Technology Law Update

ISP Entitled to Rely on Spamming Complaints in Terminating Services for Violation of Acceptable Use Policy

Asch Webhosting entered into a three-year agreement for unspecified "Internet services" with Adelphia Business Solutions, but within a few months Adelphia informed Asch that it was terminating the agreement due to violations of the agreement's Acceptable Use Policy. According to Adelphia, it had received complaints about Asch "spamming" its other customers.

Asch brought an action for breach of contract, seeking $1.4 million in consequential damages for loss of business for unjustified termination of the agreement. Adelphia countered with a motion for summary judgment barring the claim for consequential damages on the ground that such damages were barred by the exculpatory clause in the agreement. The exculpatory clause, which was printed in block letters, provided in part that "all liability or responsibility for any direct, indirect, incidental or consequential damages, including but not limited to damages due to loss of revenues or loss of business, suffered by the customer in connection with their use of or inability to use the [internet services]" shall not exceed the amount paid by the customer for the services.

The court granted Adelphia's motion barring consequential damages, rejecting Asch's contentions that Adelphia's "willful and predatory breach of contract" invalidated the exculpatory clause. Applying New Jersey contract law, the court found that the exculpatory agreement was reasonable and that the agreement was the product of an arms-length business transaction between two commercial parties. The court concluded that Adelphia acted in good faith in terminating the agreement, despite Asch's claim that the spamming complaints were inaccurate:

Plaintiff's arguments about the accuracy of the spamming complaints do not change the Court's determination because regardless of the ultimate accuracy or veracity of the spamming complaints, defendant was entitled to rely on those complaints so long as it did so in good faith, and plaintiff has not demonstrated any bad faith by defendant. Assuming for purposes of this motion that defendant did breach the Agreement, plaintiff's vague allegations of hidden motives and changing explanations by defendant for the termination, even if true, do not amount to "willful and wanton misconduct," "gross negligence," or violate the duty of good faith and fair dealing.

Asch Webhosting, Inc. v. Adelphia Business Solutions Investment, LLC, No. 04-2593, 2007 U.S. Dist. LEXIS 52932 (D. N.J. July 23, 2007) (unpublished).

The Power of the Internet: What You Say in Guyana Doesn't Stay in Guyana

In United States v. Khan, 2007 U.S. Dist. LEXIS 52373 (E.D. N.Y. July 19, 2007), Judge Irizarry issued a gag order, ruling that the statements of the defendant's attorney in a drug trafficking case violated Eastern District of New York Local Criminal Rule 23.1 because they identified prospective government witnesses, attempted to publicly tarnish the credibility of witnesses, commented on the merits of the case, and discussed evidence that the attorney knew or should have know would be inadmissible at trial.  While the statements were made to the press in Guyana, they made their way to the Eastern District by various means, including Internet Web sites and blogs.

Although this is a criminal case, the court's comments about the ability of the Internet to proliferate information have broad applicability.

In relating the statements made in Guyana to the local jury pool, the court emphasized that the Guyanese community in New York is not insignificant (being the largest outside Guyana) and that members of the Guyanese press also attended hearings in the case. The court also conducted its own Google search to determine how widespread the attorney's statements had been reported on the Internet. Judge Irizarry firmly rejected the argument that it "strains credulity" to assert that statements made to the foreign press are unlikely to affect the local New York jury pool:

In considering this motion, the court visited the Internet and ran a "Google" search for Defendant's name. Over two thousand "hits" came up, not all of which, of course, were related to the Defendant. Nonetheless, many were related to him--there were "blogs" about this case, as well as news stories on informal and formal news web sites, such as the ones brought to the court's attention by the government. Furthermore, there were news web sites reporting on Defendant and this case targeting the Jamaican population and the West Indian population in general, as well as sites in Spanish targeting the Latin American community, specifically South Americans. There was even a Cuban site concerned with this case. This is not the isolationist America of Woodrow Wilson. We live in a global community. People from Latin America, from the Caribbean and elsewhere have an interest in what happens in neighboring countries. Moreover, we have immigrants, residents, and descendants from these countries in the United States, especially in the various boroughs and surrounding areas of New York City, several of which fall within this district. Many of these people maintain a strong interest in events occurring in their home countries, or countries of descent. It is therefore not a stretch, in this court's view, to believe that remarks made by Simels in Guyana may well reach and influence our richly diverse jury pool in this district. At the very minimum, there can certainly be no per se rule that statements made to members of a foreign press will not impact the jury pool here.

The robots.txt file as a technological protection measure under the DMCA

Law.com reported today on the decision by Judge Robert Kelly, Jr., in Healthcare Advocates Inc. v. Harding Earley Follmer & Frailey, No. 05-3524 (E.D. Pa. July 20, 2007), the case in which trademark owner Healthcare Advocates sued the law firm that represented a rival company in prior litigation, for accessing archived versions of its Web site that were available on the Internet Archive's "Wayback Machine." Healthcare Advocates filed suit against the law firm and certain of its individual attorneys, as well as the Internet Archive (which earlier was dismissed from the litigation), when it learned that the law firm had viewed archived versions of its Web site on the Wayback Machine, and made printouts of those Web pages for use in the underlying litigation. Healthcare Advocates alleged that it had deployed a "robots.txt" file on its Web site to prevent access to the archived versions on the WayBack Machine, but the law firm bypassed that "technological measure" and succeeded in accessing the archived pages.

Judge Kelly dismissed Healthcare Advocates' claims under copyright law, the anticircumvention provisions of the Digital Millennium Copyright Act, the Computer Fraud and Abuse Act and state common law, ruling among other things that the law firm's access to and use of the archived Web pages in order to investigate the allegations of Healthcare Associates' underlying lawsuit against its client was permissible fair use. But the finding of fair use with respect to the copyright claims did not dispose of the DMCA anticircumvention claims or the Computer Fraud and Abuse claims.

A prominent feature of the DMCA anticircumvention portion of the opinion is the discussion of the role of the mundane and little-discussed "robots.txt" file in the archiving of Web sites, and the court's holding that in this case at least, a robots.txt file constitutes a "technological measure that effectively controls access to a work" within the meaning of the DMCA. What is a robots.txt file? It's a simple text file containing instructions to Web crawlers detailing which parts of a Web site is has permission to crawl and archive. A "robots.txt" exclusion file previously figured prominently in the reported opinion in Field v. Google, 412 F. Supp. 2d 1106 (D. Nev. Jan. 19, 2006), in which a Web site owner's failure to configure his robots.txt file to exclude search engine caching of his copyrighted content supported a ruling that the owner was estopped from asserting a copyright claim against the search engine.

As the Healthcare Associates v. Harding opinion relates in great detail, the Internet Archive periodically "crawls" the Internet and harvests screen shots of Web sites, and saves the results in the computer database that constitutes the WayBack Machine. The archived results, showing views of the archived Web site on a number of discrete dates in the past, can then be retrieved by entering the url of the Web site in a search box on the WayBack Machine Web site.

By placing a properly formatted and located robots.txt file on a Web site, the owner can control the crawling and archiving activities of the WayBack Machine, as well as other search engines that abide by the "robots.txt exclusion standard." Using the term standard may be a little strong, however, to the extent that it implies a formally adopted standard. The robots.txt exclusion standard, according to this Web site page authored by Martijn Koster, "represents a consensus on 30 June 1994 on the robots mailing list." That mailing list is now defunct, but the consensus has persisted. Wikipedia and other sources, including the Google search engine refer to this Web page as the authoritative source for the robots.txt exclusion standard.

AS related in the Healthcare Advocates opinion, the WayBack Machine also honors a robots.txt file retroactively. In other words, a Web site owner can retroactively block access to pages that were already crawled and archived by the WayBack machine by placing a robots.txt file on its site at any time. See the WayBack Machine explanation of retroactive blocking here.

And that's exactly what Healthcare Advocates Inc. did, deploying a robots.txt exclusion file on its Web site shortly after filing the complaint in the underlying litigation.

So how was the Harding Earley firm able to access the WayBack machine archive, after Healthcare Advocates deployed the robots.txt file? Healthcare Advocates claimed that the law firm "hacked" the WayBack Machine database in order to access the archive, despite the robots.txt "digital padlock" that it had deployed on its Web site. But the court found otherwise, based upon the consistent testimony of the experts presented by both the defendant and the plaintiff, that on the days that the law firm accessed the archive, the WayBack Machine's retroactive blocking functionality was not working due to a malfunction in the servers that controlled the blocking functionality.

Relying on dictionary definitions of the statutory terms terms "avoid" and "bypass," the court concluded that "[t]hese words, as well as the remainder of the words describing circumvention, imply that a person circumvents a technological measure only when he affirmatively performs an action that disables or voids the measure that was installed to prevent them from accessing the copyrighted material." According to the court, when the law firm accessed the archive, there was no protective measure to circumvent. The law firm "could not avoid or bypass any protective measure, because nothing stood in the way of them viewing these screenshots."

The court's finding that the blocking functionality was malfunctioning was fatal not only to Healthcare Associates' DMCA anticircumvention claim, it doomed its Computer Fraud and Abuse Act claim as well: "The Harding firm got lucky, because the servers were malfunctioning, but getting lucky is not equivalent to exceeding authorized access."

Judgment for the defendants.

And Another: No CFAA Claim Against Departing Employee For Copying Files

Another judge in the Third Circuit appears to be bucking the trend with respect to claims under the Computer Fraud and Abuse Act against disloyal employees. In Brett Senior & Associates, P.C. v. Fitzgerald, 2007 U.S. Dist. LEXIS 50833 (E.D. Pa. July 13, 2007), Judge McLaughlin dismissed an employer's claims that the Act was violated when an employee who later went to work for a competitor copied certain documents to a CD or hard drive or e-mailed them to his new employer. The case involved an action by a law firm against a departed employee, in this case, a CPA who performed tax, accounting and financial services for the firm's clients.

The employer's federal action included CFAA claims against both the former employee and his new employer, as well as trade secret misappropriation, unfair competition, tortious interference and unlawful conspiracy claims under state law. The employer argued that the former employee's actions (which he undertook after he had informed the employer of his new employment) exceeded his authorized access, knowingly and with the intent to defraud, in violation of 18 U.S.C. § 1030(a)(4).

In considering the motion to dismiss the CFAA claims, the court looked to the CFAA definition of "exceeds authorized access" in 18 U.S.C. § 1030(e)(6), i.e., "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter." The court concluded that Fitzgerald's conduct was not covered by this language, "by its plain terms," because "he did not obtain any information that he was not entitled to obtain or alter any information that he was not entitled to alter....The lawfulness of his entry defeats the CFAA claim."

Similarly to the recent ruling in Chas. A. Winner v. Polistina, No. 1:06cv4865, 2007 U.S. Dist. LEXIS 40741 (D. N.J. June 4, 2007) (see previous post), the court rejected the view that an employee's disloyalty renders his access to an employer's computer unauthorized or in excess of his authorization. The court commented that focusing on an employee's motive for accessing a computer or his intended use of the information obtained incorrectly interprets 18 U.S.C. § 1030(a)(4) "as if it said 'exceeds authorized use' instead of 'exceeds authorized access.'" (emphasis added) Like Judge Hillman in Chas. A. Winner v. Polistina, the court expressed concerned about the federalization of traditionally state law cases through the inclusion of CFAA claims:

The cases relied on by the plaintiff raise additional problems. First, in looking to the use to which an employee is permitted to put information, the cases often make the existence of a confidentiality or non-compete agreement dispositive of liability under the CFAA. It is unlikely that Congress, given its concern "about the appropriate scope of Federal jurisdiction" in the area of computer crime, intended essentially to criminalize state-law breaches of contract. S. Rep. 99-432, at 3 (1986).

Second, the point of the access requirement, as explained by the Senate Committee, is to ensure that the use of the computer is integral to the perpetration of a fraud, in contrast to the more expansive definitions of mail and wire fraud. Id. at 8-9. In the plaintiff's reading, however, the computer is not the locus of the wrongful conduct, but merely the fortuitous place where the information was obtained. n. 7

n.7 Under the plaintiff's view, turning over information to a competitor would be a violation of the CFAA if obtained from a computer but not, for example, from a wastebasket, even though the defendant was permitted to access the information in the computer.

The expression of concern about the scope of federal jurisdiction is somewhat ironic, given the court's ultimate disposition of the plaintiff's summary judgment motion. The court dismissed not only the CFAA claims, but also all other claims except a single claim of breach of fiduciary duty against the employee. Although the court could have dismissed the entire case (the dismissed CFAA claims were the only federal claims present in the case), the court retained jurisdiction over the single remaining claim "in accordance with the wishes of both parties."

No CFAA Cause of Action Allowed For Disloyal Employee Use of Employer's E-Mail System

A civil cause of action under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, frequently is pleaded in cases where an employer is suing a former employee for misappropriation of trade secrets or proprietary information, where the misappropriation involved some kind of access to or use of the employer's computer network. The CFAA is the federal "computer hacking" statute; in addition to criminal penalties, it provides a private right of action where a party accesses a "protected computer" without authorization, or in a manner that exceeds authorized access, causing a certain quantum of "damage" or "loss."

In these cases, the employee's access typically does not involve the kind of conduct traditionally considered "hacking," e.g., stealing a password, or utilizing computer vulnerabilities to gain surreptitious access to files the employee was otherwise not allowed to access. But the CFAA contains language penalizing unauthorized access to a computer "with intent to defraud." The courts have allowed some of these cases against disloyal employees on the theory that the employee's disloyal conduct fell within the fraud language.

The earliest example of such a case may be Shurgard Storage Center, Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000). My colleagues Ken Nissly   and Susan van Keulen  commented on this case at the time it was decided. As they pointed out, an advantage of including a CFAA cause of action in this kind of business litigation is the availablity of a federal forum for such claims, which might not be available to the plaintiff otherwise.

In an unpublished ruling issued last month, however, Judge Hillman of the District of New Jersey drew a line in the sand with respect to at least some of these types of claims brought under the CFAA.  In Chas. A. Winner v. Polistina, No. 1:06cv4865, 2007 U.S. Dist. LEXIS 40741 (D. N.J. June 4, 2007), the alleged unauthorized access involved the use of an employer's e-mail system by disloyal employees. According to the court, "with one exception, the only factual allegations in the complaint that concern the use or misuse of a computer are allegations that the individual defendants sent internal and exernal e-mails to further the interests of their prospective employer and in a manner disloyal to their former employer."

The plaintiffs alleged that they expended in excess of the $5,000 statutory amount of loss in hiring a computer expert to conduct an assessment and and investigation of the employees' conduct. Judge Hillman regarded these allegations as conclusory:

Plaintiffs have provided the Court with no evidence whatsoever regarding this alleged investigation and how it was related to any harm of damage to plaintiffs’ computer. Indeed, the only evidence cited by plaintiffs is a reference to paragraph 55 of the complaint, the merely conclusory allegation that Section 1030 was violated. In this vacuum, one is left to assume that any costs incurred by plaintiffs were spent recovering the offending e-mails and searching for other evidence of disloyal conduct. Gathering evidence from a computer to prove your state law employment claims does not turn defendants’ conduct - even disloyal conduct in breach of contract - into the kind of conduct that so concerned Congress that it criminalized it.

Judge Hillman ruled that Congress intended to permit a private right of action under the statute only with respect to conduct reached by the criminal statute. He concluded that the employee misuse of the employer's e-mail system does not constitute such conduct:

We find nothing in the structure or language of the statute to suggest that Congress intended to create a private cause of action against employees whose crime, if you will, merely involved the use of ordinary e-mail in a manner disloyal to their employer and in breach of their employment contract. The use of e-mail in the context of routine business activity - and for purposes both banal and hurtful - is almost universal and was so when Congress amended the statute. If such conduct violates the CCFA there would be no principled limit to the kinds of business disputes that Section 1030, and perforce its private right of action, would reach. We are convinced that if Congress had intended to bring the kind of employment dispute found in this case and so common in state court within the jurisdiction of the federal courts merely because a disloyal employee used e-mail to further his disloyal conduct it would have done so much more directly and with resounding clarity.

Does Judge Hillman's narrow approach to civil CFAA claims also extend to unauthorized access to computer files by disloyal employees? It would appear so. See n. 8: "In reaching this conclusion, we reject the nonetheless comprehensive and thoughtful opinion in Pacific Aerospace & Electronics, Inc. v. Taylor, 295 F. Supp. 2d 1188 (E.D. Wash. 2003)." Pacific Aerospace relied in turn on Shurgard in allowing a CFAA cause of action where an employer made a generalized claim of unauthorized access to employer proprietary information by disloyal employees.

It remains to be seen whether Judge Hillman's view of the CFAA will influence other courts. In Dudick v. Vaccarro, No. 3:06-cv-2175, 2007 U.S. Dist. LEXIS 45953 (M.D. Pa. June 25, 2007), also in the Third Circuit and decided shortly after Chas. A. Winner v. Polistina, the court relied on Shurgard in allowing a CFAA cause of action in an employee misappropriation case.

Is a contract to promote the sale of a DVD copying program void for illegality? A Georgia court says "No."

A case recently litigated in Georgia state courts involves interesting fallout from the successful actions by the motion picture industry to stop the sales of software programs that enable unlawful copying of motion picture DVDs. The issue addressed in Smith v. Saulsbury, 2007 Ga. App. LEXIS 759 (Ga. Ct. App. July 5, 2007) is whether a contract to promote sales of a DVD copying program that violates federal copyright law is void for illegality, thereby relieving the former producer of the copying program from its obligation to pay for services rendered under the contract.

The contract involved sales of "CloneMyDVD," marketed and sold by David Smith and his company More2Save, LLC. Smith et al engaged Richard Saulsbury to advertise CloneMyDVD via mass electronic mail messages at a set commission per sale, with the sales processed through PaySystems, a third-party merchant system. When Smith et al subsequently learned of the motion picture industry lawsuits against sellers of products similar to CloneMyDVD, they ceased production and distribution of the product, and PaySystems froze the company's account. Smith et al then stoped paying Saulsbury for commissions that he had earned from sales of the product to that date.

Saulsbury sued for breach of contract, and Smith et al defended on the theory that the contract with Smith was void and unenforceable because CloneMyDVD violated federal copyright law, in particular, the anticirumvention provisions of the Digital Millennium Copyright Act. The court looked to Georgia statutory law providing that "[a] contract to do an ... illegal thing is void." The court noted precedents to the effect that the provision is only applicable if the object or purpose of the contract is illegal, and it is inapplicable "where the object of the contract is not illegal or against public policy, but where the illegality is only collateral or remotely connected to the contract."

The court concluded that the defendants had failed to show that the purpose of their contract with Saulsbury was illegal:

Here, the Defendants have not shown that the purpose of their agreement with Saulsbury was illegal. Pursuant to the parties' contract, Saulsbury sent e-mails to potential customers whose e-mail addresses he obtained by purchasing distribution lists. The e-mails contained a link to the More2Save website. There is nothing inherently illegal about the services provided by Saulsbury. Although the ultimate sale or use of CloneMyDVD — if used to copy commercial DVDs that contained encryption to preclude copying — might have violated federal copyright law, such alleged illegality "was not required by the [parties'] contract and was incidental to contract performance." Thus, the trial court did not err in denying the Defendants' motion for summary judgment on this basis.

The relevant reference to federal copyright law in the court's opinion (at n. 7) is to 17 U.S.C. §1201(a)(2), the prohibition against trafficking in technology that circumvents a technological measure that prevents access to a work. Perhaps the court also should have considered 17 U.S.C. §1201(b)(1), which prohibits trafficking in technology that "effectively protects a right of a copyright owner" under the Copyright Act. The distinction between technology that completely prevents access to a work, and technology that allows access but prevents copying, is explained in Universal City Studios v. Corley, 273 F.3d 429 (2d Cir. 2001), aff'ing 111 F. Supp. 2d 294 (S.D.N.Y. 2000).

But the broader point is that both of these DMCA anticircumvention provisions broadly prohibit trafficking in anticircumvention technology, that is, "[n]o person shall manufacture, import, offer to the public, provide, or otherwise traffic in" any such technology. For example, in the Corley/Reimerdes case, the court enjoined the mere provision of links to copies of a software program that "cracks" the encryption technology protecting DVDs from copying. More to the point, in 321 Studios v. Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085(N.D. Cal. 2004), the court held that the marketing of DVD copying software violated the provisions of 17 U.S.C. §§ 1201(a)(2) and (b)(1). So the court's suggestion that the DMCA is violated only when a software program is actually used to make an unlawful copy  is a little off the mark. In defining the purpose of the contract, the court made a distinction that the DMCA anticircumvention provisions do not recognize.

Whether in the long run that fact should relieve the defendants of their obligation to pay commissions that were already earned on the sale of the program in question, before they (apparently) realized that it was unlawful, is another matter.

Seventh Circuit YouTube Reference Thwarted by Major League Baseball

Even judges like YouTube. Judge Evans of the Seventh Circuit, in an opinion this week on trademark law, begins with a vivid account of the legendary "Pine Tar Incident" which took place in a game between the Kansas City Royals and the New York Yankees in 1983. The incident involved a winning homer by Hall of Famer George Brett, and a challenge to the score by Yankees' manager Billy Martin. The issue: how many inches of pine tar on the bat. Too many, as it turned out.

Judge Evans closes his account of the incident with a citation to a video of the incident available on YouTube.

Naturally we had to check out the video. But alas! The url returns an error message: "This video is no longer available due to a copyright claim by MLB Advanced Media."

The court's inclusion of a citation to the YouTube video is interesting in light of the Ninth Circuit's recent opinion in Perfect 10 v. Amazon.com (remanding to the District Court for further proceedings Perfect 10's claims of contributory copyright infringement against search engines for providing links to unauthorized copies of copyright images).

In any event, Judge Evans's opinion in Central Manufacturing, Inc. v. Brett, No. 06-2083 (7th Cir. July 9, 2007), is a fun summer read, considering it involves, as the opinion relates, another appeal of a dispute involving George Brett and a baseball bat. And some basics of trademark infringement law, and the manner in which proof of trademark rights must be established. And, the consequences of bringing and action for infringement of trademark rights that the plaintiff is unable to establish.

As the opinion relates, a company founded by George Brett and his brother manufactures specialized wood bats, one of which was designated the "Stealth" model. Central Manufacturing and Stealth Industries, both controlled by Leo Stoller, hold a trademark registration for the use of the word "Stealth" on a wide variety of sporting goods. In 2001, Central filed an application for the use of the Stealth mark on baseball bats; the registration was granted in 2004. Stoller has also filed a large number of other applications for the "Stealth" mark on other products, and presently has upwards of 50 applications for the mark pending in the U.S.P.T.O. And he has been very successful in obtaining licensing fees from a wide variety of users of the term "stealth" on products, including a $10 licensing fee from Northrop Grumman for the use of the term on the stealth bomber fighter plane.

Central sued the Brett Brothers company for trademark infringement and ultimately (skipping a lot of detail) the issue came down to whether Central could show use of the mark in commerce prior to that of Brett Brothers. The District Court discounted Stoller's late-produced evidence of sales of baseball bats with the Stealth mark, and the appellate court agreed with its assessment:

Stoller has repeatedly sought ways to get around trademark law's prohibition on the stockpiling of unused marks, and this case is no different. It is unfathomable that a company claiming to have engaged in thousands of dollars of sales of a product for more than a decade would be unable to produce even a single purchase order or invoice as proof. Self-serving deposition testimony is not enough to defeat a motion for summary judgment. By exposing Central’s failure to make bona fide use of the “Stealth” mark for baseballs, Brett Brothers met its burden to overcome the presumption afforded by the 1985 registration, and summary judgment in its favor was the appropriate course.

Judgment in favor of the Brett Brothers affirmed, along with cancellation of the Stealth mark for baseball bats, and the award of attorney fees.

Federal court rules Telephone Consumer Protection Act does not apply to commercial SMS text messages sent to cellular phones

The ruling came a few weeks ago in Satterfield v. Simon & Schuster, No. C 06-2893 CW, 2007 U.S. Dist. LEXIS 46325 (N.D. Cal. June 26, 2007), a case involving the transmission of an SMS text message promoting a popular author's "mobile club" to a cellular phone used by a seven-year-old child. The defendants, the publishing company that contracted for the transmission of the promotional messages and the service provider that actually sent the messages, argued that the subscriber, the child's mother, had consented to the transmission of promotional messages when, in order to receive a free ringtone, she checked the box in an online form labeled "Yes! I would like to receive promotions from Nextones affiliates and brands…."

The question of whether Short Messaging Service (SMS) text messages are governed by the federal Telephone Consumer Protection Act (TCPA) is important to marketers who use SMS to send promotional messages to cellular telephones. The TCPA prohibits any "call" using an "automatic dialing telephone system" to a number assigned to a cellular telephone service without the "prior express consent" of the party to whom the message will be sent, where that party will be charged for the call. The question is also important to cellular carriers who have brought actions against marketers who have sent unsolicited SMS text messages to their subscribers under the TCPA. See, e.g., Cellco Partnership v. John Does 1-50 (D.N.J. complaint filed Oct. 18, 2006). 

Several issues are raised by the application of the statutory language to SMS text messages. Is a text message sent to a cellular telephon a "call" within the meaning of the TCPA? Is the technology used to send the text messages an "automatic dialing telephone system"? Note that the TCPA was enacted in 1991, well before the advent of SMS text messaging, so there is no discussion of the technology in the legislative history. Only one court prior to Satterfield v. Simon & Schuster has ruled on the issue, Joffe v. Acacia Mortgage, 121 P.3d 831 (Ariz. App. 2005). In Joffee, the SMS technology is described as follows:

The text message is initially delivered over the Internet as an e-mail directed to an e-mail address assigned by a cellular telephone carrier to a subscriber. Id. When the e-mail reaches the e-mail address, it is converted automatically by the carrier into a different format that can be transmitted to the customer’s cellular telephone. Id. To illustrate: assume cellular telephone carrier "Wireless" has assigned to its customer cellular telephone number (123)456-7890 and has also given its customer an e-mail address made up of the customer’s cellular telephone number and Wireless’ domain name, wireless.com. An e-mail sent to that e-mail address, 1234567890@wireless.com, will travel from the sender’s computer over the Internet to Wireless’ domain. After the e-mail arrives at Wireless’ domain, pursuant to the particular SMS protocol used by Wireless, Wireless will automatically convert the text of the message into an SMS message and forward the SMS message to its customer’s cellular telephone. Thus, Wireless actually receives the e-mail, and after processing it, directs the message to its customer’s cellular telephone as an SMS message.

The Joffe court relied on this description in concluding that an SMS text message falls within the TCPA. Broadly construing the statutory language to encompass technologies that did not exist at the time of the statute's enactment, the Joffe court concluded that the sending of an e-mail message to a wireless domain constituted a "call" to an "automatic dialing telephone system."

In Satterfield v. Simon & Schuster, Judge Claudia Wilken ruled contrary to Joffe that SMS text messages are not covered by the TCPA, first, because the manner in which the SMS messages were sent by the marketer does not fit the statutory definition of an "automatic telephone dialing system," and second, because the plaintiff had agreed to receive promotional messages under a broadly worded consent provision, executed in connection with the download of a free ringtone.

Aside from the broader issue of whether SMS text messages are covered by the TCPA, Judge Wilkens's ruling on the scope of the consent is of interest. Under the language of the consent, the subscriber agreed to receive promotions from "Nextones affiliates and brands." The message at issue stated that it was "PwdbyNexton," i.e., "Powered by Nextones." The court concluded that regardless of whether Nextones and the publisher that sent the message were "affiliates," the inclusion of the "PwdbyNexton" language in the text message "branded the text message as coming from Nextones; it identified the message with a Nextones brand." Summary judgment was therefore granted on the issue of consent to receive the message at issue.

Ninth Circuit Completes Perfect 10 Trifecta

The court's gift to busy technology attorneys everywhere as they depart for Fourth of July holiday is a 59 page opinion in Perfect 10 v. Visa, No. 05-15170 (9th Cir. July 3, 2007).

This is an important opinion on secondary liability for copyright infringement. In this case, adult image purveyor Perfect 10 sought to impose secondary liability on credit card companies and affiliated banks and data processing services for infringement of their copyrighted images by various third parties.

The appellate court affirms the district court opinion dismissing the complaint for failure to state a claim, with Judge Kozinski dissenting "for the most part." The appellate court comments that it declines "to create any of the radical new theories of liability advocated by Perfect 10 and the dissent."

Among other rulings, the panel majority held that the credit card and payment services companies do not make a "material contribution" to the underlying direct infringement by third party Web sites that make unauthorized copies of Perfect 10's copyrighted images available. The court rejected Perfect 10's comparison of those services to the activity in cases in which the courts have found contributory liability, including Fonovisa v. Cherry Auction (operation of a swap meet), Napster (operation of a file-sharing network) and Grokster (distribution of file-sharing software): "To find that Defendants’ activities fall within the scope of such tests would require a radical and inappropriate expansion of existing principles of secondary liability and would violate the public policy of the United States."

This is the third case in which Perfect 10 has sought to assign secondary liability to various Internet operators and entities for infringement of its copyrighted images. The others are Perfect 10 v. Amazon.com, decided just a few weeks ago, and Perfect 10 v. CC Bill, decided in May.

Avvo Attorney Ratings Web Site Seeks Dismissal on CDA Section 230, First Amendment Grounds

Avvo.com is a recently launched Web site that offers information and "ratings" of attorneys. The site was immediately the subject of criticism for many obvious and even rather humorous errors, such as good ratings for indicted or convicted attorneys, ratings for deceased attorneys, and low ratings for certain Supreme Court justices (see CNET article). It wasn't a question of when Avvo would be sued, just which lawyers would take on the task. And so, a class action alleging claims under the Washington Consumer Protection Act was filed in the Western District of Washington on June 14, 2007, captioned John Henry Browne and Alan J. Winokur v. Avvo, Inc., No. cv7-920. Here's the complaint.

The complaint relates the manner in which the site operates. In brief, profiles contain certain "default" information that Avvo gleanes from the Web sites of various attorney disciplinary authorities and other sources. Additional information may come from "clients" who rate their attorneys, and peer reviews by other attorneys. Avvo applies an algorithm to derive a rating for the attorney based upon the information provided from these sources.  Attorneys are also invited to "claim" their profiles to add additional relevant information that may affect their rating. It is necessary to use a credit card to register to claim an attorney profile; according to Avvo the purpose of the credit card requirement is to avoid fraudulent postings.

The complaint contains some interesting statements, including allegations that some attorneys raised their ratings by adding information on sports awards to their Avvo profile, and that attorneys connected with Avvo received the highest ratings of any other attorneys listed on the site.  The complaint also alleges that the act of claiming a profile can immediately raises an attorney's rating by on point (on the site's ten point scale).

The defenses raised by Avvo are as predictable as the filing of the lawsuit. We are guessing that Avvo's attorney had the motion to dismiss prepared in draft form prior to the launch of the site, considering that it was filed on June 28, only two weeks after the complaint. Here's the motion. The motion is based on First Amendment and CDA Section 230 grounds.

The CDA Section 230 claim makes sense with respect to the reviews that may be added by clients and peers directly to the Avvo site, but it is interesting to note that Avvo's Section 230 immunity claim lumps information provided directly to the site by these parties together with the information it apparently proactively obtains from bar disciplinary authorities and attorney Web sites: "Section 230 bars the claims that plaintiffs base on the posting or republication of thirdparty content. Avvo cannot be held liable for information it posts from state bar associations, attorney websites, attorneys, and clients." (Avvo brief, p. 20). Here's the relevant language from Section 230: "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." Does this language encompass information obtained from another online information content provider by the defendant and posted on its own site, rather than being posted by that provider directly to the defendant's Web site?