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Court Finds That State Law Claims Against Online Forum Operator For Misappropriation, Theft, and Tortious Interference Hinge on “Publisher” or “Speaker” Status–Stevo Design, Inc. v. SBR Marketing Ltd., 2013 WL 308996 (D. Nev. Jan. 25, 2013)

A Nevada federal court held that Communications Decency Act (CDA) immunity barred state tort claims asserted in a lawsuit involving the dissemination of sports betting information.  The court’s holding was based on a liberal interpretation of what it means to be a “publisher” or “speaker” under section 230 of the CDA.

Stevo Design, Inc. (Stevo) sells licenses for access to its sports betting reports.  SBR operates a website with a discussion forum where users may post messages relating to sports betting and handicapping and to send messages to other users.  SBR encourages activity on its website by awarding loyalty points to users for doing different things on the website, including posting original content.  The loyalty points may be redeemed for credits at offshore gambling websites.  Stevo claimed that SBR and its users published Stevo’s protected works on the SBR website without obtaining a license.

In addition to bringing claims for copyright and trademark infringement, Stevo asserted a slew of state-law claims against SBR.  SBR asked the court to dismiss these state-law claims.  The court first determined if SBR qualified for CDA immunity.  The key question was whether SBR had a hand in developing the online content at issue.  If so, then SBR does not enjoy CDA immunity.

Relying on Fair Housing Council of San Fernando Valley v. Roomates.com, 521 F.3d 1157 (9th Cir. 2008), the court concluded that SBR did not “develop” the offending online content.  SBR encouraged its users to post original content.  It did not specifically encourage its users to publish information illegally on the website.  The fact that SBR users could freely contribute loyalty points to each other further evidenced the minimal role that SBR played in monitoring the content of forum posts.  That SBR “sporadically” tried to eliminate infringing content did not persuade the court that SBR was a developer of unlawful content—the CDA allows interactive computer services to perform some editing of user-generated content without becoming liable for all unlawful messages they do not edit or delete.

Having determined that SBR qualified for CDA immunity, the court next considered the impact of immunity on the state-law claims.  CDA immunity effectively precludes the operator of the interactive computer service from being considered the “publisher or speaker” of user-generated content.  As a result, only claims requiring the defendant to be the “publisher or speaker” are barred by CDA immunity.  Applying the meaning of “publisher or speaker” status liberally, the court concluded that CDA immunity barred each of the state-law claims:

Misappropriation of trade secrets: Misappropriation involves either “acquisition” or “disclosure” of a trade secret.  The court easily found that “disclosure” of trade secrets through user posts on the SBR website to require there to have been publishing or “speaking.  The court found “acquisition” to be a closer question, but the only kind of acquisition alleged in the complaint involved user posts on the SBR website, so the CDA barred that kind of misappropriation as well.

Misappropriation of licensable commercial property:  The court is not sure such a claim exists under Florida common law, but assuming it is a form of misappropriation, the plaintiff must have suffered competitive injury due to the defendant’s taking of information.  Stevo alleged that SBR injured it giving away its copyrighted information for free.  The only way SBR could have done that was by disclosing the information, i.e., it acted as a publisher or speaker.

Contributory misappropriation of licensable commercial property:  This claim merely required that SBR induced others to speak or publish.  The court refused to allow circumvention of CDA by alleging that the defendant induced publication or speech instead of itself doing the publishing or speaking.  Since SBR did not tell users what kind of information to include in their posts or encourage infringing content, it enjoyed immunity from this claim.

Civil theft:  Common law theft is defined as obtaining or using the property of another with intent to appropriate the property to his or her unauthorized use.  The only plausible way SBR procured or used Stevo’s property was through publication.  This claim is barred.

Tortious interference with contractual relations:  This claim requires interference with a business relationship.  The only interference that could be inferred from the complaint involved SBR’s publication of Stevo’s works.  As this claim depended on SBR’s status as the publisher, it is barred.

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Facebook entitled to Communications Decency Act (CDA) immunity as an “interactive computer service” — Klayman v. Zuckerberg, 2012 WL 6725588 (D.D.C. Dec. 28, 2012)

This is one of the few (but growing) cases recognizing that Facebook qualifies as an “interactive computer service” under the Communications Decency Act (CDA).  In particular, the court finds that Facebook is an interactive computer service when acting as the publisher of a user-created Facebook page.

The plaintiff (Klayman), a Facebook user who is the chairman and general counsel of an organization called Freedom Watch, found a Facebook page titled “Third Palestinian Intifada.”  This Facebook page “called for an uprising beginning on May 15, 2011, after Muslim prayers [were] completed, announcing and threatening that ‘Judgment Day will be brought upon us only once Muslims have killed all Jews.”  This page caught the attention of the Public Diplomacy Minister of Israel, who wrote a letter to Facebook requesting that they take down this and related pages.  Klayman alleges that Facebook initially resisted removing the page, but eventually did so “begrudgingly.”  Klayman then filed an action against Facebook and its CEO, Mark Zuckerberg, in the District of Columbia, who removed the action to federal court.  The action asserted claims of negligence and assault against the defendants and sought, among other things, injunctive relief and punitive damages of over $1 billion.

Facebook argued that it had immunity under the CDA, and the court agreed.  First, the court found that Facebook meets the definition of an “interactive computer service provider” because its website gives its users the ability to create, upload, and share various types of information with multiple users.  Second, the court ruled that the allegations supporting the negligence and assault claims are based on Facebook’s status as a publisher or speaker.  Third, the court concluded that Facebook was not the “information content provider” because it did not contribute in any way to the contents of the Facebook page in question.

LegalTXTS Lesson:  The analysis of CDA immunity in this case is straightforward, but it’s noteworthy for concluding that Facebook is an “interactive service provider” for purposes of the CDA.  Not many have cases have addressed the issue.  This case joins  Fraley v. Facebook, Inc., 830 F. Supp. 2d 785 (N.D. Cal. 2011), and Young v. Facebook, Inc., 20120 WL 42690304 (N.D. Cal. Oct. 25, 2010) (both cited in Klayman), as well as Gaston v. Facebook, Inc., 2012 WL 629868 (D. Or. Feb.2, 2012).  Note, though, that the status of a social media website status as an “interactive service provider” could hinge on the functionality of the site at issue (e.g., Facebook newsfeed vs. Facebook ads).

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An NLRB administrative law judge ruled on November 28 that a union did not engage in unlawful labor practices by failing to disavow threatening comments posted on its Facebook page.  In addition to finding that the Facebook page was not an extension of the picket line, the judge concluded that, under Section 230 of the Communications Decency Act (CDA), the union was not responsible for the comments posted on the page.  The case is Amalgamated Transit Union, Local Union No. 1433 v. Weigand, 28-CB-78377 (NLRB Nov. 28, 2012).   (Read the decision here)

A union representing public bus drivers went on strike.  Several months earlier, the union set up a Facebook page, which the union’s vice-president administered.  The union accepted “friend requests” only from union members in good standing.  Friends of the union Facebook page could see messages posted on the union’s “wall” and “like” such posts.

Shortly before and during the strike, union members posted comments on the union’s Facebook page threatening retaliation against workers who crossed the picket line.  The comments threatened less favorable union representation for those crossing the line, more aggressive reporting of workplace violations against line-crossers, and even violence.  Several comments suggested that line-crossers would be physically beaten.  Another comment announced the location where employer’s replacement drivers were allegedly being housed, to which a rank-and-file member commented: “Can we bring the Molotov Cocktails this time?”  At least one other union member “liked” this comment.

The NLRB Acting General Counsel issued a complaint alleging that the union violated Section 8(b)(1) of the Act by failing to disavow the threatening comments.  Rather than alleging that the members posting comments acted as the union’s agents, the Acting General Counsel relied on the theory that a union is responsible for the coercive acts of its pickets on a picket line when the union fails to take corrective action or disavow the actions.  The Acting General Counsel argued that the union’s Facebook page is an “electronic extension” of the picket line.

The judge rejected the “electronic extension” theory, noting initially that the Facebook page existed well before the picket line.  Moreover, unlike a picket line, a Facebook page does not force union members to make a public and immediate decision to cross the picket line.   The Facebook page did not serve to communicate a message to the public, as it is private in nature.

In a somewhat surprising twist, the judge further ruled that the CDA immunized the union from liability for the comments on its Facebook page–an argument neither side had raised.  Often invoked in online defamation cases, Section 230(c)(1) of the  CDA states that  “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided.”  The judge regarded the union as merely the “provider” of the Facebook page, not the “publisher or speaker” of the comments posted on the page by its rank-and-file members.  Thus, the union itself could not be held liable for the comments posted on the page.

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AF Holdings, LLC owns the copyrights to various porn videos.  AF Holdings has filed numerous copyright infringement actions against individuals who download and share its videos illegally through BitTorrent, an online peer-to-peer sharing tool.  Besides targeting the individuals actively downloading and sharing files—whose identities are often unknown and therefore end up being named as “Doe” defendants—AF Holdings goes after owners of the Internet connections used in the torrent activity (the “Network Defendants”).   AF Holdings sued the Network Defendants under a negligence theory.  AF Holdings alleged that the Network Defendants breached their duty to secure their Internet connections from third parties who use the connections for unlawful activity.  In a pair of similar lawsuits, the courts rejected AF Holding’s negligence claims.  See AF Holdings, LLC v. John Doe and Josh Hatfield, 2012 WL 3835102 (N.D. Cal. Sept. 4, 2012); AF Hodlings, LLC v. John Doe and John Botson, 2012 WL 4747170 (N.D. Cal. Oct. 3, 2012)

No legal duty to secure Internet connection to prevent copyright infringement

AF Holdings argued that the Network Defendants owed it a duty to secure their Internet connections to prevent infringement of AF Holdings’ copyrighted works.  The duty at issue was one of “non-feasance,” or the failure to take certain steps, as opposed to “misfeasance,” which involves activity putting the plaintiff in a worse position, such as exposing the plaintiff to risk of peril.  A duty arises in non-feasance situations when the plaintiff has a special relationship with the defendant.  Finding no special relationship between the Network Defendants and AF Holdings, the court concluded that the Network Defendants owed no legal duty to protect AF Holdings against copyright infringement.  The courts therefore dismissed the negligence claims.

Copyright Act preempts negligence claims

Part of the Network Defendants’ defense was that the negligence claims are preempted by the Copyright Act of 1976 because they seek protection for the same exclusive rights that the Act protects.  A state law claim is preempted by the Act when (1) the work at issue comes within the subject matter of copyright, and (2) the rights granted by state law are equivalent to the exclusive rights of copyright holders under section 106 of the Act.  The Network Defendants cleared the first test easily because AF Holdings’ videos clearly are protected by copyright.  In analyzing the second issue, most courts determine whether the state law claim contains an “extra element” that is different or in addition to a claim based on the Copyright Act.  The only “extra elements” in AF Holdings’ negligence claim were the elements of duty and breach of duty.  Since the Network Defendants had no duty to secure their Internet connections to prevent copyright infringement, the negligence claims had no extra elements to be saved from being preempted.  Essentially, AF Holdings repackaged its copyright infringement claim into a negligence claim.

CDA immunity applies

The Network Defendants also claimed immunity under the Communications Decency Act (“CDA”).  The court in the Hatfield case found it unnecessary to decide the issue given the dismissal of the negligence action on other grounds, but the court in the Botson case ruled that the defendant had immunity.  A defendant qualifies for CDA immunity if (1) it is the provider or user of an interactive computer service; (2) the cause of action treat the defendant as a publisher or speaker of information; and (3) the information at issue is provided by another information content provider.  Botson met these qualifications, the court found.  AF Holdings alleged that Botson was the provider of a computer service (i.e., the Internet connection) to pirate the videos.  AF Holdings also treated Botson as a copyright infringer or a participant in the infringement.  Finally, the information at issue (the videos) were provided by another content provider, namely the “Doe” defendant.

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Reliance on Communications Decency Act immunity does not convert a lawsuit into a federal case — Sulla v. Horowitz, Civ. No. 12-00449 (D. Haw. Oct. 4, 2012)

“You wanna make a federal case out of it?”  Well, maybe you do, but as the federal district court of Hawaii recently explained, citing a federal statute and arguing that the Internet is involved won’t cut it.

The plaintiff (Sulla) was counsel to a party that foreclosed on property owned by the  nonprofit corporation that one of the defendants (Horowitz) owned.  Sulla alleged that Horowitz and his co-defendant began publishing defamatory statements about Sulla over the Internet, including through a website with a domain name bearing his name.  Sulla sued Horowitz for defamation in state court, but the defendants removed the case to federal court, apparently based on diversity jurisdiction (i.e., all the plaintiffs are citizens of a different state than all the defendants).  Noting that all the parties might be citizens of Hawaii, the federal court issued an order to show cause why the action should not be sent back to state court.  Defendants’ briefing on the jurisdictional issue did not allay the court’s concerns.

The defendants argued that the court actually had federal question jurisdiction.  The basis for their argument?   Because the allegedly defamatory statements were published on the Internet, defendants argued, the court has exclusive federal jurisdiction over the case based on the Communications Decency Act (CDA).  The court disagreed, giving a quick lesson on how the CDA and federal question jurisdiction work.

First, “Section 230 [of the CDA] does not shield persons from liability for defamatory statements that they make via the internet.”  Second, whether CDA immunity applies is irrelevant to the analysis of federal jurisdiction.  The court cited the basic rule that federal question jurisdiction cannot arise out of a defense (as compared to a claim) based in federal law.  CDA immunity is a defense, so the possibility that the CDA might protect the defendants from liability for defamation did not convert the lawsuit into a “federal case.”

The court also found the defendants’ other arguments for federal jurisdiction unpersuasive and sent the case back to state court.