September 2007
Technology Law Update September 2007
In this issue:
- Failure to Adhere to Terms of Open Source License Constitutes Breach, Not Copyright Infringement
- Availability Of Copyrighted Music Files In Shared Folder Accessible To P2P File-Sharing System Constitutes Copyright Infringement
- Commodity Exchange’s Daily Settlement Prices Not Copyrightable Under Merger Doctrine
- Where Copyright In Selection Of Data On Online Shopping Bargains Is Claimed, Showing Of 70% Overlap In Data Creates Triable Issue
- Domain Name Registrar Subject To California Long-Arm Jurisdiction Based Upon Numerous California Registrations And Involvement With Spam-Sending Domains
- Use Of Trademark In A Web Site File Path Not Actionable Under ACPA
- Use Of Domain Name Identical To Company’s Claimed Trademark To Redirect Traffic To A Search Engine For A Fee Is ‘Commercial Use’ Under the Lanham Act
- Display Of Photographs On Stock Photography Web Site May Constitute Improper Commercial Use Under Illinois Right Of Publicity Statute
- Internet Banner Ads Containing Hyperbolic Comparison To Competitor’s Cable Service Deemed Non-Actionable ‘Puffery’ Under The Lanham Act
- Immunity Under CDA 'Good Samaritan' Blocking Provision Given To Provider of Anti-Spyware Software
- Online Dating Service Immune Under CDA Section 230 From Liability For Failure To Remove Profiles Of Underage Users
- Class Action Waiver In Cellphone Contract Unconscionable Under California Law
- Arbitration Clause In Clickwrap Software License Agreement Mandating A Foreign Arbitration Forum Is Not Unconscionable Under Washington Law
- Search Engine’s Advertising Clickwrap Agreement Enforceable Under California Law, Including Accessible FAQs
- District Court Decision On State Government Block Of Employee Access To Blogs Certified For Interlocutory Appeal
- Difficulty of Researching Internet-Based Technology Prior Art Supports Motion For Leave To Amend Patent Invalidity Claims
- Acknowledgment Of E-Mail Communication Regarding Contract May Constitute "Delivery Verification" Under Contract Termination Provision
- Under New York Law, Subsequent Publication Of Print Article On Web Site Constitutes "Republication"
- Law Firm Web Site Announcement Of Product Liability Investigation Protected By Litigation Privilege Under Tennessee Law
- Source Code Lacked "Independent Economic Value" Necessary For Trade Secret Protection, Absent Showing Of Value To A Competitor
- Allegation That Payment Processing Software Installed "Spyware" States Claim Under Federal And New Jersey Computer Fraud Statutes
- Attorney Fee Awarded To Prevailing Defendant Justified In CAN-SPAM Case, Under "Evenhanded" Approach
- Damages For Lost Profits Attributable To Theft Of Proprietary Data Are Recoverable Under CFAA, Despite No Interruption Of Computer Service
- Cost Of Credit Monitoring Following Data Security Breach Not A Cognizable Injury In Fact
- Bare Allegations Of Emotional Harm From Release Of Personal Data Do Not Support Finding Of Actual Damages Under Federal Privacy Act
- Information Temporarily Stored In Computer RAM Is Discoverable Under Revised Federal Rule
- In Non-Compete Dispute, Company Web Site May Not Be Reliable Source For Business Facts
- In Federal Court TCPA Action, Availability Of Class Action Governed By State Law
- California Resident Amenable To Suit In New Jersey Over Defamatory Newsgroup Posts Targeted At New Jersey
- Opinions and Developments of Note
Failure to Adhere to Terms of Open Source License Constitutes Breach, Not Copyright Infringement
A software distributor's failure to adhere to the attribution requirements of the open source Artistic License does not give rise to a copyright infringement claim, because the distributor's use of the code did not exceed the terms of the license. Jacobsen v. Katzer, No. 3:06-cv-01905, 2007 U.S. Dist. LEXIS 63568 (N.D. Cal. Aug. 17, 2007). The court denied the copyright holder's motion to preliminarily enjoin the software distributor from distributing the copyrighted code, because the copyright holder had failed to show a likelihood of success on the merits of his copyright infringement claim. The court ruled that the open source license pursuant to which the copyrighted code was distributed broadly permitted copying, distribution and creation of derivative works, and that the failure to adhere to the condition in the license requiring attribution "may have constituted a breach of the nonexclusive license, but does not create liability for copyright infringement where it would not otherwise exist."
Opinion: http://www.thelen.com/tlu/JacobsenVKatzer.pdf
Editor's Note: This is a significant opinion, if only because it is one of the very few in which a court has construed the terms of an open source license. This case involved code licensed under the open source "Artistic License." Whether the ruling may have significance for other open source licenses such as the GNU General Public Licenses is an open question. Perhaps the recent filing of the complaint in Andersen v. Monsoon Multimedia, Inc., alleging a violation of the GNU GPL, will provide an answer to that question. See further discussion of the new filing on the Technology Law Update blog.
Availability Of Copyrighted Music Files In Shared Folder Accessible To P2P File-Sharing System Constitutes Copyright Infringement
An individual who placed digital copies of copyrighted sound recordings in a shared folder on his computer, available to a peer-to-peer file sharing system, is liable for direct copyright infringement. Atlantic Recording Corp., v. Howell, No. 2:06cv2076, 2007 U.S. Dist. LEXIS 81268 (D. Ariz. Aug. 20, 2007). The court granted the recording companies' motion for summary judgment on the issue of infringement, holding that the individual violated the record companies' right of distribution by making the files available in the shared folder. The court rejected the individual's argument that his ownership of the compact discs that contained the disputed recordings was a defense to a charge of infringement, commenting that the individual's "right to use for personal enjoyment copyrighted works on CDs he purchased does not confer a right to distribute those works to others without Plaintiffs' authorization."
Opinion: http://www.thelen.com/tlu/AtlanticVHowell.pdf
Commodity Exchange’s Daily Settlement Prices Not Copyrightable Under Merger Doctrine
A commodity exchange’s daily settlement prices, which are used to value of futures contracts for a particular date, are not copyrightable because the expression of such values has merged with the real-world economic ideas and facts underlying the numbers. New York Mercantile Exchange, Inc. v. IntercontinentalExchange, Inc., No. 05-5585, 2007 U.S. App. LEXIS 18230 (2nd Cir. Aug. 1, 2007). The appeals court affirmed the lower court’s dismissal of the plaintiff’s copyright claims. The court found that any settlement price for a particular futures contract would be determined based on the same market data, and as such, the merger doctrine precluded copyrightability due to the lack of a range of settlement price variations. The court concluded that giving copyright protection for the plaintiff’s settlement prices “would inevitably accord protection to an idea” effectively barring the defendant and other competitors from valuing commodity futures contracts.
Opinion: http://www.thelen.com/tlu/NYMEXVIntercontinentalExchange.pdf
Where Copyright In Selection Of Data On Online Shopping Bargains Is Claimed, Showing Of 70% Overlap In Data Creates Triable Issue
A competing compiler of Web-based deals that copied another Web site’s selective, daily compilation of online shopping bargains may be liable for infringement of the plaintiff’s copyright in the selection of items, if the overlap is substantial. BensBargains.net, Inc. v. XPBargains.com, No. 06-1445, 2007 U.S. Dist. LEXIS 60544 (S.D. Cal. Aug. 16, 2007). The court ruled that there is a triable issue of fact with respect to those daily copyrighted compilations where the plaintiff demonstrated that the overlap of items was 70% or more. The court granted summary judgment in favor of the defendant on the claims of infringement with respect to the arrangement of the items, however, finding no substantial similarity on a visual comparison of the compilations.
Opinion: http://www.thelen.com/tlu/BensBargainsVXPBargains.pdf
Domain Name Registrar Subject To California Long-Arm Jurisdiction Based Upon Numerous California Registrations And Involvement With Spam-Sending Domains
A domain name registrar, which had at least 5,000 California customers and at one time owned or sold multiple domain names to California businesses that allegedly sent illegal spam, is subject to jurisdiction under California’s long-arm statute. Silverstein v. E360 Insight, LLC, No. 2:07cv2835, 2007 U.S. Dist. LEXIS 57695 (C.D. Cal. Aug. 6, 2007). The court denied the registrar’s motion to dismiss for lack of personal jurisdiction, rejecting the argument that the use of a forum-selection clause in contracts with its customers entitles it to avoid personal jurisdiction in California. The court concluded that by creating continuing relationships with California residents, the registrar had purposely availed itself of California law. The court also commented that the registrar’s contacts with the forum included the alleged offering of a privacy service that masks the identity of spammers who sent emails to California residents.
Opinion: http://www.thelen.com/tlu/SilversteinVE360Insight.pdf
Use Of Trademark In A Web Site File Path Not Actionable Under ACPA
The Anticybersquatting Protection Act (ACPA) does not prohibit a Web site owner’s use of a another’s trademark in a Web site file path. Gregerson v. Vilana Financial, Inc. No. 06-1164, 2007 U.S. Dist. LEXIS 64960 (D. Minn. Aug. 31, 2007). In dismissing the defendant’s ACPA counterclaim, the court noted that the plaintiff’s use of the defendant’s trademark in a URL’s file path is not actionable under the statute since the defendant failed to establish that the plaintiff used “a domain name that is identical or confusingly similar” to the defendants’ trademark. The court also dismissed the defendant’s trademark infringement claims based upon the use of the defendant’s trademark in metatags, rejecting the defendant’s initial interest confusion argument since the parties were not competitors and the plaintiff’s use of the trademark was for critical commentary.
Opinion: http://www.thelen.com/tlu/GregersonVVilana.pdf
Use Of Domain Name Identical To Company’s Claimed Trademark To Redirect Traffic To A Search Engine For A Fee Is ‘Commercial Use’ Under the Lanham Act
The use of a domain name identical to the defendant’s trademark to redirect Web traffic to a search engine in exchange for income from sponsored search results constitutes “commercial use” under the Lanham Act. Lahoti v. Vericheck, Inc., No. C06-1132JLR, 2007 U.S. Dist. LEXIS 64666 (W.D. Wash. Aug. 30, 2007). The court declined to grant summary judgment on the defendant’s trademark infringement counterclaims, finding material issues of fact concerning whether likelihood of confusion exists. However, the court ruled that the plaintiff’s use of an identical domain name to direct users to another Web site, coupled with the plaintiff’s attempt to sell the domain name to the defendant, constitutes commercial use under the Lanham Act.
Opinion: http://www.thelen.com/tlu/LahotiVVericheck.pdf
Display Of Photographs On Stock Photography Web Site May Constitute Improper Commercial Use Under Illinois Right Of Publicity Statute
The display of low resolution photographs by a copyright owner on its stock photography Web site, in order to offer the photographs for licensing, may violate the rights of a celebrity depicted in the photographs under the Illinois Right of Publicity statute. Brown v. AMCI Pop Division, No. 1-06-0870, 2007 Ill. App. LEXIS 843 (Ill. App. Ct., 1st Dist. Aug. 2, 2007). The Illinois appeals court responded to questions certified by a trial court, concluding that the trial court was correct in declining to dismiss the celebrity's Illinois right of publicity claims. The court reasoned that the licensing of the photographs could be construed as a use of the celebrity's identity for a "commercial purpose" within the meaning of the Illinois right of publicity statute. The appeals court also concluded that the celebrity's right of publicity claim with respect to the licensing of the photographs was not preempted by section 301 of the Copyright Act.
Opinion: http://www.thelen.com/tlu/BrownVAMCI.pdf
Internet Banner Ads Containing Hyperbolic Comparison To Competitor’s Cable Service Deemed Non-Actionable ‘Puffery’ Under The Lanham Act
Internet banner ads that depict a competitor’s cable television service in grossly distorted, pixilated images are hyperbolic, non-actionable “puffery” under the Lanham Act because no reasonable consumer buyer would be justified in relying on such representations. Time Warner Cable v. DirecTV, Inc., No. 06-0468, 2007 U.S. App. LEXIS 18846 (2nd Cir. Aug. 9, 2007). The appeals court reversed the lower court’s preliminary injunction barring the defendant from running the Internet advertisements, finding that they were not likely “literally false” under the Lanham Act. While the court found that the ads were inaccurate depictions of the picture quality of the plaintiff’s cable service, the court ruled that they were “puffery” and that given the gross distortions in the banner ads, “it would be difficult to imagine any consumer…would actually be fooled…into thinking that cable’s picture quality is so poor that the image is nearly entirely obscured.”
Opinion: http://www.thelen.com/tlu/TWCVDirecTV.pdf
Editor's Note: Although the court vacated the injunction with respect to the Internet banner ads, it affirmed the district court’s ruling that certain television advertisements were likely to be proven literally false, and thus upheld the issuance of the injunction with respect to those advertisements.
Immunity Under CDA 'Good Samaritan' Blocking Provision Given To Provider of Anti-Spyware Software
A software maker whose anti-spyware software classified the plaintiff’s Web-based product as potential malware is immune from liability under the "Good Samaritan" provision of the Communications Decency Act (CDA) for claims of tortious interference and trade libel. Zango v. Kaspersky Lab, Inc., No. 07-0807 (W.D. Wash. Aug. 28, 2007). The court dismissed the plaintiff’s action, finding the software maker immune under Section 230(c)(2)(B) as an “access software provider" who made available tools to restrict access to material that the provider or user considers "objectionable." The court also refused to consider the plaintiff’s conclusory assertions of bad faith concerning the software maker’s classification of the plaintiff’s software, rejecting the plaintiff’s argument that Section 230(c)(2)(B) only immunizes those providers who take actions in good faith.
Opinion: http://www.thelen.com/tlu/ZangoVKasperskyLab.pdf
Online Dating Service Immune Under CDA Section 230 From Liability For Failure To Remove Profiles Of Underage Users
An online dating service is an "interactive service provider" entitled to immunity under Section 230 of the Communications Decency Act (CDA) from liability for false profiles posted by underage users of the service. Doe v. SexSearch.com, Inc., No. 3:07cv604, 2007 U.S. Dist. LEXIS 61776 (N.D. Ohio Aug. 22, 2007). The court granted the online dating service's motion to dismiss a user's claims related to his exposure to criminal liability as a result of his encounter with a minor who posted a false profile on the dating service claiming that she was 18 years of age. The court also rejected the plaintiff's multiple claims of liability on the merits, concluding, among other things, that the provider's online terms and conditions, which contained a limitation of liability clause, was not substantively unconscionable. The court further concluded that the dating service did not have a duty to warn the user that the service might have users who were minors, because it was "common knowledge that 'young children all over America use the Internet,'" and that "given the 'anonymity of the Internet,' the danger that a minor might enter an adult-only website was open and obvious, as persons wishing to gain access merely had to click a box stating they were above 18 years of age."
Opinion: http://www.thelen.com/tlu/DoeVSexSearch.pdf
Editor's Note: This is the latest in a long line of cases from both state and federal courts that apply the CDA to shield online businesses from a wide variety of liabilities.
Class Action Waiver In Cellphone Contract Unconscionable Under California Law
A class action waiver contained in an arbitration clause in a consumer cellphone services contract is unenforceable under California law, because it is both procedurally and substantively unconscionable. Shroyer v. New Cingular Wireless, No. 06-55964, 2007 U.S. App. LEXIS 19560 (9th Cir. Aug. 17, 2007). The appeals court reversed the lower court's order compelling arbitration, finding that the class action waiver was not severable from the arbitration provision in the contract. The court concluded that the class action waiver was indistinguishable from that found unconscionable by the California Court of Appeals in Szetela v. Discover Bank, 97 Cal. App. 4th 1094 (2002), an opinion later cited with approval by the California Supreme Court in its seminal decision on unconscionability, Discover Bank v. Superior Court of Los Angeles, 36 Cal. 4th. 148 (Cal. 2005). The panel also reversed the district court's ruling that a finding that the class action waiver is unconscionable is preempted by the Federal Arbitration Act.
Opinion: http://www.thelen.com/tlu/ShroyerVNewCingular.pdf
Editor's Note: The court cited ten opinions in which district courts in the Ninth Circuit found class action waiver provisions in consumer contracts to be unconscionable under California law. Not included in that list were the opinions issued a few days earlier in Oestereicher v. Alienware, No. C 07-00523, 2007 U.S. Dist. LEXIS 58616 (N.D. Cal. Aug. 10, 2007) (class action waiver unconscionable under California law, in a case involving the online purchase of a computer) and Brazil v. Dell Inc., No. 07-01700, 2007 U.S. Dist. LEXIS 59095 (N.D. Cal. Aug. 3, 2007) (same, despite Texas choice of law in the contract).
Arbitration Clause In Clickwrap Software License Agreement Mandating A Foreign Arbitration Forum Is Not Unconscionable Under Washington Law
An arbitration clause contained in a clickwrap software license agreement between an American software developer and a U.K. software company that mandates all disputes be referred to a London arbitration forum is enforceable under Washington law. Hauenstein v. Softwrap Ltd., No. 07-0572, 2007 U.S. Dist. LEXIS 60618 (W.D. Wash. Aug. 17, 2007). The court granted the defendant's motion to compel arbitration, finding that the clause, while part of an adhesion contract, was not procedurally unconscionable because the plaintiff was “not deprived of a meaningful choice of whether to agree to the contract terms.” The court also found that the arbitration clause was not substantively unconscionable, commenting that the plaintiff failed to offer evidence or financial reasons why he could not arbitrate abroad or cite any legal authority suggesting that a foreign forum clause renders an arbitration clause unenforceable.
Opinion: http://www.thelen.com/tlu/HauensteinVSoftwrap.pdf
Search Engine’s Advertising Clickwrap Agreement Enforceable Under California Law, Including Accessible FAQs
A search engine’s advertising clickwrap agreement is enforceable under California law, including the provisions of a “Frequently Asked Questions” document referenced in the terms and conditions presented at the time the advertisers signified assent to the agreement. CLRB Hanson Industries, L.L.C. v. Google Inc., No. 05-03649 (N.D. Cal. Aug. 21, 2007). The court ruled that advertisers assented to the search engine’s terms and conditions and searchable FAQs when they clicked on a button entitled “Sign Me up for AdWords Select.” The court concluded that the search engine provided “reasonably conspicuous notice of the existence of contract terms,” making it unreasonable for advertisers entering into a commercial agreement to dispute the existence of a contract. The court found, however, that the AdWords Agreement’s shortening of the limitations period for contract claims from the statutory four years to 60 days, without clearly highlighting this limitation, is “so unreasonable as to show undue advantage” and declined to enforce that provision of the agreement.
Opinion: http://www.thelen.com/tlu/CLRBHansonVGoogle.pdf
Editor's Note: This action concerns state unfair competition and breach of contract claims stemming from alleged overdelivery of ads and overcharging of fees beyond an advertiser’s “daily budget” level during partial months or during months when an advertisers paused their online ads. The court was unable to rule on these claims as a matter of law due to triable issues of material fact.
District Court Decision On State Government Block Of Employee Access To Blogs Certified For Interlocutory Appeal
The question of whether a blogger on political issues has standing to challenge a State government decision to block state employee access to all Web sites classified as "blogs" has been certified for interlocutory appeal. Nickolas v. Fletcher, No. 3:06-cv-00043, 2007 U.S. Dist. LEXIS 58351 (E.D. Ky. Aug. 9 2007). In April, the court ruled that the blogger, who published a blog that was critical of the administration of the State government, had standing to challenge the government's decision to block employee access to blogs, because his allegation that he lost readership because of the blocking "is a sufficient injury-in-fact to confer standing on a First Amendment claim." The court also ruled, however, that while the blogger had stated valid First Amendment and Equal Protection claims, there was not a likelihood of success on the merits of those claims sufficient to justify the issuance of a preliminary injunction. In certifying the issue of the blogger's standing for interlocutory appeal, the court commented in the instant opinion that because of "the distinct nature of the Internet and the ease to which information may readily be obtained ... there is substantial ground for difference of opinion on this largely novel issue."
Opinion: http://www.thelen.com/tlu/NickolasVFletcher.pdf
Difficulty of Researching Internet-Based Technology Prior Art Supports Motion For Leave To Amend Patent Invalidity Claims
The difficulty of identifying prior art related to Internet-based technologies supports a motion for leave to amend a patent infringement defendant's invalidity claims. Yodlee, Inc. v. Cashedge, Inc., No. C 05-01550 SI, 2007 U.S. Dist. LEXIS 58872 (N.D. Cal. Aug. 6, 2007). The court granted the defendant's motion to amend its invalidity contentions to add reference to web-based prior art, finding that the difficulty of searching for and identifying such prior art partly excused the defendant's failure to identify the proffered prior art sooner. The court agreed with the defendant's contention that "there are no comprehensive sources for locating web-based prior art," and that "in the new and rapidly innovation field of internet technology," traditional sources, such as scholarly articles and published patent records are not very helpful in identifying prior art.
Opinion: http://www.thelen.com/tlu/YodleeVCashedge.pdf
Acknowledgment Of E-Mail Communication Regarding Contract May Constitute "Delivery Verification" Under Contract Termination Provision
An e-mail which expressed the desire to negotiate significant changes to the terms of an expiring contract, and which was responded to in e-mail by the other party to the contract, may constitute proper notice of termination under a contractual provision that required notice of termination by a "delivery service that provides written delivery verification." America's Collectibles Network, Inc. v. MIG Broadcast Group, Inc., No. 3:06-cv-260, 2007 U.S. Dist. LEXIS 62374 (E.D. Tenn. Aug. 23, 2007). The court declined to grant summary judgment, ruling that there were material issues of fact concerning, among other things, the effective termination of the contract alleged to have been breached. With respect to the sufficiency of e-mail notice in light of the notice of termination provision, the court the parties' prior course of dealing, including the conduct of negotiations by telephone and e-mail, and the continuation of the relationship in reliance on telephone and e-mail agreements.
Opinion: http://www.thelen.com/tlu/AmericasVMIG.pdf
Under New York Law, Subsequent Publication Of Print Article On Web Site Constitutes "Republication"
Under New York law, the subsequent publication of a print article on a newspaper Web site constitutes a republication of the print article, giving rise to a new cause of action for defamatory statements contained in the article. Rivera v. NYP Holdings, Inc., No. 114858/06, 2007 N.Y. Misc. LEXIS 5684 (Sup. Ct., N.Y. Cty Aug. 2, 2007) (unpublished). The court declined to dismiss the plaintiff's separate claim for the Web site publication, concluding that the claim was not barred under the single publication rule. The court ruled that the subsequent publication on the newspaper defendant's Web site was a "separate publication inasmuch as it is clearly targeted at a different audience that obtains its news through the Internet."
Opinion: http://www.thelen.com/tlu/RiveraVNYP.pdf
Editor's Note: In another recent case involving a claim of defamation on a Web site, a federal court stated that, if faced with the issue of whether an article continues to be published once it moves to a Web site's online archive, it is not clear that a South Carolina court would adopt the single publication rule. Taub v. McClatchy Newspapers, Inc., No. 9:05-678, 2007 U.S. Dist. LEXIS 60037 (D. S.C. Aug. 7, 2007) (refusing to grant summary judgment to the newspaper on defamation claims stemming from a print article that was subsequently published on the newspaper's Web site).
Law Firm Web Site Announcement Of Product Liability Investigation Protected By Litigation Privilege Under Tennessee Law
A law firm that announced on its Web site that it was investigating a defectively manufactured product may be protected from liability for defamation by the absolute litigation privilege under Tennessee law. Simpson Strong-Tie Co., Inc., v. Stewart, Estes & Donnell, No. M2006-02407-SC-R23-CQ, 2007 Tenn. LEXIS 654 (Tenn. Aug. 20, 2007). Responding to state law questions certified by a federal district court, the Tennessee Supreme Court ruled that the litigation privilege applies to attorney solicitations published prior to the start of litigation, provided certain criteria are met. The Supreme Court further ruled that the litigation privilege applied to statements made to persons unconnected with the litigation. The court commented that limiting the privilege to persons already connected with the litigation would "inhibit potential parties or witnesses from coming forward and impede the investigatory ability of litigants or potential litigants, thereby undermining the reasons for the privilege."
Opinion: http://www.thelen.com/tlu/SimpsonVStewart.pdf
Source Code Lacked "Independent Economic Value" Necessary For Trade Secret Protection, Absent Showing Of Value To A Competitor
A software company claiming trade secret misappropriation of segments of computer source code failed to meet its burden of showing that the disputed import functions, routines and procedures had "independent economic value," because it failed to establish that the segments, "in and of themselves would provide a competitive advantage to a competitor." Yield Dynamics, Inc. v. TEA Systems Corp., No. H029604, 2007 Cal. App. LEXIS 1399 (Cal. Ct. App. 6th Dist. Aug. 23, 2007). The appeals court upheld the entry of judgment in favor of the defendant on the plaintiff's trade secret misappropriation claim, affirming the trial court's conclusion that there was "no credible evidence" that the disputed code segments satisfied the independent economic value test. Among other things, the trial court concluded that the disputed functions and procedures "are common to virtually every type of software program that can be conceived of," and that such functions can be obtained from the Internet.
http://www.thelen.com/tlu/YieldVTea.pdf
Allegation That Payment Processing Software Installed "Spyware" States Claim Under Federal And New Jersey Computer Fraud Statutes
An allegation that payment processing software installed unauthorized "spyware" on the purchaser's server that diverted confidential customer data to the software developer makes out a claim under the federal and New Jersey computer fraud statutes. Slim CD, Inc. v. Heartland Payment Systems, Inc., No. 3:06cv2256, 2007 U.S. Dist. LEXIS 62536 (D. N.J. Aug. 24, 2007). The district court declined to dismiss the software purchaser's claims under the New Jersey statute, rejecting the developer's argument that the statute required a showing of how the developer had used the diverted information for its own benefit. The court also ruled that the purchaser had properly alleged damages in excess of $5,000 within one year under the federal computer fraud statute.
Opinion: http://www.thelen.com/tlu/SlimVHeartland.pdf
Attorney Fee Awarded To Prevailing Defendant Justified In CAN-SPAM Case, Under "Evenhanded" Approach
The "evenhanded" approach, which treats prevailing plaintiffs and prevailing defendants equally, should be used in determining whether the prevailing defendant in a CAN-SPAM Act case is entitled to an award of attorney fees. Gordon v. Virtumundo, Inc., No. 06-0204, 2007 U.S. Dist. LEXIS 55941 (W.D. Wash. Aug. 1, 2007). The court granted the defendant's motion for attorney fees, concluding that the more stringent test applied in civil rights cases, which is more favorable to plaintiffs, should not be applied in CAN-SPAM cases. The court examined the purpose of the CAN-SPAM Act, concluding among other things that Congress's "twin purposes of protecting consumers and imposing a regulatory structure on businesses with which they reasonably can comply lend themselves well" to a test that treats plaintiffs and defendants equally in the determination of attorney fee awards. In determining that an award to the prevailing defendant was appropriate in this case, the court referenced the plaintiffs' institution of numerous similar CAN-SPAM action in the same district, commenting that "it is obvious that Plaintiffs are testing their luck at making their 'spam business' extraordinarily lucrative by seeking statutory damages through a strategy of spam collection and serial litigation."
Opinion: http://www.thelen.com/tlu/GordonVVirtumundoAttyFees.pdf
Damages For Lost Profits Attributable To Theft Of Proprietary Data Are Recoverable Under CFAA, Despite No Interruption Of Computer Service
Damages for lost profits attributable to unauthorized copying of proprietary computer data are recoverable under the Computer Fraud and Abuse Act (CFAA), whether or not the plaintiff has suffered an interruption of computer service as a result of the defendant’s actions. Frees, Inc. v. McMillian, No. 05-1979, 2007 U.S. Dist. LEXIS 57211 (W.D. La. Aug. 6, 2007). The court denied the defendant’s motion to exclude the plaintiff’s claims for lost profits, ruling that in providing for the recovery of “compensatory damages,” Congress intended to incorporate the ordinary meaning of the term into the statute, which includes lost profits. The court concluded that the definitional provision of the statute, which refers to damages “incurred because of interruption of service,” merely refers to a jurisdictional threshold and does not control or limit what damages are available in a civil action once the threshold is met. The court commented: “When a defendant copies unauthorized data to gain a competitive edge, it makes no sense to limit the plaintiff’s recovery when the lost revenue is a direct result of defendant’s misconduct.”
Opinion: http://www.thelen.com/tlu/FreesIncVMcMillian.pdf
Cost Of Credit Monitoring Following Data Security Breach Not A Cognizable Injury In Fact
In a negligence and breach of contract action alleging unauthorized access to personal information as the result of a data security breach, the cost of credit monitoring is not a cognizable injury in fact under Indiana law. Pisciotta v. Old National Bancorp, No. 05-668, 2007 U.S. App. LEXIS 20068 (7th Cir. Aug. 23, 2007). The appeals court affirmed the lower court’s dismissal of the putative class action against a financial services provider, ruling that in the absence of any specific evidence of identity theft resulting from the security breach, the plaintiffs suffered merely the anticipation of future injury. The court followed the general rule that an alleged increase of future injury is not a cognizable injury that can form the basis of a successful negligence claim. The court also commented that Indiana’s data notification law, which outlines narrow disclosure duties and provides only for state enforcement actions, strongly suggests that Indiana law would not recognize the costs of credit monitoring as compensable damages.
Opinion: http://www.thelen.com/tlu/PisciottaVONB.pdf
Bare Allegations Of Emotional Harm From Release Of Personal Data Do Not Support Finding Of Actual Damages Under Federal Privacy Act
Cursory descriptions of alleged emotional harm stemming from the Government’s release of personal financial information do not support a finding of “actual damages” under the federal Privacy Act. Rice v. United States, No. 00-2960, 2007 U.S. Dist. LEXIS 62507 (D. D.C. Aug. 27, 2007). The court granted the Government’s motion for summary judgment dismissing the plaintiffs’ claims, concluding that the plaintiffs failed to raise a question of material fact as to whether they could prove actual damages at trial. Without conclusively deciding whether non-pecuniary harm could qualify as actual damages as a matter of law, the court found that the plaintiffs’ failed to produce any evidence to corroborate their bare allegations and failed to allege their emotional injuries produced any physical manifestation requiring medical treatment.
Opinion: http://www.thelen.com/tlu/RiceVUS.pdf
Information Temporarily Stored In Computer RAM Is Discoverable Under Revised Federal Rule
Information written to and temporarily stored in the random access memory (RAM) of a computer is discoverable under revised Fed. R. Civ. P. 34, where the information can be copied from temporary storage for production to the requesting party. Columbia Pictures, Inc. v. Bunnell, No. 2:06-cv-01093, 2007 U.S. Dist. LEXIS 63620 (C.D. Cal. Aug. 24, 2007). The presiding judge upheld a magistrate's order directing the operators of a Web site that allegedly facilitates unauthorized file-sharing to preserve and produce server log data stored in the RAM of its servers. The court rejected the argument that because the information was retained in RAM for as little as six hours, it did not constitute "electronically stored information" within the meaning of the federal rule. In concluding that data in computer RAM is "stored," the court referenced dictionary definitions of the term, as well as the Ninth Circuit's ruling in Mai Systems v. Peak Computers, in which the court held that a computer program copied into RAM is "fixed in a tangible medium of expression" within the meaning of the Copyright Act.
Opinion: http://www.thelen.com/tlu/ColumbiaVBunnell.pdf
Editor's Note: This case is significant in that it indicates that litigants may need to preserve RAM under their control for document production.
In Non-Compete Dispute, Company Web Site May Not Be Reliable Source For Business Facts
A company's Web site may not be a reliable source by which to establish facts relevant to a dispute regarding a non-compete clause. Victaulic Co. v. Tieman, No. 07-2088, 2007 U.S. App. LEXIS 20077 (3d Cir. Aug. 23, 2007). The appeals court concluded that the district court erred in considering evidence drawn from the plaintiff company's Web site concerning the nature of the company's business that was not properly authenticated nor properly the subject of judicial notice. The appeals court commented that the mere appearance of a company's name in a uniform resource locator was not sufficient authentication of the source of the information. The court also commented with respect to the substance of the information on a company Web site, that it often consists of marketing material "full of imprecise puffery," and that "courts should be wary of finding judicially noticeable facts amongst all the fluff; private corporate websites, particularly when describing their own business, generally are not the sorts of 'sources whose accuracy cannot reasonably be questioned'" within the meaning of the federal evidence rules.
http://www.thelen.com/tlu/VictaulicVTieman.pdf
Editor's Note: Compare the district court's skepticism concerning the reliability of the information on the Web site in this case, with the Tenth Circuit's opinion in O'Toole v. Northrop Grumman Corp. (10th Cir. Aug. 28, 2007), where the appeals court ruled that a district court abused its discretion in refusing to take judicial notice of the earnings results of employee-sponsored investment funds, posted on the employer's Web site.
In Federal Court TCPA Action, Availability Of Class Action Governed By State Law
In an action under the Telephone Consumer Protection Act (TCPA) removed to federal court under the court’s diversity of citizenship jurisdiction, the question of whether the action may be maintained as a class action is a substantive issue to be decided under the law of the forum state. Giovanniello v. The New York Law Publishing Co., No. 07-1990, 2007 U.S. Dist. LEXIS 56694 (S.D.N.Y. Aug. 6, 2007). The district court granted the defendant’s motion to dismiss the plaintiff’s putative class action, because under New York C.P.L.R. §901(b), a case brought to recover statutory penalties may not be maintained as a class action. The court noted that in enacting the TCPA, Congress intended to incorporate state law limits on private causes of action under the Act. Applying the Erie doctrine, the court concluded that state law limits on class actions are substantive rather than procedural rules, and thus the class action could not be maintained. Because the plaintiff’s individual claim was less than the $75,000 amount required for diversity jurisdiction, the court dismissed the case in its entirety.
Opinion: http://www.thelen.com/tlu/GiovannielloVNewYorkLawPublishingCo.pdf
Editor's Note: The court noted that plaintiff Giovanniello, an attorney, and his current counsel, have been involved in several cases seeking class action relief under the TCPA, e.g. Giovanniello v. Carolina Wholesale Office Machines Co., Inc., 2007 U.S. Dist. LEXIS 60671 (S.D.N.Y. Aug. 20, 2007) (TCPA class action dismissed as moot because individual claim resolved and class certification denied in identical state court action). Note, however, other states may permit class actions under the TCPA. See American Home Services v. A Fast Sign Co., Inc., 2007 Ga. App. LEXIS 906 (Ga. Ct. App. Aug. 9, 2007) (Georgia appellate court affirmed the lower court’s ruling certifying TCPA class action, rejecting the defendant’s claim that the proposed class failed the commonality requirement based upon “the hypothetical existence of persons in the class against whom it could assert the existing business relationship exception”).
California Resident Amenable To Suit In New Jersey Over Defamatory Newsgroup Posts Targeted At New Jersey
A California resident who made derogatory posts on an open Internet newsgroup about New Jersey residents, their neighbors, and a local municipality was deemed to have “targeted” New Jersey, such that a New Jersey court could exercise long-arm jurisdiction over the plaintiff’s defamation claims. Goldhaber v. Kohlenberg, No. A-5114-05T2, 2007 N.J. Super. LEXIS 282 (N.J. App. Div. Aug. 2, 2007). The state appellate court affirmed the trial court’s ruling that the court had personal jurisdiction over the out-of-state defendant. The court recognized that the mere posting of messages on an open online forum such as an Internet newsgroup is not generally sufficient to confer long-arm jurisdiction over the poster of the message in a foreign court. However, the court found the defendant’s allegedly defamatory comments were knowingly directed and focused at New Jersey, such that the “defendant should reasonably have anticipated being haled into court here.”
Opinion: http://www.thelen.com/tlu/GoldhaberVKohlenberg.pdf
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Unrebutted Evidence Of Sender's Phone Call Seeking Permission To Fax Supports Summary Judgment Dismissing TCPA Claim
Plaintiff's Unrebutted Allegation That TCPA Class Claims Cannot Meet Federal Jurisdictional Threshold Precludes Removal To Federal Court
Unrebutted Allegations That Defendant Collaborated In Design Of Web Site Support Conclusion That Site Was A Joint Work
Vote Swapping Web Sites Protected By First Amendment
California Public Employee Names And Salaries Over $100,000 Year Not Exempt From Disclosure Under Public Records Act
Under Amended Federal Rules, Non-Party Must Produce Documents In Electronic Form On Party's Request, Absent Evidence Of Undue Burden
Online Ticket Broker's Clickwrap Terms Of Use And Liability Limitations Held Enforceable
Defendant's Fifth Amendment Refusal To Divulge Source Of Plaintiff's Attorney-Client E-Mails Justifies Striking Answer And Counterclaim
Illinois Anti-Phishing Act Signed Into Law
District Court Vacates Billion Dollar Lucent Patent Judgment Against Microsoft
Warrant Not Required Under ECPA For Government Access To Electronic Payment Services Records
Injunction And $11 Million Damages Verdict Against Anti-Spam Project Vacated
Court Declines To Dismiss VoIP Patent Infringement Litigation By Sprint Against Vonage
California Violent Video Games Law Permanently Enjoined
Motion For Judgment Of Acquittal Denied In CAN-SPAM Criminal Conviction
Banner Displayed At Computer Login, Warning Employee Of Employer's Computer Monitoring, Negates Employee Expectation Of Privacy
Indiana Restrictions On Direct-Shipping Wine Violates Commerce Clause In Part
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