In 1994, in the early days of the internet, domain names were free for the asking. At that time, Network Solutions, Inc. (NSI), was the sole registrar of domain names. NSI had a contract with a federal government agency stating that NSI had the primary responsibility for “ensuring the quality, timeliness, and effective management” of domain name registration services.

Gary Kremen, seeing what he felt was a great opportunity, registered the name “sex.com” with NSI. Unfortunately for Kremen, Stephen Cohen also saw the potential of that domain name. Cohen, who had just gotten out of prison for impersonating a bankruptcy lawyer, knew that Kremen had already registered the name. that fact, however, in the words of the court, “was only a minor impediment for a man of Cohen’s boundless resource and bounded integrity.” Through forgery and deceit, Cohen succeeded in having NSI transfer the domain name to his company. When Kremen later contacted NSI, he was told that it was too late to undo the transfer. Kremen then turned to the courts for assistance.

Kremen sued Cohen, seeking as damages the substantial profits that Cohen had made by using the name. The court held in Kremen’s favor and awarded him millions of dollars in damages. Kremen could not collect the judgement, however, because Cohen had disappeared – after first transferring large sums of money to offshore accounts. Kremen then tried to hold NSI responsible for his losses by alleging that he was an intended third party beneficiary of NSI’s contract with the government. He claimed that because NSI had not “effectively managed” its duties, as it was obligated to do under the contract, his domain name had been wrongfully transferred.

Was Kremen an intended third party beneficiary of the contract?