.(2) To own a domain name is to hold title to that name and to be vested with the powerunder law to control a bundle of rights relating to that name, including to ultimately direct the use,management, and enjoyment of the domain name, and including the right to convey those rights toothers. In other words, owning title of a domain name is having legal rights in and to the propertythat are recognized at law as being superior to the legal interest in the property of all others.FURTHER BRIEFING: There is no inherent correlation between ownership of titleof a domain name and the registration of a domain name. Title relates to the right tocontrol and alienation of the property whereas registration relates to the technicaladministration of the property within the domain name management system ascurrently implemented. Just as holding a dog’s leash is irrelevant to ownership of a dog, sois holding registration of a domain name. There should be nothing astounding about thisprinciple. For example, a book can be copyright in the name of the author, X. X can thenfreely transfer his or her ownership of the copyright to Y. The book can recite “copyright2012 by X”, while the copyright owner is actually Y. Thus, most domain investment portfoliostypically have a third party or subsidiary hold the DM (domain name) registrations to maintainthe privacy of domain portfolio ownership. This Court has had prior experience with thisconcept in the case of Dauben. Dauben, Inc. provided a privacy service. That is, the companyheld a portfolio of names as registrant without acquiring an ownership interest in the domainnames themselves. Similarly, Ondova provided the same service to its customers, holdingdomain names as registrant on behalf of the domain name owners to protect the owner’s privacy.Case 3:12-cv-00367-F Document 19 Filed 05/25/12 Page 5 of 6 PageID 1551-5-Respectfully submitted,/s/ Gary N. ScheppsGary N. ScheppsTexas State Bar No. 00791608Drawer 670804Dallas, Texas 75367(972) 200-0000 - Telephone(972) 200-0535 - FacsimileEmail: legal@schepps.netCOUNSEL FOR APPELLANTCERTIFICATE OF SERVICEThis is to certify that this brief was served this day on all parties who receive notification throughthe Court’s electronic filing system.CERTIFIED BY: /s/ Gary N. ScheppsGary N. ScheppsCOUNSEL FOR APPELLANTCase 3:12-cv-00367-F Document 19 Filed 05/25/12 Page 6 of 6 PageID 1552