December 14, 2008 (InfoPowa News) — Pretty much as expected, there was no immediate decision Friday on the iMEGA and IGC vs. Kentucky state hearing in the Kentucky Appeals Court in Louisville … but the good news is that almost all of those present felt that the three judges hearing the case were very well prepared, asked many pertinent and probing questions, and that an early decision looks likely.

The plaintiffs were contesting an earlier Franklin County Circuit Court ruling by Judge Thomas Wingate that supported the astounding presumption by state governor Steve Beshear that he has the authority and jurisdiction to seize and ultimately confiscate the Internet domain names of online gambling and other companies domiciled elsewhere in the world. The case, involving some 141 domains, has major implications for Internet commerce everywhere, and has attracted widespread media coverage and criticism from Net Neutrality organizations (see earlier reports).

Judge Wingate's rulings are on hold pending the Appeal Court findings, which will hopefully show that he has overeached his jurisdiction and authority in the matter.

Not all perspectives on the case were heard Friday, although earlier briefs were considered. Attorneys for the various organizations who had filed amicus briefs — EFF, the Center for Democracy and Technology, the Poker Players Alliance and the ACLU-Kentucky — were denied a speaking slot before the judges.

Friday's hearing had been preceded by the opposing lawyers submitting briefs and arguments to Judges Michelle Keller, Michael Caperton and Jeff Taylor who heard the case. Other written submissions from friends of the court were also considered, and it was clear from the outset that the three Appeal Court judges were very well versed in the facts of the issue.

The hearing, which took just over 50 minutes, provided a platform for final oral arguments from legal representatives of companies impacted by the Wingate ruling, as well as iMEGA and IGC.

The judges asked many relevant and probing questions before retiring to consider their finding, which will be released at a date yet to be determined.

The Associated Press news agency, which covered the hearing, reported that William Johnson, a lawyer who represents five of the websites, said Kentucky's laws do not spell out that the state can seize domain names. Because lawmakers haven't acted since the law was written in 1974, the state lacks the authority to seize the websites and shut them down, Johnson said.

"If they had wanted to correct this law, they could have done so annually," Johnson said. "That is a matter for the legislature to decide."

Attorney Jon L. Fleischaker, representing the trade body iMEGA, said that the lower court had not properly applied Kentucky criminal statutes permitting forfeiture and confiscation, because there had been no previous criminal finding to support such action. Fleischaker argued that in order for Kentucky to use the seize and confiscate statute, there first had to be a criminal complaint followed by a conviction or a guilty plea. In other words, only after there is a finding of a violation of the criminal code could the seizure statute be used.

"What they have done is turn the law on its head," Fleischaker claimed. "If they want to bring a criminal case, they should bring a criminal case."

"It is not sufficient for the state or a lower court judge to decide on their own that there is a criminal violation — they have to go through a criminal proceeding first," he added.

The iMEGA representative said that the lower court hearing had also misapplied the definition of "gambling appliances" to extend to Internet domains. The state criminal statute definition of "gambling devices" which could be seized and confiscated could not be applied to an Internet domain, he argued.

The judges examined this argument with the state's lawyers, who continued to assert that because the domain gave access to the gambling website it could be construed as a gambling device.

Eric Lycan, an attorney who represented the Kentucky Justice Cabinet, which is handling the case for the state, rather than the state's Attorney General, described the online gambling sites in strong terms as a "massive, global, offshore criminal enterprise" whose owners know they are violating the laws of nearly every state in the country by fostering gambling via the Internet. He made the arguable allegation that over 80 percent of the websites' revenue comes from the United States, and that this gave individual states like Kentucky the right to exercise jurisdiction.

"They [the online gambling sites] are doing this because they don't think anyone can catch them," Lycan said.

Judge Michelle Keller asked Lycan the pertinent question of why the state doesn't handle the illegal gambling the same way it handles illegal drug transactions — by making both the sale, purchase and use of the drugs against the law. "It's illegal to sell the drugs and it is also illegal to use the drug," Keller said. "I don't see much of a difference here."

Lycan responded by claiming that the decision to only criminalize the offering of gambling was a decision made by lawmakers. "The legislature specifically exempted the player from the legislation," Lycan said.

The jurisdictional aspects of the case arose on several occasions and were debated.

William Johnson, representing some of the affected websites, argued that the sites were located offshore and that Kentucky cannot exert authority over property that is not within its boundaries.

For the state, Lycan responded that this was irrelevant as the offending websites were accessible within the state.

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