California Supreme Court Rules in Section 230 Case

11/20. The Supreme Court of California issued its opinion [41 pages in PDF] in Barrett v. Rosenthal, a state defamation action involving the issue of Section 230 immunity. The Court reversed the Court of Appeal's October 15, 2003 opinion, and extended immunity to someone who posted to two internet newsgroups an allegedly defamatory article written by another person.

Introduction. 47 U.S.C. § 230(c)(1) provides that "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."

Most of the reported opinions have involved providers of interactive computer services such as America Online. These service providers have been largely successful in asserting this section to avoid defamation liability, and other forms of liability, for the statements of users of their services. However, the defendant in this case is not the provider of an interactive computer service. She is a user of interactive computer services. She posted to internet newsgroups an allegedly defamation article written by another person.

The statute also extends immunity to users. This opinion construes this aspect of the statute.

The statements at issue in this appeal, which are alleged to be defamatory, were made by Tim Bolen in an e-mailed article titled "Opinion by Tim Bolen". Ilena Rosenthal, the appellant in this case, directed something titled "Humantics Foundation for Women". She also operated an internet discussion group. Rosenthal posted a copy of Bolen's article on the web sites of two newsgroups devoted to alternative health issues and the politics of medicine, not on the site of her own discussion group.

Stephen Barrett and Timothy Polevoy allege that they were defamed by the Bolen article.

Proceedings Below. They filed a complaint in California Superior Court for Alameda County against Bolen and Rosenthal alleging defamation. The Superior Court (trial court) held that Rosenthal's republication of Bolen's statements was immunized by Section 230.

The Court of Appeal of California (intermediate appellate court) reversed, holding that Section 230 did not protect Rosenthal from liability as a distributor under the common law of defamation.

The Supreme Court of California (SCC) wrote that "Under the common law, ``distributors´´ like newspaper vendors and book sellers are liable only if they had notice of a defamatory statement in their merchandise. The publisher of the newspaper or book where the statement originally appeared, however, may be held liable even without notice."

The SCC wrote that the Court of Appeal "decided that common law ``distributors´´ liability survived the congressional grant of immunity, so that Internet service providers and users are exposed to liability if they republish a statement with notice of its defamatory character."

Rosenthal brought the present appeal to the SCC.

Amicus Briefs. Rosenthal received substantial amicus curiae support. The law firm of Wilmer Hale, which has for many years been litigating Section 230 cases, submitted an amicus brief [3MB PDF scan] on behalf of a large group of e-commerce, internet service, publishing, software, and broadband companies, and the groups that represent them.

This group of amici included Amazon, eBay, Google, Yahoo, Netscape, AOL, Microsoft, CNN, ESPN, Washington Post, Newspaper Association of America, Online News Association, Online Publishers Association, SBC Internet Services, Time Warner Cable, Association for Competitive Technology (ACT), and many others.

The American Civil Liberties Union (ACLU) and the Electronic Frontier Foundation (EFF) also submitted a joint amicus brief [29 pages in PDF] in support of Rosenthal.

Supreme Court Opinion. The SCC reversed the Court of Appeal.

It concluded that "section 230 prohibits ``distributor´´ liability for Internet publications", and that "section 230(c)(1) immunizes individual ``users´´ of interactive computer services, and that no practical or principled distinction can be drawn between active and passive use."

The SCC noted that "This appears to be the first published case in which section 230 immunity has been invoked by an individual who had no supervisory role in the operation of the Internet site where allegedly defamatory material appeared, and who thus was clearly not a provider of an ``interactive computer service´´ under the broad definition ..."

But, it held that a user is "anyone using an interactive computer service, without distinguishing between active and passive use".

It held that "there is no basis for deriving a special meaning for the term ``user” in section 230(c)(1), or any operative distinction between ``active´´ and ``passive´´ Internet use. By declaring that no ``user´´ may be treated as a ``publisher´´ of third party content, Congress has comprehensively immunized republication by individual Internet users."

The SCC concluded that "by its terms section 230 exempts Internet intermediaries from defamation liability for republication. The statutory immunity serves to protect online freedom of expression and to encourage self-regulation, as Congress intended. Section 230 has been interpreted literally. It does not permit Internet service providers or users to be sued as ``distributors,´´ nor does it expose ``active users´´ to liability."

However, the SCC commented that "The prospect of blanket immunity for those who intentionally redistribute defamatory statements on the Internet has disturbing implications."

Justice Corrigan wrote the unanimous opinion of the SCC.

Justice Moreno wrote in a concurring opinion that "Although there may be a considerable gap between the specific wrongs Congress was intending to right in enacting the immunity at issue here and the broad statutory language of that immunity, that gap is ultimately for Congress, rather than the courts, to bridge. I write separately to express the view that publishers that conspire with original content providers to defame would not be covered by the immunity provided by" Section 230.

The trial court proceeding was in the Superior Court for Alameda County, and numbered Super. Ct. No. 833021-5. The intermediate appeal was heard by the California Court of Appeal, First Appellate District, Division Two; that was Case No. A096451. The present opinion was issued by the Supreme Court of California, which is the highest court of the state; the SCC case number is S122953.

More Section 230 Cases. The SCC relied heavily upon (and the Court of Appeal rejected) the landmark case of Zeran v. America Online, 958 F. Supp. 1124 (E.D.Va. 1997); affirmed by U.S. Court of Appeals, 4th Circuit, 129 F.2d 327 (1997); certiorari denied. In Zeran, the courts applied § 230(c)(1) in holding AOL not liable for defamatory statement contained in posting in various AOL bulletin boards by an AOL subscriber. See, Court of Appeals opinion, and TLJ summary of Zeran v. AOL.

On July 18, 2006, the U.S. Court of Appeals (11thCir) issued its opinion [25 pages PDF] in Almeida v. Amazon.com. The District Court held that Amazon is immune under § 230 from Florida right of publicity and invasion of privacy claims for listing a book and picture in its web site. The Court of Appeals affirmed, but solely on state law grounds. It wrote that whether § 230 provides immunity against claims for violation of state intellectual property laws, including the right of publicity, misappropriation, and invasion of privacy, remains an open question. See, story titled "11th Circuit Addresses § 230 Interactive Computer Service Immunity and Amazon Book Listing" in TLJ Daily E-Mail Alert No. 1,413, July 19, 2006.

On March 24, 2004, the U.S. Court of Appeals (4thCir) issued its opinion [2 pages in PDF] in Noah v. AOL, affirming the opinion of the U.S. District Court (EDVa) that § 230 immunizes AOL from claims that it violated the Civil Rights Act of 1964 when it provided chat rooms in which subscribers mocked Noah's religious beliefs. See, story titled "4th Circuit Affirms That Section 230 Immunity Extends to Federal Civil Rights Action", in TLJ Daily E-Mail Alert No. 863, March 25, 2004.

On October 21, 2003, the U.S. Court of Appeals (7thCir) issued its opinion [12 pages in PDF] in Doe v. GTE. The District Court dismissed the complaint against a pair of interactive computer service providers (or ISPs) who had merely provided web hosting services to smut merchants who had surreptitiously videotaped the plaintiffs, and then sold the videotapes through their web sites. The Appeals Court affirmed. The Court also held that the ISPs are not liable under the Electronic Communications Privacy Act (ECPA) when their users sell videotapes that were made in violation of the ECPA. See, story titled "7th Circuit Interprets Section 230 Immunity and ECPA" in TLJ Daily E-Mail Alert No. 763, October 22, 2003.

On August 13, 2003, the U.S. Court of Appeals (9thCir) issued its opinion [12 pages in PDF] in Carafano v. Metrosplash.com, a case regarding application of Section 230 interactive computer service immunity to an online dating service. The District Court had held that the online dating service, which wrote the questionnaire to be used by persons who post their profiles, did not have § 230 immunity for a false posting, because it contributed to the content. The Appeals Court held that the service does have § 230 immunity. See, story titled "9th Circuit Applies Section 230 Immunity to Online Dating Service" in TLJ Daily E-Mail Alert No. 718, August 14, 2003.

On June 24, 2003, the U.S. Court of Appeals (9thCir) issued its opinion [41 pages in PDF] in Batzel v. Smith, a case involving the application of California's Anti-SLAPP statute to a suit alleging defamation on an internet listserv. The District Court denied a defendant's motion to dismiss under the Anti-SLAPP statute. The Appeals Court, relying upon the federal interactive computer service immunity provision of § 230(c)(1), vacated and remanded. See, story titled "9th Circuit Construes Section 230 Immunity in Suit Against Listserv Operator" in TLJ Daily E-Mail Alert No. 687, June 25, 2003. On December 3, 2003, the Appeals Court issued an order [16 pages in PDF] denying the petition for rehearing and the petition for rehearing en banc. See, story titled "9th Circuit Denies Petition for Rehearing En Banc in Section 230 Immunity Case" in TLJ Daily E-Mail Alert No. 792, December 4, 2003. Then, the Supreme Court denied certiorari. See, story titled "Supreme Court Denies Certiorari in Section 230 Immunity Case" in TLJ Daily E-Mail Alert No. 913, June 8, 2004.

See also, Blumenthal v. Drudge and AOL, in which AOL raised § 230(c)(1) as a defense to Sidney Blumenthal's claim that AOL was liable for alleged defamation of content provider Matt Drudge. The District Court granted AOL's Motion for Summary Judgment based on § 230. See, District Court opinion and TLJ summary of Blumenthal v. Drudge. And see, Ben Ezra, Weinstein, & Co. v. America Online Inc., 206 F.3d 980 (10th Cir. 2000), and Green v. America Online, 318 F.3d 465 (3d Cir. 2003).

State courts have also construed § 230. See, for example, Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, holding that eBay is immunity from liability for negligence for auction items bearing fake autographs. See also, Doe v. America Online, Inc., Trial Court Case No. CL 97-631 AE; Decision: 1997 WL 374223 (Fla. Cir. Ct. June 26, 1997), holding that AOL was not liable for statements made by an AOL subscriber in an AOL chatroom. Plaintiff appealed to Florida's Fourth District Court of Appeals. The appeals court affirmed the trial court decision. See, trial court opinion, and appeals court opinion.

Grand Jury Indicts US Providers of Hizballah TV

11/20. A grand jury of the U.S. District Court (SDNY) returned an eleven count indictment, which was unsealed on November 20, 2006, that charges Javed Iqbal and Saleh Elahwal with violation of the United Nations Participation Act, and providing support to terrorists, in connection with their providing satellite television broadcasts of al Manar, a television station owned by Hizballah, which the U.S. government has designated as a terrorist entity.

The Office of the US Attorney (OUSA) for the Southern District of New York stated in a release that "The indictment alleges that, through a company called HDTV Ltd., Iqbal and Elahwal conspired to broadcast Hizballah's TV station, Al Manar, to HDTV's customers from September 2005 through August 2006. ``Al Manar´´ means ``the beacon´´ in Arabic. In exchange, HDTV received payments of thousands of dollars from Al Manar. The indictment further alleges that Iqbal and Elahwal worked to provide electronic equipment relating to satellite television broadcasting to Hizballah through Al Manar."

The indictment contains two counts of providing material support to a foreign terrorist organization, in violation of 18 U.S.C. § 2339B, two counts of conspiracy to provide material support to a foreign terrorist organization, two counts of violation of the the United Nations Participation Act of 1945, which is codified at 22 U.S.C. § 287c, and five counts of conspiracy to violate the UN Participation Act.

Section 2339B provides, in part, that "Whoever knowingly provides material support or resources to a foreign terrorist organization, or attempts or conspires to do so, shall be fined under this title or imprisoned not more than 15 years, or both, and, if the death of any person results, shall be imprisoned for any term of years or for life. To violate this paragraph, a person must have knowledge that the organization is a designated terrorist organization (as defined in subsection (g)(6)), that the organization has engaged or engages in terrorist activity (as defined in section 212(a)(3)(B) of the Immigration and Nationality Act), or that the organization has engaged or engages in terrorism (as defined in section 140(d)(2) of the Foreign Relations Authorization Act, Fiscal Years 1988 and 1989)." (Parentheses in original.)

22 U.S.C. § 287c(a) provides, in part, that "Notwithstanding the provisions of any other law, whenever the United States is called upon by the Security Council to apply measures which said Council has decided, pursuant to article 41 of said Charter, are to be employed to give effect to its decisions under said Charter, the President may, to the extent necessary to apply such measures, through any agency which he may designate, and under such orders, rules, and regulations as may be prescribed by him, investigate, regulate, or prohibit, in whole or in part, economic relations or rail, sea, air, postal, telegraphic, radio, and other means of communication between any foreign country or any national thereof or any person therein and the United States or any person subject to the jurisdiction thereof, or involving any property subject to the jurisdiction of the United States. ..."

22 U.S.C. § 287c(b) provides, in part, that "Any person who willfully violates or evades or attempts to violate or evade any order, rule, or regulation issued by the President pursuant to subsection (a) of this section shall, upon conviction, be find not more than $10,000 or, if a natural person, be imprisoned for not more than ten years, or both ..."

This is the second set of charges against Iqbal. On August 22, 2006, the OUSA charged Iqbal by criminal complaint [2 pages in PDF] with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) in connection with the same activities. See, story titled "US Attorney in New York Prosecutes Provider of Hizballah TV Broadcasts" in TLJ Daily E-Mail Alert No. 1,438, August 24, 2006.

The August complaint alleged violation of 50 U.S.C. § 1705(b), which is the penalties section of the IEEPA, and 18 U.S.C. § 371, the federal conspiracy statute.

The present case is USA v. Javed Iqbal and Saleh Elahwal, U.S. District Court for the Southern District of New York, No. 06 CRIM 1054.

Paulson Calls for More Effective Section 404 Implementation

11/20. Henry Paulson, the Secretary of the Treasury, gave a speech in New York, New York. He said that Section 404 of the Sarbanes Oxley act should not be amended, but that it should be implemented in a more cost effective manner. He also called for reform of tort litigation.

Paulson and the Department of the Treasury do not have authority to implement Section 404. The Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) do. Also, federal tort reform legislation is highly unlikely in a Democratic Congress.

Background on Section 404. The "Sarbanes-Oxley Act of 2002" was HR 3763 in the 107th Congress. It is now Public Law No. 107-204. Its main sponsors were Sen. Paul Sarbanes (D-MD) and Rep. Mike Oxley (R-OH).

The retirement of both Sen. Sarbanes and Rep. Oxley at the end of the 109th Congress removes an obstacle to amending the act. However, the Democratic takeover of both the House and Senate reduces the possibility of amending the statute.

Section 404 is titled "Management assessment of internal controls". It provides, in full, as follows:

(a) RULES REQUIRED- The Commission shall prescribe rules requiring each annual report required by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) to contain an internal control report, which shall--
   (1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
   (2) contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
(b) INTERNAL CONTROL EVALUATION AND REPORTING- With respect to the internal control assessment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accordance with standards for attestation engagements issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement.

Small public technologies companies assert that Section 404, and the SEC's implementation of it, imposes huge burdens on them, with little benefit to investors. These arguments are supported by the May 8, 2006, Government Accountability Office (GAO) report [93 pages in PDF] titled "Sarbanes-Oxley Act: Consideration of Key Principles Needed in Addressing Implementation for Smaller Public Companies". See also, story titled "GAO Reports that Section 404 of Sarbanes Oxley Burdens Small Public Companies" in TLJ Daily E-Mail Alert No. 1,366, May 9, 2006.

Paulson's Comments on Section 404. Paulson (at right) said that "I do not believe we need new legislation to amend Sarbanes-Oxley. Instead, we need to implement the law in ways that better balance the benefits of the legislation with the very significant costs that it imposes, especially on small businesses."

He continued that "By far the single biggest challenge with Sarbanes-Oxley is section 404, which requires management to assess the effectiveness of a company's internal controls and requires an auditor's attestation of that assessment."

He said that "section 404 should be implemented in a more efficient and cost effective manner. It seems clear that a significant portion of the time, energy, and expense associated with implementing section 404 might have been better focused on direct business matters that create jobs and reward shareholders."

Paulson also praised Chris Cox, the Chairman of the SEC, and Mark Olson, the Chairman of the PCAOB. He said that Cox "recognizes the severity of this problem and is providing strong leadership to address it. He understands that it will take an aggressive forward-leaning approach to change the implementation of Section 404 and make it more efficient." Paulson added that Olson "shares Chris Cox's viewpoint."

Paulson also stated that "The SEC will soon seek comments on a new and much improved auditing standard aimed at ensuring that the internal control audit is top down, risk based, and focused on what truly matters to the integrity of a company's financial statements. This new guidance for both companies and their auditors should encourage common sense reliance on past work, and on the work of others. Moreover, the SEC and the PCAOB are going to provide tailored guidance for small companies that recognizes their specific characteristics and needs."

Litigation Reform. Paulson said that "reform of our legal system" is "crucial to the long-term competitiveness of our economy."

He said that "A sophisticated legal structure -- with property rights, contract law, mechanisms to resolve disputes, and a system for compensating injured parties -- is necessary to protect investors, businesses, and consumers. But our legal system has gone beyond protection."

He elaborated that "In 2004, U.S. tort costs reached a record quarter-trillion dollars, which is approximately 2.2 percent of our GDP. This is twice the relative cost in Germany and Japan, and three times the level in the UK."

He also noted that most tort compensation goes to administration, attorneys fees and defense costs. It is "effectively a tax paid by shareholders, employees, and consumers."

He concluded that "the broken tort system is an Achilles heel for our economy. This is not a political issue, it is a competitiveness issue and it must be addressed in a bipartisan fashion."

He did not comment on the possibility that a Democratic Party controlled Congress would ever enact any tort reform legislation.

More News

11/20. The Government Accountability Office (GAO) released a letter [44 pages in PDF] to the Congress regarding "Suggested Areas for Oversight for the 110th Congress". One of its recommendations, discussed at page 16, is to "Enhance Computer Security and Deter Identity Theft".

11/20. The Government Accountability Office (GAO) released a report [28 pages in PDF] titled "Information Security: Agencies Need to Develop and Implement Adequate Policies for Periodic Testing". The report finds that "Agencies have not adequately designed and effectively implemented policies for performing periodic testing and evaluation of information security controls", and that this leaves "the agencies’ information and systems vulnerable to attack or compromise".

11/20. The Government Accountability Office (GAO) released a report [50 pages in PDF] titled "Managing Sensitive Information: DOJ Needs a More Complete Staffing Strategy for Managing Classified Information and a Set of Internal Controls for Other Sensitive Information".

People and Appointments

11/20. The Business Software Alliance (BSA) gave its annual Cyber Champion Awards to Sen. Gordon Smith (R-OR) and Rep. Adam Schiff (D-CA). The BSA cited Sen. Smith's long time support for free trade, and Rep. Schiff's anti-piracy efforts.

US and Russia Sign Bilateral Market Access Agreement

11/19. President Bush met with Russian President Vladimir Putin at the APEC meeting in Hanoi, Vietnam. Bush said that "Today, Vladimir and I are pleased to report that after a long set of negotiations, Representative Gref and Ambassador Schwab have signed agreements that will be good for the United States and good for Russia -- and that is we support Russia's accession into the WTO."

Bush added that "this is a good agreement for the United States. And it's an equally important agreement for Russia. And it's a good agreement for the international trading community." See, transcript of ceremony.

The Office of the US Trade Representative (OUSTR) issued a release that states that USTR Susan Schwab (at right) and Russian Minister of Trade and Economic Development German Gref "signed a bilateral market access agreement that is an important element in Russia’s accession to the" World Trade Organization (WTO).

The OUSTR did not release the text of any agreement. However, it did issue a series of short releases that offer its description of the some of the content the agreement.

The OUSTR added that "Congress will need to enact legislation terminating application of the Jackson-Vanik amendment to Russia and authorizing the grant of permanent normal trade relations (PNTR) to Russia."

Intellectual Property. The OUSTR issued a release [3 pages in PDF] regarding intellectual property rights (IPR). It states that the US and Russia "have agreed on a binding blueprint for actions that Russia will take to address piracy and counterfeiting and improve protection and enforcement of" IPR. The OUSTR did not release the text of any "binding blueprint". Nor did it explain what a "binding blueprint" is.

The OUSTR release states that this item "sets the stage for further progress on IPR issues in Russia through the next phase of multilateral negotiations, during which the United States and other WTO members will examine Russia's IPR regime."

The OUSTR item adds that this item "requires action" on "fighting optical disc piracy", "fighting Internet piracy", and bringing Russian laws into compliance with the WTO TRIPs agreement, among other things.

It adds that "The United States and Russia agreed on the objective of shutting down websites that permit illegal distribution of music and other copyright works. The agreement names the Russia-based website allofmp3.com as an example of such a website."

IT Products and Software. The OUSTR also announced in a release [2 pages in PDF] that the US and Russia have "reached agreement in principle on a bilateral market access agreement", that addresses, among other things, IT and communications products. The OUSTR did not release the text of any market agreement.

This release states that "Russia will join the Information Technology Agreement (ITA). Information technology products from computers to telecommunications equipment will enter the Russian market duty-free in accordance with the ITA. Russia will implement 95 percent of its ITA commitments within three years of accession."

The OUSTR's release also addresses "technology products with encryption (mobile phones, operating systems, and a wide variety of products)". (Parentheses in original.)

It states that "Russia will set up a streamlined interim system for the import of goods with encryption capability within three months after signing the U.S.-Russia WTO bilateral market access agreement."

It continues that "Russia will implement transparent, nondiscriminatory, and WTO-compatible procedures and will allow import of most commercially traded information technology and telecommunications goods after a one-time notification, or in some cases, with no encryption-related requirements at all. After evaluating the operation of this interim system, Russia will develop final regulations. Russia and the United States will continue to consult on the treatment of goods with encryption and the operation of its import procedures to further liberalize trade in this area."

Telecommunications. The OUSTR also issued another release [2 pages in PDF] regarding a bilateral market access agreement on services between the US and Russia. The OUSTR did not release the text of any agreement.

The OUSTR's release states that "Russia will open its telecommunications services market both on a facilities and non-facilities basis to all foreign suppliers. Sectoral coverage is comprehensive and Russia will allow foreign telecommunications companies to operate as 100 percent foreign-owned enterprises. Russia also accepted the pro-competitive WTO Basic Telecommunications Reference Paper establishing an independent regulator, obligations to prevent anti-competitive behavior by the dominant supplier, transparency obligations and interconnection requirements."

It also states that "Russia’s commitments for business services will ensure market access and national treatment for a wide variety of professions, including lawyers, ..."

Gonzales Defends Terrorist Surveillance Program

11/18. Attorney General Alberto Gonzales gave a speech at the U.S. Air Force Academy (USAFC) in Colorado Springs, Colorado. Gonzales, who attended the USAFC, defended the National Security Agency's (NSA) electronic surveillance program that the government has named "Terrorist Surveillance Program" and "TSP".

He said that "Common myths about the Terrorist Surveillance Program are that it is an invasion of privacy and an unlawful eavesdropping tool."

He said that this program "does not invade anyone's privacy, unless you are talking to the enemy in this time of war. It targets only international communications in which we have reasonable grounds to believe that one party is a member or agent of al Qaeda or an affiliated terrorist organization. The TSP is lawful. The President established the Program under both the authority given to him by Congress when it passed the Authorization for Use of Military Force in the wake of the 9/11 attacks, and by his authority under the Constitution."

He stated that it "serves as an essential early warning system, alerting us to the presence of al Qaeda operatives in the United States, and it operates with the speed and agility necessary to protect the nation. The Program does not violate any constitutional freedoms. History and law both confirm this. The Program is, in fact, nothing more than a modern-day version of the ``signals´´ intelligence that our country has gathered and relied upon in every conflict in our history, and that every nation has relied upon."

He pointed out that "During both World Wars, we intercepted telegrams in and out of the United States."

He also stated that this program "has proven to be one of our most effective tools in the war against terrorism. U.S. intelligence officials have confirmed that the program has helped stop terrorist attacks and has saved American lives."

4th Circuit Rules in CAN SPAM Case

11/17. The U.S. Court of Appeals (4thCir) issued its opinion [17 pages in PDF] in Omega World Travel v. Mummagraphics, a case involving the CAN SPAM Act. The Court of Appeals affirmed the judgment of the District Court for the e-mail sender.

This case illustrates that while the Congress enacted the CAN-SPAM Act three years ago, some people who use e-mail remain irate about the messages that they receive. It also shows that amateur attempts to complain and seek redress can be legally hazardous to the recipients. In this case, the alleged spammers sent commercial e-mail messages to an individual with a small business who then complained over the phone, through the mail, and in a web site. The alleged spammers then sued the recipient on a variety of claims and won.

The District Court, and Court of Appeals, also held that the anti-spam statute related counterclaims of the recipient all fail. First, the courts held that the federal statute preempts the state statute. Second, the courts held that the federal cause of action fails because the recipient only received 11 messages, the inaccuracies in these messages were not material, and the recipient attempted to opt-out in a manner not specified by the opt-out language of the statute.

Statute. The Congress enacted the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003", or "CAN-SPAM Act", in 2003. It was S 877 in the 108th Congress. It is now codified at 15 U.S.C. §§ 7701-7713.

One of the prohibitions of the CAN-SPAM Act, found at 15 U.S.C. § 7704(a)(1), is as follows: "It is unlawful for any person to initiate the transmission, to a protected computer, of a commercial electronic mail message, or a transactional or relationship message, that contains, or is accompanied by, header information that is materially false or materially misleading."

A similar prohibition, found at subsection (a)(2), prohibits deceptive subject headings. Notably, in both of these prohibitions, the deceptive information must be material. Subsection (a)(1) requires that it be "materially false or materially misleading". Subsection (a)(2) requires that it be "about a material fact regarding the contents or subject matter of the message".

Subsection (a)(3) provides that "It is unlawful for any person to initiate the transmission to a protected computer of a commercial electronic mail message that does not contain a functioning return electronic mail address or other Internet-based mechanism, clearly and conspicuously displayed" that enables the recipient to opt out by sending a reply electronic message.

Subsection (a)(4) then provides that it is unlawful to continue to send commercial electronic mail messages to a recipient who has utilized the opt-out mechanism described in subsection (a)(3).

Background. A defendant below, and appellant on appeal, is Mummagraphics, Inc., dba Webguy Internet Solutions, an Oklahoma based business. It President, Mark Mumma, who is another defendant, does not like to receive unsolicited commercial e-mail.

A plaintiff below, and appellee on appeal, is Cruise.com, Inc. It sent multiple commercial e-mail messages to the Mummagraphics' e-mail address. Mumma telephoned asking to be removed from the mailing list. He also wrote a letter. But, he did not utilize the electronic opt-out mechanism provided in the messages.

Mumma threatened to sue. He also published information on an anti-spam web site alleging that the plaintiffs were "spammers".

District Court. The cruise.com plaintiffs filed a complaint in U.S. District Court (EDVa) against the Mumma defendants alleging defamation, copyright infringement, trademark infringement, and unauthorized use of likeness.

The Mumma defendants' counterclaims included allegations of violation of the federal CAN-SPAM Act, and the state of Oklahoma's anti-spam statute.

The District Court granted summary judgment to the spammers on all claims and counterclaims, except libel, which may go to trial. It held that the federal CAN-SPAM Act preempted the Oklahoma statute, and that the cruise.com plaintiffs did not violate the CAN-SPAM Act because the inaccuracies in the e-mail messages were not material, and because the cruise.com plaintiffs had not violated the opt-out provisions of the Act.

Court of Appeals. Mummagraphics brought this appeal on the spam statute issues only. The Court of Appeals affirmed.

The Court of Appeals wrote that "The CAN-SPAM Act prohibits some material misstatements and imposes opt-out requirements, but it does not make every error or opt-out request into grounds for a lawsuit. The e-mails in this case are not actionable under the Act. Nor can the messages be actionable under Oklahoma’s statutes, because allowing a state to attach liability to bare immaterial error in commercial e-mails would be inconsistent with the federal Act’s preemption text and structure ..."

This case is Omega World Travel, Incorporated, et al. v. Mummugraphics, Inc., et al., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 05-2080, an appeal from the U.S. District Court for the Eastern District of Virginia, Alexandria Division, D.C. No. CA-05-122, Judge Leonie Brinkema presiding. Judge Wilkinson wrote the opinion of the Court of Appeals, in which Judges Duncan and Voorhees joined.

People and Appointments

11/17. House Republicans selected Rep. John Boehner (R-OH) (at right) to be the Minority Leader in the 110th Congress. He defeated Rep. Mike Pence (R-IN) by a vote of 168-27. See, Rep. Boehner's release. Rep. Roy Blunt (R-MO) was elected Minority Whip. He defeated Rep. John Shadegg (R-AZ) by a vote of 137-57. See, statement by Rep. Blunt. Rep. Eric Cantor (R-VA) will be the Chief Deputy Whip. Rep. Adam Putnam (R-FL) was elected Conference Chairman. Rep. Thaddeus McCotter (R-MI) was elected Policy Committee Chairman. Rep. Kay Granger (R-TX) was elected Conference Vice-Chair. Rep. John Carter (R-TX) was elected Conference Secretary. Rep. Tom Cole (R-OK) was elected NRCC Chairman.

More News

11/17. President Bush traveled to Hanoi, Vietnam for the Asia Pacific Economic Cooperation (APEC) conference. In an exchange of toasts, he stated that "We strongly support Vietnam in the World Trade Organization."

11/17. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and sets the effective date (December 18, 2006) for the Report and Order (R&O) portion of its R&O and Further Notice of Proposed Rulemaking (FNPRM) regarding the use of TV white space by unlicensed devices. See, Federal Register, November 17, 2006, Vol.  71, No. 222, at Pages 66876-66878. This proceeding is titled "Unlicensed Operation in the TV Broadcast Bands". The R&O and FNPRM is FCC 06-156 in ET Docket Nos. 04-186 and 02-380. The FCC adopted this item at an October 12, 2006, meeting, and released it on October 18, 2006. See also, story titled "FCC Adopts Order and FNPRM Regarding TV White Space" in TLJ Daily E-Mail Alert No. 1,467, October 12, 2006. The deadline to submit initial comments to the FCC in response to the FNRPM portion of this item is January 31, 2007. The deadline to submit reply comments is March 2, 2007. See, notice in the Federal Register, November 17, 2006, Vol. 71, No. 222, at Pages 66897-66905.

11/17. John Kneuer, acting head of the National Telecommunications and Information Adminstration (NTIA), sent a letter to the Federal Communications Commission (FCC) Chairman Kevin Martin urging the FCC to expedite its action on the NTIA's August 4, 2006, petition for rulemaking [19 pages in PDF] regarding amending the National Table of Frequency Allocations to allow federal earth station to operate with non-federal satellites on a co-primary basis consistent with the regulatory status afforded commercial operations. This letter discusses President Bush's U.S. National Space Policy [10 pages in PDF], dated August 31, 2006. Kneuer wrote that this space policy "sets forth the United States’ commitment to encourage and facilitate a growing and entrepreneurial U.S. commercial space sector.  Towards that end, the Space Policy states that the United States Government will use U.S. commercial space capabilities to the maximum practical extent.  To accomplish this objective, the Space Policy provides that the United States will seek spectrum regulatory status under U.S. domestic regulations for government owned and operated earth stations operating through commercial satellites consistent with the regulatory status afforded commercial operations and with the allocation status of the satellite service." See also, September 15 comment [6 pages in PDF] of Hispasat SA, September 18 comment [8 pages in PDF] of the Satellite Industry Association, September 18 comment [5 pages in PDF] of Lockheed Martin, and October 3 comment [5 pages in PDF] the Fixed Wireless Communications Coalition. This FCC proceeding is RM-11341.

Cox Addresses Affect of Communications Technology on Securities Regulation

11/16. Chris Cox, Chairman of the Securities and Exchange Commission (SEC), gave a speech to the International Organization of Securities Commissioners Technical Committee Conference in London, United Kingdom.

Cox (at left) said that "if companies and investors find the rules within a particular jurisdiction too restrictive, technology makes it easy for them to find another jurisdiction more to their liking."

He added that "in the information age ... Technology has made it possible for fraudsters and criminals anywhere in the world to play in whatever yard they wish, even though they're physically located across an ocean or on the other side of the planet. And the swindlers know that the regulators responsible for enforcing the rules can't pursue them outside the yard, let alone to the ends of the earth, because the regulator's power stops at its borders."

Cox argued that national regulators "have no choice but to cooperate" with each other. But, he added, there is an "opposite force at work pulling hard in the other direction. That is the temptation for regulators to relax their standards to attract investors and issuers, at the expense of the other jurisdictions -- with the result that the overall standard of regulatory quality suffers."

He said that "The way for each of us, as national regulators, to maintain robust investor protections while building healthy international markets is first, to adopt strong regulatory regimes at home that are cost-justified; and second, to cooperate with our fellow securities regulators abroad to implement agreed-upon regulatory objectives on a global level. We've got to constantly re-examine our regulatory systems from top to bottom, and capitalize on every opportunity for mutual improvement. And we must also continually reassess the costs and benefits of our regulations as they are actually applied.

People and Appointments

11/16. House Democrats nominated Rep. Nancy Pelosi (D-CA) (at left) to be their candidate for Speaker of the House in the 110th Congress. She ran unopposed. Since Democrats won a majority of seats in the next Congress, this assures Rep. Pelosi of being elected the next Speaker. House Democrats selected Rep. Steny Hoyer (D-MD) to be the majority leader. He defeated Rep. John Murtha (D-PA) by a vote of 149-86. In addition, House Democrats selected Rep. James Clyburn (D-SC) to be the majority whip.

11/16. House Republicans meet on Friday, November 17, 2006, to select their leaders for the 110th Congress. Rep. Joe Barton (R-TX) withdrew from the race for minority leader. This leaves Rep. John Boehner (R-OH) and Rep. Mike Pence (R-IN) as candidates. Rep. Barton endorsed Rep. Boehner.

11/16. The Senate confirmed Kevin Martin to be a Commissioner of the Federal Communications Commission (FCC). Martin released a statement [PDF] in which he thanked President Bush and the Senate. He also stated that "I look forward to working with the Administration and Congress, as well as with my fellow Commissioners and the incredibly able staff at the FCC to ensure that all Americans share in the benefits and opportunities offered by the best communications system in the world. I will continue to work to provide a regulatory environment that promotes competition and drives investment and innovation while protecting consumers and promoting public safety." See also, statement [PDF] by Commissioner Michael Copps, statement [PDF] by Commissioner Jonathan Adelstein, and statement [PDF] by Commissioner Robert McDowell. Sen. Ted Stevens (R-AK) stated in a release that Martin "is a fine chairman, and I am delighted that he will have another term to continue his work at the FCC."

11/16. The Defense Information Systems Agency's (DISA) Performance Review Board published a notice in the Federal Register announcing that Marilyn Quagliotti, Diann McCoy, John Garing, and John Penkoske have been appointed members of the Board for one year terms. See, Federal Register, November 16, 2006, Vol. 71, No. 221, at Page 66757.

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11/16. President Bush gave a speech at National Singapore University in Singapore. He spoke about, among other topics, trade, technology and terrorism. He said that the US "has long been committed to a global trading system that is free and that is fair. And so is Singapore. Singapore was the host of the first meeting of the World Trade Organization in 1996, where we announced an important new agreement on information technology goods. A decade later, America and Singapore are again close partners working toward a common purpose, a breakthrough in the Doha negotiations. Only an ambitious Doha agreement with real market access can achieve the economic growth and development goals that this world has set, and we look to nations across the Asia Pacific region to help put these vital talks back on track." He also said that "The same technology and global openness that have transformed our lives also threaten our lives. The same innovations that make it easier to build cars and computers make it easier to build weapons of mass destruction. The same advances in international transportation and finance that allow a manufacturer in Singapore to sell electronics to a store in San Francisco would also allow a proliferating regime in the Far East to sell dangerous technologies to a terrorist organization in the Middle East. The danger is unmistakable. In an age of unprecedented technological advances, irresponsible behavior by a few can have catastrophic consequences for the entire world." He also commented, as he has in the past, on the relation between freedom and innovation. He said that "Freedom has unleashed the creative talents of people throughout Asia."

11/16. The Department of Justice's (DOJ) Antitrust Division took another action in its long running effort against participants in price fixing in the dynamic random access memory (DRAM) industry. The DOJ filed a one count criminal complaint in U.S. District Court (NDCal) against James Sogas, a former executive of Elpida Memory, alleging violation of the Sherman Act in connection with his involvement in DRAM price fixing. The DOJ also also announced in a release that Sogas has entered into a plea agreement in which he "has agreed to plead guilty, pay a $250,000 criminal fine, and serve prison time", as well as cooperate with the DOJ.

11/16. The US Patent and Trademark Office (USPTO) and the European Patent Office (EPO) announced that they "are preparing to launch a new service that will allow patent application priority documents to be exchanged between the two offices electronically. Priority documents have to be filed when applicants wish to claim an earlier application filing date in one patent office based on a prior filing in another. Claiming priority is a valuable tool for businesses wanting to pursue patent rights globally." See, USPTO release.

Go to News from November 11-15, 2006.