Technology Law Update

Florida Appeals Court Vacates Order Allowing Computer Expert Access To All Computers In Defendant's Household

The due process and privacy rights of a teacher accused of inappropriate electronic communications with students were violated by an administrative law judge's discovery order that would have allowed a computer expert unlimited access to all computers in teacher's household. Menke v. Broward County School Board, No. 4D05-978 (Fla. Ct. App. 4th Dist. Sep. 28, 2005) The court noted that the order would have permitted the expert to examine material on the computers without giving the teacher or others in the teacher's household the opportunity to assert privileges in advance of disclosure. The court also noted that there was no evidence of destruction of evidence or thwarting of discovery, or that any other less intrusive method of discovery of relevant information had been sought, such as requesting the teacher to provide hard copies of relevant documents.
The opinion is available at http://www.4dca.org/Sept%202005/09-28-05/4D05-978.op.pdf

FTC Settles Data Security And Privacy Charges Against Mortgage Lender

The Federal Trade Commission (FTC) has settled charges brought against a multi-state mortgage lender under the FTC Safeguards Rule promulgated under the Gramm-Leach-Bliley Act. In re Superior Mortgage Corp., No. 052 313 (FTC Sep. 28, 2005) The FTC alleged that the mortgage lender violated the Rule by failing to assess risks to sensitive customer financial information, failing to implement appropriate password policies to limit access to sensitive customer information, failing to encrypt or otherwise protect customer information being transmitted by e-mail, and failing to ensure that its service providers were providing security for customer data. The FTC also alleged that the company engaged in deceptive practices by representing that it encrypted sensitive customer data collected through its Web site, when in fact that data was subsequently transmitted electronically in clear and readable form. The settlement requires the company to hire an independent auditor to assess compliance for the next ten years.
The FTC press release is available at http://www.ftc.gov/opa/2005/09/superior.htm

Offshore Company's Indirect Acquisition Of Copyrighted Photographs From U.S. Subsidiary Triggers Long-Arm Jurisdiction

The exercise of specific jurisdiction over an offshore company is warranted in a copyright infringement suit where the company continuously and systematically requested copies of photographs from an intermediary, knowing that its subsidiary located in the forum state would burn copies of the photographs to a CD-ROM and deliver them to the company pursuant to the intermediary's request. Peter Rosenbaum Photography Corp. v. Otto Doosan Mail Order Ltd., No. 04 0767 (N.D. Ill. Sep. 26, 2005) The court noted that the law of the forum state provides that a nonresident can submit to jurisdiction through the acts of an agent. The court also found that it was reasonable for the offshore company to have anticipated being haled into court in the forum state, when it requested model releases from its subsidiary by e-mail and telephone communications. The court concluded that the company took precautions to prevent being sued in the forum state with respect to the photographs and thus there was nothing unfair or unreasonable about requiring the company to defend the copyright action in the forum state.
The opinion is available at http://www.brownraysman.com/InternetLawUpdate/PeterRosenbaum.pdf

Court In FTC Enforcement Against Spyware Distributor Action Has Jurisdiction Despite Defendant's Claim That He Is No Longer In Business

In an enforcement action brought by the Federal Trade Commission against various defendants engaged in distributing "spyware," a federal district court may exercise personal jurisdiction over a party that claims he is no longer engaged in the business sought to be enjoined. Federal Trade Commission v. Seismic Entertainment Productions, Inc., No. 04-377-JD (D. N.H. Sep. 22, 2005). The court ruled that assessing the validity of personal jurisdiction in an FTC enforcement action does not entail an examination of the merits of the claim, only whether there is a "likelihood" that jurisdictional facts exist. The court found that the FTC had provided a sufficient basis to supports its reasonable belief that, absent an injunction, the defendant would again pursue activities in violation of the FTC Act. The court also noted that personal jurisdiction under the Federal Trade Commission Act extends to defendants who have sufficient minimum contacts with the United States, and is not limited to those who have minimum contacts with the forum state.
The opinion is available at http://www.brownraysman.com/InternetLawUpdate/Seismic.pdf

Alaska Anti-Adware Legislation Signed Into Law

Legislation prohibiting deceptive acts or practices related to spyware has been signed into law in Alaska. SB 140 makes it unlawful for a person not the owner or authorized user of a computer to display pop-up advertisements "by means of a spyware program," with knowledge that the advertisement is "displayed in response to a user accessing a specific mark or Internet website address," and with knowledge that the advertisement was purchased or acquired by a person who is not either the mark owner, a licensee or authorized agent of the mark owner, or a person advertising a lawful transaction in goods bearing the mark. It is also unlawful for a person to purchase such advertising after receiving notice of a violation from the mark owner. A "spyware program" is further defined as one which collects information about an Internet website at the time it is being viewed "in the state." The law contains a "safe harbor" for programs that exclude the display of pop-up advertisements to individuals residing in Alaska.
The legislation is available at http://www.legis.state.ak.us/basis/get_bill_text.asp?hsid=SB0140Z&session=24

Use Of Automatic Dialing System To Send Text Messages To Cellular Telephones Violates TCPA

The use of an automatic dialing system to send messages to cellular telephones in the Short Messaging Service (SMS) format constitutes a "call" that violates the Telephone Consumer Protection Act (TCPA). Joffe v. Acacia Mortgage Corp., No. CA-CV 02-0701 (Ariz. Ct. App., Sep. 20, 2005). The appeals court ruled that the prohibition in the TCPA against the use of automatic dialing systems to make "any call" to a telephone number assigned to a cellular telephone service was not limited to two-way real time voice intercommunications. The court noted that its interpretation of the term "call" was consistent with other provisions of the TCPA that prohibit making a call to a cellular or residential telephone number using an artificial or prerecorded voice, a form of call that "has no potential for a real time voice intercommunication."
The opinion is available at http://www.cofad1.state.az.us/opinionfiles/CV/CV020701.pdf

Authors Guild Files Copyright Infringement Suit Over Google Print Project

The Authors Guild filed a class-action suit against Google, Inc., claiming that the search engine company's "Google Print" project violates the copyright rights of certain of its member-authors. The Authors Guild v. Google Inc., No. 05-8136 (S.D.N.Y. complaint filed Sep. 20, 2005). As described by Google, the project involves copying out of print titles in the collections of several libraries, and enabling users of its search engine to perform text searches on the contents of those books. The Authors Guild alleges that Google's project involves the unauthorized reproduction of copyrighted works for commercial use, and seeks class action status.
The complaint is available at

http://news.findlaw.com/hdocs/docs/google/aggoog92005cmp.pdf

Third-Party That Provided Anti-Phishing Software Is "Information Content Provider" Under Communications Decency Act Section 230

An Internet Service Provider (ISP) cannot be held liable for erroneously identifying a legitimate bank Web site as a fraudulent site where the ISP relied upon a list of "phishing" sites provided in anti-phishing software licensed from a third party. Associated Bank-Corp., v. Earthlink, Inc., No. 05-C-0233-S (W.D. Wis. Sept. 13, 2005). The court dismissed a suit brought against the ISP by a bank whose Web site was erroneously identified to the ISP's customers as fraudulent, due to an error in the anti-phishing software. The court concluded that ISP was an "interactive computer service" that was immune under Section 230 of the Communications Decency Act from liability for information provided by an "information content provider." The court noted that the list of phishing sites was input into the software database by the software company, without any alteration of content by the ISP.
The opinion is available at http://www.brownraysman.com/InternetLawUpdate/AssociatedVEarthlink.pdf

Interlocking Agreements Covering Abandoned Software Development Project Preclude Confidentiality And Trade Secret Claims

Unambiguous provisions in a series of interlocking agreements covering an abandoned software development project preclude of the parties from asserting that its contributions to the project had been misappropriated by the other party. G5 Technologies, Inc. v. International Business Machines Corp., No. 04 Civ. 1201 (S.D.N.Y. Sep. 19, 2005) The court examined five interlocking agreements covering the development of processes for the formation and operation of virtual companies, and concluded that they unambiguously gave the defendant company title to all of the documents detailing the processes claimed by plaintiff and permitted it to "freely use" any idea contributed by the plaintiff in the course of the project. The court rejected the plaintiff's breach of contract claims based upon the unambiguous language in the agreements. The court also rejected the plaintiff's implied contract and quantum meruit claims for compensation for the use of its contributions by the defendant, because the express agreements between the parties foreclosed such claims.
The opinion is available at http://www.brownraysman.com/InternetLawUpdate/Technologies.pdf

Aggressive Internet Marketing by Junior Trademark User Creates Factual Issue On Defense Of Laches

A plaintiff's five-year delay in filing suit challenging a junior user's registration of an allegedly infringing domain name raises a triable issue of fact with respect to the doctrine of "progressive encroachment" and whether it overcomes a defense of laches. Ameripay LLC v. Ameripay Payroll, Ltd, No. 04 C 5253 (N.D. Ill. Sep. 16, 2005) In response to defendant's motion for summary judgment based on the defense of laches, the court ruled that aggressive Internet marketing by the junior user via an interactive Web site that more directly competed with the plaintiff raised a factual question concerning the applicability of the doctrine of "progressive encroachment." Under that doctrine, the court explained, a trademark owner is entitled to tolerate minor infringements without losing the right to take enforcement action when a junior user's activity threatens more serious harm. The court concluded that a reasonable jury could find that the plaintiff was justified in delaying legal action until the junior user's Internet marketing placed it more squarely in competition with the plaintiff.
The opinion is available at http://www.brownraysman.com/InternetLawUpdate/Ameripay.pdf