July 2007
Technology Law Update July 2007
In this issue:
- Credit Card Companies and Payment Processors Not Secondarily Liable for Infringement of Copyrighted Adult Photos
- Criminal Anti-Bootlegging Sound Recording Statute Not Unconstitutional Under Copyright Clause
- Copyright Infringement Dispute Arbitrable Under Broadly-Worded Arbitration Clause Of Software License Agreement
- Software Licensee Liable For Actual Damages For Unauthorized Copies Even If Not Used
- News Service Distribution Of Copyrighted Photograph To Multiple Subscribers Subject To One DMCA Statutory Damage Award
- Copyright Misuse Defense Not A Proper Counterclaim In Music File-Sharing Action
- Delayed Removal, Refusal To Respond To Lawsuit, Support Enhanced Damages For Unauthorized Display Of Photograph On Web Site
- Purchase of Trademark Terms As Advertising Keywords Not A Use In Commerce Under Lanham Act
- Domain Name Owner Has No Trespass, Nuisance Claims For Mistaken Traffic To Web Site
- Advertiser May Be Enjoined Under Federal CAN-SPAM Act Even If Advertiser Had No Knowledge Of Affiliate Violations
- In First CAN-SPAM Prosecution For Adult Images, Jury Convicts On All Charges
- Commercial Email Sent From Multiple Domain Names Not Misleading Under State Spam Law
- Corporate Principals May Be Personally Liable For Participation In Sending Of Allegedly Questionable Email Prize Offers
- Small Internet Information Service Has Standing Under Federal And State Anti-Spam Laws
- TCPA Does Not Apply To Commercial SMS Text Messages
- Individual Members of Delaware Limited Liability Company May Be Liable For TCPA Violations
- Prejudgment Interest Not Warranted Where Plaintiff Is Awarded Statutory Damages Under TCPA
- No Duty To Mitigate Damages In TCPA Case By Registering On Do-Not-Call List
- Common Carrier Responsible For Removal Of Fax Numbers Not Liable Under TCPA, Absent High Degree Of Involvement
- "Advertising Injury" Insurance Policy Provides Coverage For TCPA Violations
- Fourth Amendment Warrant Requirement Applies To Government Searches Of Stored E-Mail
- No CFAA Cause Of Action Allowed For Disloyal Employee’s Use Of Employer's E-Mail System
- Anti-Spyware Company’s Classification Of Potential Malware Not Likely Tortious Interference, Trade Libel
- Non-Commercial Gripe Site Not Liable Under Lanham Act, Regardless Of Intent To Cause Economic Harm
- Bar On Class Action Arbitration In Wireless Service Contract Unconscionable Under California Law
- Payment Of Registration Fees For Fantasy Sports Leagues Not Gambling Under State And Federal Law
- Running Computer Wiping Program After Duty To Preserve Electronic Evidence Is Triggered Warrants Sanctions For Spoliation
- Single Online Auction Sale Does Not Support Long-Arm Jurisdiction Over Out-Of-State Seller
- Mere Affiliation With Gripe Site Does Not Support Long-Arm Jurisdiction Over Out-of-State Individual
- No Specific Jurisdiction Under New York Long-Arm Statute For Defamatory Comments On Web Site
- Developments of Note
Credit Card Companies and Payment Processors Not Secondarily Liable for Infringement of Copyrighted Adult Photos
Credit card companies and payment services providers that process payments made to the operators of third party Web sites hosting unauthorized copies of copyrighted images are not secondarily liable for copyright infringement. Perfect 10 v. Visa International Service Assn, No. 05-15170, 2007 U.S. App. LEXIS 12508 (9th Cir. July 3, 2007). The appeals court affirmed the district court's dismissal of the copyright owner's complaint for failure to state a claim, ruling that the defendants do not make a "material contribution" to the underlying direct infringement by the third party Web sites. The majority of the panel commented that it declined "to create any of the radical new theories of liability advocated by Perfect 10 and the dissent."
Criminal Anti-Bootlegging Sound Recording Statute Not Unconstitutional Under Copyright Clause
The U.S. Congress did not lack authority to enact the criminal provisions of the federal anti-bootlegging statute under its powers conferred in the Commerce Clause of the U.S. Constitution, even though the statute conflicts with the limitations contained in the Copyright Clause. U.S. v. Martignon, No. 04-5649, 2007 U.S. App. LEXIS 13800 (2d Cir. June 13, 2007). The appeals court overruled the lower court dismissal of an indictment under 18 U.S.C. §2319A, which prohibits the unauthorized recording of live performances, as well as the copying, distribution, sale, rental and trafficking of phonorecords of such performances. The appeals court concluded that the criminal anti-bootlegging statute is not a "copyright law" subject to the limitations of the Copyright Clause because it "does not create, bestow, or allocate property rights in expression." The court also concluded that Congress had the power to enact the statute under its Commerce Clause authority because of the "nexus between bootlegging and commerce."
Copyright Infringement Dispute Arbitrable Under Broadly-Worded Arbitration Clause Of Software License Agreement
A broadly-worded arbitration clause in a software license agreement is applicable to a claim for copyright infringement brought by a software licensor against a former licensee. Empowered Benefits, LLC v. Blue Cross Blue Shield of Tennessee, No. 3:06-cv-161, 2007 U.S. Dist. LEXIS 40969 (W.D.N.C. June 5, 2007). In compelling the parties to arbitration, the court rejected the licensor’s argument that the copyright infringement action did not fall under the scope of the arbitration clause. The court noted that the complaint alleged that the former licensee copied the licensor’s copyrighted software program in order to develop a competing application. The court concluded that there was a "significant relationship" between the asserted copyright claims and the software license agreement. The court broadly interpreted the arbitration clause, which covered "all disputes arising under these agreements," with no specific limitations or exclusions.
Software Licensee Liable For Actual Damages For Unauthorized Copies Even If Not Used
A software licensee is liable for actual damages for all unauthorized copies of licensed software, regardless of whether these copies were accessible to or used by the licensee or its customers. Thoroughbred Software Int’l, Inc. v. Dice Corp., No. 06-2080, 2007 U.S. App. LEXIS 13890 (6th Cir. June 14, 2007). In reversing the lower court’s denial of actual damages, the appellate court rejected the lower court’s reasoning that the plaintiff failed to show a casual connection between the unused software copies made by the licensee and an alleged loss of sales by the plaintiff. The court found that since the licensing agreement provided that a license fee is payable for each copy of software purchased, with additional copying prohibited, the licensee should have paid the plaintiff for each unauthorized copy it made, regardless of use.
News Service Distribution Of Copyrighted Photograph To Multiple Subscribers Subject To One DMCA Statutory Damage Award
The distribution of a copyrighted photograph to the subscribers of a news service, without the plaintiff's copyright notice, is subject to a single award of statutory damages under the copyright management information provisions of the Digital Millennium Copyright Act (DMCA). McClatchey v. The Associated Press, No. 3:05-cv-145, 2007 U.S. Dist. LEXIS 40416 (W.D. Pa. June 4, 2007). In ruling on this issue of first impression, the court concluded that the reference in the DMCA damages provision, 47 U.S.C. 1203(c)(3), to an award for "each violation" should be understood to mean "each violative act by Defendant." The court rejected the argument that the distribution of the photograph to multiple subscribers should result in multiple statutory damages awards, commenting that "Congress would not have intended to make the statutory damages windfall totally independent of the defendant's conduct."
Opinion http://www.thelen.com/tlu/McClatcheyVAP.pdf
Editor's Note: This case involves unusual facts. The plaintiff is an amateur photographer who captured an image of the Flight 93 crash in September 2001, and was herself photographed by the news service on the first anniversary of the crash, holding a copy of her copyrighted photograph. The plaintiff alleges that the news service cropped out her image, and the copyright information on her photograph, prior to distributing their photograph to their subscribers.
Copyright Misuse Defense Not A Proper Counterclaim In Music File-Sharing Action
Copyright misuse is an affirmative defense and not the basis for affirmative relief in the form of a counterclaim seeking a declaratory judgment in the course of defending a music file-sharing copyright infringement action. Interscope Records v. Kimmel, No. 3:07cv108, 2007 U.S. Dist. LEXIS 43966 (N.D. N.Y. June 18, 2007). The court dismissed defendant’s counterclaims seeking a declaratory judgment of copyright misuse, as well as the defendant’s counterclaims seeking a declaration of non-infringement. In dismissing the non-infringement counterclaim, the court found that, should the plaintiff withdraw its claims, there would be no continuing controversy for the court to consider, particularly since the defendant is not challenging the validity of the plaintiff’s copyrights.
Delayed Removal, Refusal To Respond To Lawsuit, Support Enhanced Damages For Unauthorized Display Of Photograph On Web Site
A Web site owner's delay in removing infringing photographs from his Web site, coupled with his refusal to respond to the copyright owner's infringement lawsuit, support a finding of wilfulness under 17 U.S.C. § 504(c)(2). Burch v. Nyarko, 2007 U.S. Dist. LEXIS 43275 (S.D.N.Y. June 15, 2007) (report and recommendation of magistrate judge). In the absence of admissible evidence from the copyright owner as to his actual damages, the magistrate judge considered damages awards referenced in reported decisions in fashioning a statutory award for the copyright owner's lost revenue. The court awarded the copyright owner $15,000 per photograph for four photographs displayed on the defendant’s website, commenting that the enhanced award was justified to deter both the defendant and others from engaging in similar conduct.
Purchase of Trademark Terms As Advertising Keywords Not A Use In Commerce Under Lanham Act
A competitor's purchase of a company's trademark term as an search engine advertising keyword does not constitute an actionable trademark use under the Lanham Act, where the trademark owner did not allege that the competitor placed the trademark on any product or in a sponsored search advertisement. FragranceNet.com, Inc. v. FragranceX.com, Inc., No. 2:06-cv-02225, 2007 U.S. Dist. LEXIS 48373 (E.D. N.Y. June 12, 2007). The court denied the plaintiff’s motion to amend its complaint to add various federal and state trademark claims based upon the defendant’s keyword purchases. The court noted that under Second Circuit precedent, actionable trademark use is not shown unless there is an allegation that defendant "placed plaintiff's trademark on any goods, displays, containers, or advertisements, or used plaintiff's trademark in any way that indicates source or origin." The court also found that defendant's placement of the plaintiff's trademark in the metatags of its Web site, which is not displayed to consumers, is not a use in commerce under the Lanham Act.
Opinion http://www.thelen.com/tlu/FragranceNetVFragranceX.com.pdf
Editor's Note: This is the fourth decision within the Second Circuit that held that a defendant’s use of plaintiff’s trademark as a contextual advertising keyword does not constitute a use in commerce under the Lanham Act. In recognizing that other circuits have generally sustained such Lanham Act claims, the court commented that several of those prior decisions "conflate the issue of ‘use’ and ‘likelihood of confusion’" and otherwise conflict with Second Circuit precedent that "internal utilization of a trademark in a way that does not communicate it to the public does not violate the Lanham Act."
Domain Name Owner Has No Trespass, Nuisance Claims For Mistaken Traffic To Web Site
The owner of the UTube.com domain name, whose Web site was mistakenly visited and disrupted by thousands of Internet users seeking the YouTube.com online video site, cannot assert state law claims of trespass and nuisance against the owners of the YouTube.com site. Universal Tube & Rollform Equipment Corp. v. YouTube, Inc., No. 06-2628, 2007 U.S. Dist. LEXIS 40395 (N.D. Ohio June 4, 2007). The court granted YouTube's motion to dismiss the trespass claim on several grounds: that mistaken Internet users, not YouTube, had "made contact" with the UTube.com Web site; that the Web site is not movable, physical, personal property that meets the definition of a chattel; and that the physical object that was "touched" was the computers hosting the UTube.com site, in which the plaintiff did not have a possessory interest. The court also dismissed Universal's nuisance claims on the ground that under Ohio law such a claim requires an allegation of interference with land. The court also dismissed Universal's negligence and RICO claims, but declined to dismiss state trademark and unfair competition claims.
Advertiser May Be Enjoined Under Federal CAN-SPAM Act Even If Advertiser Had No Knowledge Of Affiliate Violations
A Web site operator that "induces" or pays for another to send a commercial email may be enjoined under the civil provisions of the federal CAN-SPAM Act for violations of the Act committed by its marketing affiliates despite a lack of knowledge of such violations. U.S. v. Impulse Media Group, Inc., No. 05-1285, 2007 U.S. Dist. LEXIS 42230 (W.D. Wash. June 8, 2007). The court refused to grant motions for summary judgment by either the Government or the operator, because there were disputed issues of fact as to whether the operator intended affiliates to use commercial e-mail in marketing the operator's Web site. The court distinguished between the intent requirement for civil injunctive relief and the knowledge requirement for criminal liability, concluding that a party is not subject to the criminal penalties of the Act unless there is a showing that the party had knowledge of an affiliate's violations of the Act.
In First CAN-SPAM Prosecution For Adult Images, Jury Convicts On All Charges
A federal district court jury convicted two individuals on all charges related to the transmission of commercial bulk unsolicited e-mail in violations of the CAN-SPAM Act provisions prohibiting the transmission of adult images. United States v. Kilbride, No. CR 05-870 (D. Ariz., jury verdict returned June 25, 2007). The charges concerned the defendants' enterprise which involve the transmission of millions of unsolicited e-mail messages advertising commercial Internet sites containing adult images, utilizing false header information and domain names registered using materially false information. The charges also included money laundering and felony obscenity charges. According to the U.S. Attorney, the prosecution was the first under the CAN-SPAM Act involving obscene images.
Press Release http://www.usdoj.gov/opa/pr/2007/June/07_crm_453.html
Editor's Note: The district court's pre-trial opinion ruling on various issues related to the admission of evidence concerning the transmission of the e-mails in question and the receipt of complaints by ISPs and the Federal Trade Commission is available at http://www.thelen.com/tlu/USVKilbride.pdf.
Commercial Email Sent From Multiple Domain Names Not Misleading Under State Spam Law
A marketer that used multiple domain names for its commercial emails allegedly for the purpose of avoiding anti-spam mechanisms, but did not employ any false email content or misleading subject lines, did not violate a California anti-spam statute. Kleffman v. Vonage Holdings Corp., No. 2:07-cv-02406, 2007 U.S. Dist. LEXIS 40487 (C.D. Cal. May 22, 2007). The court dismissed the plaintiff’s action, finding that even if the marketer intended to avoid anti-spam filters by using multiple domain names, this would not be a violation of the state statute prohibiting email containing a "falsified, misrepresented or forged header." Regardless, the court also ruled that the California statute was preempted by the federal CAN-SPAM Act, as it amounted to a "state law requiring some or all commercial e-mail to…contain specified content" and was not a "traditional" state law fraud prohibition permitted under the Act.
Corporate Principals May Be Personally Liable For Participation In Sending Of Allegedly Questionable Email Prize Offers
Corporate principals of an Internet marketing limited liability company that sent out allegedly questionable email prize offers may be personally liable under Ohio state consumer protection laws for participating in or directing acts that violate the statute. Ferron v. Search Cactus, L.L.C., No. 2:06cv327, 2007 U.S. Dist. LEXIS 44473 (S.D. Ohio June 19, 2007). The court denied the defendants’ motion to dismiss, rejecting the defendants’ argument that plaintiff must not only show that the corporate officers dealt directly with the plaintiff via the subject email offers but also must meet the elements necessary to "pierce the corporate veil." The court found that approval of the content of the prize emails by the defendant’s president and CEO would clearly show that the corporate officers "specifically directed" the allegedly questionable activity, leading to potential individual liability.
Small Internet Information Service Has Standing Under Federal And State Anti-Spam Laws
Related entities that provided free e-mail accounts for a small number of individuals have standing to pursue claims under state anti-spam laws and the federal CAN-SPAM Act as a result of unsolicited commercial e-mail sent to its users. Gordon v. Ascentive, LLC, No. 2:05cv5079, 2007 U.S. Dist. LEXIS 44207 (E.D. Wash. June 19, 2007). The court was unable to conclusively determine whether the plaintiff was an "interactive computer service" under state anti-spam law or an "internet access service" under the federal CAN-SPAM Act and thus refused to grant the defendants’ motion to dismiss for lack of standing. The court found that the defendants failed to provide any contrary analysis that an individual who operates a domain name may not quality as an interactive computer service or an internet access service.
Opinion http://www.thelen.com/tlu/GordonVAscentive.pdf
Editor's Note: The plaintiff in this case has brought a number of actions, with mixed success, under the Washington anti-spam laws and CAN-SPAM Act for unsolicited, allegedly misleading commercial emails sent to his Internet service email accounts. For example, a recent action, filed in the same district court against another out-of-state electronic marketing company, survived a motion to dismiss under similar grounds. Gordon v. Impulse Marketing, Inc. 2007 U.S. Dist. LEXIS 34989 (E.D. Wash. May 14, 2007) However, federal CAN-SPAM Act claims in a third action were recently dismissed on summary judgment by the Western District of Washington, which conducted a thorough analysis in finding the plaintiff’s federal and state claims deficient. See Gordon v. Virtumundo, Inc., 2007 U.S. Dist. LEXIS 35544 (W.D. Wash. May 15, 2007)
TCPA Does Not Apply To Commercial SMS Text Messages
The transmission of an SMS text message to a cellular telephone is not a "call" sent using an "automatic telephone dialing system" within the meaning of the Telephone Consumer Protection Act (TCPA). Satterfield v. Simon & Schuster, No. C 06-2893, 20907 U.S. Dist. LEXIS 46325 (N.D. Cal. June 26, 2007). The court granted summary judgment dismissing the plaintiff's TCPA claim, concluding that the equipment that sent the SMS text messages at issue utilized a specific, finite, non-random and non-sequential list of numbers assigned to the cellular telephone company's subscribers, rather than the kind of random or sequential number generator covered by the statute. The court also granted summary judgment on the issue of consent to receive the promotional message. The court noted that the plaintiff had consented to receive promotional messages from the cellular telephone company's "affiliates and brands," and the message at issue carried the company's "brand" in the form of a phrase identifying the source of the message. See further discussion of this opinion in the Technology Law Update blog. http://brownraysman.typepad.com/technology_law_update/2007/07/federal-court-r.html.
Individual Members of Delaware Limited Liability Company May Be Liable For TCPA Violations
Individual members of a limited liability company registered in Delaware may be liable for violations of the Telephone Consumer Protection Act (TCPA) since corporate officers may generally be held liable for tortious conduct even while acting in their official capacity. Weber v. U.S. Sterling Securities, Inc., 2007 Conn. LEXIS 235 (Conn. June 19, 2007). The state appeals court reversed the lower court’s ruling that the defendants’ membership in a limited liability company (LLC) precluded a finding of liability for TCPA claims. While the court found that the Delaware statute precluded individual liability for the malfeasance of an LLC by virtue of membership in the LLC, it ruled that the statute permitted individual member liability for tortious conduct undertaken in a member’s official capacity. The court concluded that since TCPA claims are generally deemed tortious in nature, the defendants could be held individually liable for the transmission of unsolicted fax advertisements.
Opinion http://www.jud.ct.gov/external/supapp/Cases/AROcr/CR282/282CR80.pdf
Prejudgment Interest Not Warranted Where Plaintiff Is Awarded Statutory Damages Under TCPA
An award of prejudgment interest is not warranted in a case involving violations of the Telephone Consumer Protection Act (TCPA), where the plaintiff has already been awarded statutory damages for the defendant's wilful conduct in violation of the Act. Kopff v. Roth, 2007 U.S. Dist. LEXIS 43702 (D. D.C.June 15, 2007). The court ruled that an award of prejudgment interest is not warranted where the statutory damages award "far exceeds actual damages and is fundamentally punitive in nature." The court also declined to enter an order enjoining the defendant from future violations of the TCPA, because the record in the case showed no activity by the defendant subsequent to 2004, or any other evidence indicating that the defendant had continued to violate the TCPA after that date.
No Duty To Mitigate Damages In TCPA Case By Registering On Do-Not-Call List
Registration on the FCC do-not-call list is not a prerequisite for maintaining an action for violations of the Telephone Consumer Protection Act (TCPA) for unsolicited, prerecorded telemarketing calls. State Ex Rel. Charvat v. Frye, No. 2006-2275, 868 N.E.2d 270 (Ohio June 27, 2007). In affirming the vacating of a stay of the plaintiff’s TCPA claim until the plaintiff registered on the FCC do-not-call list, the court ruled that while courts have the inherent power to manage their dockets, judges cannot create conditions to statutes that do not exist. The court found that a plaintiff in a TCPA case did not have to mitigate its damages by using statutory methods to request the defendant cease transmitting unsolicited calls or faxes instead of merely collecting the ads and commencing suit.
Opinion http://www.sconet.state.oh.us/rod/newpdf/0/2007/2007-ohio-2882.pdf
Common Carrier Responsible For Removal Of Fax Numbers Not Liable Under TCPA, Absent High Degree Of Involvement
A common carrier that maintained toll-free numbers for a marketer and forwarded requests for removal from the marketer's fax database, but did not send or control the content of any of the marketer’s unsolicited fax advertisements, is not liable under the Telephone Consumer Protection Act (TCPA). Taylor v. XRG, Inc., No. 06AP-839, 2007 Ohio App. LEXIS 2846 (Ohio Ct. App. June 21, 2007). In affirming summary judgment in favor of the common carrier on the plaintiff’s TCPA claims, the court ruled that common carriers that simply provide facilities to transmit others’ fax ads are not liable in the absence of a high degree of involvement in or actual notice of an illegal use. While the common carrier maintained the toll-free number that appeared on the bottom of the faxed ads, the court found no evidence that the common carrier was anything more than a provider of a network over which a subscriber sent unsolicited fax advertisements.
Opinion http://www.sconet.state.oh.us/rod/newpdf/10/2007/2007-ohio-3209.pdf
"Advertising Injury" Insurance Policy Provides Coverage For TCPA Violations
An insurance policy that covers "advertising injury" provides coverage for alleged violations of the Telephone Consumer Protection Act (TCPA) resulting from the sending of unsolicited faxed advertisements. Nautilus Insurance Co. v. Easy Drop Off, LLC, No. 1:06cv4286, 2007 U.S. Dist. LEXIS 42380 (N.D. Ill. June 4, 2007). The court found that the plaintiff insurance company has a duty to defend its insured in such lawsuits, based upon the policy definition of an "advertising injury" as the "oral or written publication of materials that violates a person’s right of privacy." The court, applying Florida law in accordance with an agreement between the parties, declined to follow contrary Seventh Circuit precedent and concluded that the TCPA claims associated with unsolicited fax advertisements fell within the ordinary definition of "advertising injury."
Opinion http://www.thelen.com/tlu/NautilusVEasyDrop.pdf
Editor’s Note: In rejecting the contrary precedent in the Seventh Circuit Court of Appeals from 2004, the court noted that, at that time, the appeals court was predictively applying Illinois law in ruling on this issue. However, the court further noted, in 2006 the Illinois Supreme Court expressly disagreed with the analysis of the Seventh Circuit, thereby depriving the Seventh Circuit opinion of its authoritative force.
Fourth Amendment Warrant Requirement Applies To Government Searches Of Stored E-Mail
The Fourth Amendment applies to Government seizures of the content of subscriber e-mail stored by Internet Service Providers (ISPs). Warshak v. United States, No. 06-4092, 2007 U.S. App. LEXIS 14297 (6th Cir. June 18, 2007). The appeals court upheld the grant of a preliminary injunction against Government seizure of the contents of any such e-mail of residents of the Southern District of Ohio without a warrant or a proceeding on notice, ruling that e-mail users have a reasonable expectation of privacy in the content of e-mail stored by an ISP. The appeals court analogized e-mail to print mail, and reasoned that an e-mail user's privacy expectation is not defeated by the routine use of technology to screen user e-mail for viruses or other proscribed content.
No CFAA Cause Of Action Allowed For Disloyal Employee’s Use Of Employer's E-Mail System
Misuse of an employer’s e-mail system by disloyal employees to further the interests of their prospective employer is not actionable under the Computer Fraud and Abuse Act (CFAA). Chas. A. Winner v. Polistina, No. 1:06cv4865, 2007 U.S. Dist. LEXIS 40741 (D. N.J. June 4, 2007) (unpublished).. The court dismissed the employer’s complaint, commenting that Congress did not intend to permit a private right of action under the CFAA for such conduct. The court also ruled that the employer’s pleading of the statutory minimum of "loss" was "merely conclusory," and unrelated to any harm or damage done to the employer’s computer.
Opinion http://www.thelen.com/tlu/WinnerVPolistina.pdf
Editor’s Note: The court’s ruling is remarkable for its explicit refusal to follow precedents which have allowed a CFAA cause of action in cases involving disloyal employee use of employer computer systems. See further discussion of this case on the Technology Law Update blog.
Anti-Spyware Company’s Classification Of Potential Malware Not Likely Tortious Interference, Trade Libel
An anti-spyware vendor that labeled an Internet company’s software as a "potentially unwanted application" is not likely liable for tortious interference or trade libel, in light of the Internet company’s past conduct and other companies’ similar classification of its software. Zango v. PC Tools Pty Ltd., No. 2:07cv0797, 2007 U.S. Dist. LEXIS 44140 (W.D. Wash. June 5, 2007). The plaintiff’s motion for a temporary restraining order compelling the defendant to remove the plaintiff’s software product from its spyware detection database was denied. The court found a lack of irreparable harm since the defendant’s software was subsequently modified so that the plaintiff’s software would not be automatically removed by an auto-scan. The court also found that it would be unlikely that the plaintiff could prove that the defendant had an "improper" motive in attempting to protect users who knowingly download the defendant’s software to protect against malware. Concerning the trade libel claim, the court ruled that the plaintiff was unlikely to succeed, given the court had "serious questions" as to whether the plaintiff could demonstrate that the defendant’s classification were false or that a "classification is a statement of fact rather than non-actionable opinion."
Non-Commercial Gripe Site Not Liable Under Lanham Act, Regardless Of Intent To Cause Economic Harm
An Internet gripe site that criticized the plaintiff’s business but lacked any commercial content or links to commercial websites could not be liable under the Lanham Act, even though economic damage might have been the website’s intended effect. Taylor Building Corp. of America v. Benfield, No. 1:04cv510, 2007 U.S. Dist. LEXIS 43667 (S.D. Ohio June 15, 2007). In dismissing the plaintiff’s Lanham Act claims, the court found that the defendant’s gripe site, which included the hyphenated phrase "ripoff.com," had an editorial, rather than commercial purpose and did not create any possibility of consumer confusion. The court also rejected the plaintiff’s "initial interest confusion" claim, concluding that the defendant’s non-commercial site had "little or no meaningful effect in the marketplace" and no user would ever think that the plaintiff sponsored a website with the word "ripoff" in the address.
Bar On Class Action Arbitration In Wireless Service Contract Unconscionable Under California Law
An arbitration clause that prohibits class action arbitration is unconscionable and unenforceable under California law when part of a consumer contract of adhesion in a setting where disputes typically involve small amounts of damages. Gatton v. T-Mobile USA, Inc., No. A112082, 2007 Cal. App. LEXIS 1030 (Cal. Ct. App. June 22, 2007). The appeals court upheld the trial court's refusal to compel arbitration of the plaintiffs’ termination fee dispute, finding that the arbitration clause was both procedurally and substantively unconscionable. The court found a minimal degree of procedural unconscionability, holding that the use of a "contract of adhesion" generally establishes a minimal degree of procedural unconscionability, notwithstanding available market alternatives (i.e. other wireless carriers). The court also concluded that substantive unconscionability may be found in a class action waiver when it is alleged that the "party with superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money."
Payment Of Registration Fees For Fantasy Sports Leagues Not Gambling Under State And Federal Law
An online fantasy sports league, which allows participants to "manage" a virtual team of professional sports players and compete for prizes based upon statistical performance, is not gambling under state or federal law, and therefore does not violate applicable state gambling loss qui tam statutes. Humphrey v. Viacom, Inc., No. 2:06cv2768, 2007 U.S. Dist. LEXIS 44679 (D. N.J. June 20, 2007). In dismissing the plaintiff’s complaint, the court found that where the fantasy league entry fees are unconditional, the prizes are guaranteed, and the defendant league operators do not compete for the prizes, such entrance fees are not gambling "wagers" under state law. The court ruled that participants suffer no "loss" when they pay a one-time entry fee to participate for fixed prizes, and receive in consideration the defendants’ online statistical services throughout the season. The court therefore found that the gambling qui tam laws of the District of Columbia, Georgia, Illinois, Kentucky, Massachusetts, New Jersey, Ohio and South Carolina did not apply to the activity at issue. The court also found that the newly-enacted Unlawful Internet Gambling Enforcement Act, 31 U.S.C. §5631 et seq., specifically states that fantasy sports leagues as described in this case do not constitute gambling as a matter of law.
Running Computer Wiping Program After Duty To Preserve Electronic Evidence Is Triggered Warrants Sanctions For Spoliation
A debtor who ran a security software program that eradicated data and files after the Government’s commencement of an adversary bankruptcy proceeding was subject to sanctions for spoliation of evidence in bad faith. In Re: Krause, No. 05-17429, 2007 Bankr. LEXIS 1937 (Bankr. D. Kan. June 4, 2007). In granting the Government’s motion for spoliation and contempt sanctions, the court found that the service of an adversary complaint and document production request triggered the debtor’s duty to preserve electronic evidence. The court also found that the intentional, first-time use of a wiping software program following service of document requests leads to the "inescapable conclusion" that the debtor willfully and intentionally destroyed electronic evidence, warranting sanctions, including an entry of partial default judgment against the debtor.
Single Online Auction Sale Does Not Support Long-Arm Jurisdiction Over Out-Of-State Seller
A Massachusetts district court does not have personal jurisdiction over an out-of-state online auction seller on the basis of a single transaction with a Massachusetts buyer, because such a relationship does not constitute sufficient minimum contacts with the forum state. Ginsburg v. Dinicola, No. 1:06cv11509, 2007 U.S. Dist. LEXIS 41418 (D. Mass. June 7, 2007). In dismissing the plaintiff’s complaint, the court found that the usual online auction process does not rise to the level of purposeful conduct required to assert specific jurisdiction over an out-of-state defendant. The court declined to employ the well-known "Zippo sliding scale" to determine whether a court could exercise jurisdiction over a defendant, since the scale is typically applied in cases where the issue is a defendant’s conduct on a Web site that defendant controls.
Mere Affiliation With Gripe Site Does Not Support Long-Arm Jurisdiction Over Out-of-State Individual
An Arizona district court does not have personal jurisdiction over an out-of-state individual who has no contacts with the forum state and lacks a substantiated connection to the ownership or management of the allegedly defamatory Internet gripe site. Mesa Airlines, Inc. v. Uslan, No. 2:07cv178, 2007 U.S. Dist. LEXIS 46369 (D. Ariz. June 25, 2007). In dismissing the plaintiff’s complaint, the court concluded that the plaintiff failed to demonstrate that the defendant performed an intentional action expressly aimed at the forum state warranting an exercise of long-arm jurisdiction. The court found that the defendant, who was identified in a news article as a member of the group running the gripe site, had, at best, a loose affiliation insufficient to establish a substantial connection with the defamatory content.
No Specific Jurisdiction Under New York Long-Arm Statute For Defamatory Comments On Web Site
Jurisdiction under the New York long-arm statute, N.Y. C.P.L.R. 302(a), does not extend to an out-of-state Web site owner in an action by a commercial plaintiff for alleged defamatory comments. Best Van Lines, Inc. v. Walker, No. 04-3924-cv, 2007 U.S. App. LEXIS 15152 (2d Cir. June 26, 2007). The appeals court upheld the lower court dismissal of the case for lack of jurisdiction, holding that "making defamatory statements outside of New York about New York citizens does not, without more, provide a basis for jurisdiction," even when the comments are accessible to readers in New York. The court concluded that the Web site owner's comments were not purposefully directed to New York residents, as the material on the Web site concerned interstate moving companies located in many states, for the ostensible benefit of readers in many states. The court also concluded that the acceptance of donations on the defendant's Web site did not justify the exercise of jurisdiction, because the acceptance of donations was unrelated to the defamatory statements underlying the lawsuit.
Opinion http://www.thelen.com/tlu/BestVWalker.pdf
Editor's Note: The jurisdictional defense in this case was raised by a pro se defendant, who was successful in the lower court. The Second Circuit panel determined that New York appellate courts had not addressed the issue presented by the case, and deemed it important enough to appoint pro bono counsel to appear for the defendant as amicus curiae. The panel opinion is an exhaustive treatise on the application of the New York long-arm statute to defamation cases in general, and a valuable addition to the jurisprudence on this perennial issue.
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