1st Circuit Rules in Section 230 Case

February 23, 2007. The U.S. Court of Appeals (1stCir) issued its opinion in Universal Communication Systems v. Lycos, a case involving Section 230 interactive computer service immunity. The Court of Appeals affirmed the District Court, which had held that Lycos and others are entitled to immunity under Section 230.

The Court of Appeals rejected attempts by the plaintiffs to get around Section 230 by pleading trademark dilution (intellectual property claims are an exception to Section 230 immunity), and federal cyberstalking (which is also an exception), and state securities fraud and cyberstalking claims.

Universal Communication Systems, Inc. is a publicly traded company. Michael Zwebner is its Chairman and CEO.

Lycos operates web sites, including Quote.com and RagingBull.com, which allow subscribing users to create message boards, and post comments regarding companies.

Messages were posted to a UCS message board on the RagingBull.com web site that pertained to the financial condition, business prospects, and management of UCS. UCS and Zwebner allege that these were false and defamatory. However, they did not plead slander or defamation.

There is a long line of cases holding that interactive computer services are not liable for defamation by third party posters. Rather, in the Court of Appeals' words, "UCS attempted to plead around this Section 230 statutory immunity".

UCS and Zwebner filed a complaint in U.S. District Court (SDFla) against Lycos and other interactive service services. USC and Zwebner initially alleged for claims: (1) fraudulent securities transactions under Florida statute, (2) cyberstalking in violation of 47 U.S.C. § 223, (3) dilution of trade name under Florida law, and (4) cyberstalking under Florida law.

Pursuant to a forum selection clause in a Lycos subscriber agreement, the case was transferred to the U.S. District Court (DMass). The District Court dismissed the complaint.

Statute. The relevant portions of 47 U.S.C. § 230 are as follows:

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".

However, 47 U.S.C. § 230(e)(2) then provides that "Nothing in this section shall be construed to limit or expand any law pertaining to intellectual property". (The trademark dilution claim is an intellectual property claim.)

Also, 47 U.S.C. § 230(e)(1) provides, in part, that "Nothing in this section shall be construed to impair the enforcement of section 223 ... of this title, ... or any other Federal criminal statute." (The federal cyberstalking language in included within Section 223.)

47 U.S.C. § 230(f)(2) provides that an "interactive computer service" is "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions".

Also, 47 U.S.C. § 230(f)(3) provides that an "information content provider" is "any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service".

Court of Appeals Holding. The Court of Appeals held that Lycos is an "interactive computer service" within the meaning of the statute. It rejected USC's argument that it failed to qualify on the basis that it did not provide internet access to customers.

It held that the anonymous poster was an "information content provider", and that the state cyberstalking and securities claims sought to treat Lycos of the publisher of information provided by this information content provider.

The Court of Appeals also affirmed the dismissal of the trademark dilution claim. It first wrote that "Claims based on intellectual property laws are not subject to Section 230 immunity." Instead, it affirmed because the alleged used of a protected mark (that is, the use of the UCSY ticker symbol in the message board) was not actionable absent Section 230 immunity, "because of the serious First Amendment issues that would be raised by allowing UCS's claim here".

The Court of Appeals continued that "The injury that UCS alleges, however, is not a form of trademark injury. Trademark injury arises from an improper association between the mark and products or services marketed by others. ... But any injury to UCS ultimately arises from its being criticized on the Raging Bull site. To premise liability on such criticism would raise serious First Amendment concerns."

The Court of Appeals added that "To be sure, UCS does allege that in this case the criticism is false and misleading. But while such an allegation might be relevant to a defamation claim, it is not determinative of whether UCS's allegations can support a trademark claim. If the injury alleged is one of critical commentary, it falls outside trademark law, whether the criticism is warranted or unwarranted."

The Court of Appeals also affirmed the dismissal of the federal cyberstalking claim. This is a recently enacted prohibition with a short and unusual legislative history. During the First Session of the 109th Congress, the House Judiciary Committee (HJC) and its staff produced a cyber stalking bill. This carefully prepared bill did not become law. Rather, a much different version pushed by Rep. Jim McDermott (D-WA) was substituted for the HJC version during last minute negotiations and vote trading over HR 3402 (109th Congress), a Department of Justice reauthorization bill. The McDermott language makes it a federal crime to use the internet to "annoy" someone. The bill also includes the internet within the definition of "telecommunications device" for the purpose of 47 U.S.C. § 223.

For an explanation of this late amendment, see story titled "Bush Signs DOJ Reauthorization Bill" in TLJ Daily E-Mail Alert No. 1,284, January 6, 2006. See, subsection titled "The Internet as a Telecommunications Device".

The Court of Appeals affirmed the District Court's dismissal of the Section 223 claim, but only the basis that UCS did not raise this on appeal. The Court of Appeals wrote that "On the federal cyberstalking claim under 47 U.S.C. § 223, in addition to finding the claim barred by Section 230, the district court also found that the cyberstalking statute does not provide a private right of action. UCS does not challenge this dispositive ruling on appeal, so we affirm the dismissal of the claim on that basis, expressing no view on the appropriateness of applying Section 230 immunity to a putative civil claim under 47 U.S.C.§ 223."

Hence, the Court of Appeals left unresolved the question of whether there is a private right of action under Section 223. However, Section 223 is clearly a criminal prohibition which includes no express private right of action. However, were a court to create a private right of action under Section 223, then the McDermott internet annoyance language might provide a means to evade a Section 230 dismissal, because Section 223 is an exception to a Section 230 immunity.

See also, stories titled "The District Court District Court Holds Rep. McDermott Violated Wiretap Act" in TLJ Daily E-Mail Alert No. 964, August 23, 2004, and "Court of Appeals Holds that Rep. McDermott Violated Wiretap Act" in TLJ Daily E-Mail Alert No. 1,339, March 30, 2006.

This case is Universal Communication Systems, Inc. and Michael Zwebner v. Lycos, Inc., et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 06-1826, an appeal from the U.S. District Court for the District of Massachusetts, Judge Robert Keeton presiding.