Cybersmearing: the ugly side of the Web.

Almost event business has had something unkind said of it at some time, somewhere. When the Internet is used to express an unfavorable opinion about another person or company, most particularly where the commentary on the Web site is defamatory or uses the complained-of company's trademarks or service marks, the practice is known as "cybersmearing." Because the Internet is cheap to access, an easy medium on which to publish, and visible virtually anywhere in the world, no company is immune to "cybersmearing."

For over 200 years, the First Amendment to the U.S. Constitution has guaranteed free speech. In most instances, that ends the discussion when it comes to someone who wishes to express their views about another person or company. However, those who wish to express their views sometimes tread a thin line in terms of making defamatory remarks and, particularly when it comes to the Internet, misusing another party's intellectual property--such as trademarks. When persons expressing an opinion step over the line and misuse another party's intellectual property or defame another party, those who are victimized are entitled to look to the courts for the proper remedy.

The Legal Background

In general, so long as a critical Web site is restricted to matters of truth or opinion, its content likely constitutes fair criticism and is protected by the First Amendment. In one of the first "dot sucks" cases, Bally Total Fitness Holding Corp. v. Faber, Bally sued a consumer who ran a "Bally Sucks" Web site, alleging trademark infringement, dilution, and unfair competition. The court ruled against Bally finding, among other things, that no person searching the Internet would likely confuse the "Bally Sucks" Web site with the official Bally's Web site. The court also observed that the consumer's use of Bally's marks was a consumer commentary protected by the First Amendment. More recently, in The Taubman Co. v. Webfeats, the U.S. Court of Appeals reversed an injunction issued by the district court by applying similar reasoning.

Other recent cases suggest that it is difficult to obtain injunctions against the operators of critical Web sites. In SNA, Inc. v. Array, the court refused to enjoin a Web site operator's statements, holding that money damages are a proper remedy for past statements and an injunction against future speech would be an unconstitutional prior restraint. In CPC Int'l, Inc. v. Skippy Inc., the court of appeals noted that, if a trademark owner could shield itself from criticism about itself and its business practices by a Web site owner, a corporation could forbid the use of its name in commentaries critical of its conduct.

However, when a Web site unfairly uses a franchisor's name in the domain name or when the content crosses the line between fair criticism and defamation or bad faith cybersmearing, the Web site operator may be shut down. For example, in People for the Ethical Treatment of Animals, Inc. v. Doughney, the district court dismissed a First Amendment defense raised by the person who registered the domain name peta.org, who claimed that he represented an organization named "People Eating Tasty Animals." People for the Ethical Treatment of Animals--or PETA--objected, claiming that the public would think that a Web site operated at peta.org was associated with their group. Similar results were obtained in several other "issue-oriented" cybersmearing cases, such as those involving names including jewsforjesus.com and planned parenthood.com. The key in these cases was the cybergripers' relatively blatant use of the trademark for the purpose of calling attention to their site--invoking legal theories such as the "initial interest confusion" doctrine. However, courts are not always amenable to these arguments, which invariably are very fact-specific.

Of course, if a critical Web site not only uses a franchisor's marks to attract attention, but also uses those marks to drive business to the Web site operator, the operator is more likely to face liability for domain name infringement and trademark infringement, among other claims. When a Web site that would otherwise constitute fair criticism serves the additional purpose of commercial gain for the Web site operator, the Web site then has a commercial aspect that can serve as the basis for a claim of unfair use of the franchisor's marks.

Finally, traditional defamation law can also play an important role in the case of online postings that defame or libel others. For example, in December 2001, a California jury awarded $245,000 in actual damages and suggested that punitive damages might also be awarded in a case brought by a company and two of its managers against two disgruntled former employees. In Mathis v. Cannon, a Georgia court found certain messages posted in an Internet chat room to be libelous per se and that punitive damages could not be avoided by failure to demand a retraction, as the court determined that the retraction rules do not apply to Internet postings.

Tips

What should franchisors do? There are a number of steps to mitigate the potentially harmful effects of critical Web sites.

First, a franchisor's official Web site should be easily accessible and provide valuable and current information. A franchisor should take the necessary steps to ensure that its official Web site is likely to appear as a top response to an Internet search. Once the franchisor is able to reach its desired audience, it needs to provide accessible information. If the franchisor's Web site provides abundant information and contains an archive of press releases, it will be well-poised to ensure that the true nature of its business is known to the public.

Second, companies should consider providing an easy-to-use way for consumers to provide feedback--and then to respond to those comments. This can be a valuable tool not only to glean consumers' perspectives, but may also head off problems with disgruntled parties. More than a few cybergripe sites stemmed from a consumer's desire to provide "feedback" on product problems that might have been nipped in the bud had there been an opportunity to let the company know their views, and particularly if the company followed up as would ordinarily have been advisable.

Third, a franchisor should provide a forum within its own extranet, open only to employees and franchisees, to allow employees and franchisees to comment, share information, and raise questions and concerns. This facilitates an open exchange of ideas, grievances, and even fears, and also helps all parties to keep the facts straight, and keep open lines of communication on matters small and large. Many times, unresolved frustration over a relatively small issue can lead to larger relationship problems. Providing this wpe of forum will afford an opportunity for a dissatisfied franchisee to raise concerns in a private setting, get answers, and do so behind closed doors, so as not to be injurious to the business of the franchisor, the business conducted by other franchisees, and even by the dissatisfied franchisee itself.

Fourth, companies must consider monitoring the Internet either directly or through third parties that provide these services, while it is not always possible or even advisable to follow up on all postings, companies will usually find that it is important to be aware of what is being said about them, and the Web is among the easiest places to keep track of that information.

A comprehensive review of these issues--both before and especially after problems are found--with trusted legal counsel is essential. If a cybergripe Web site is located, there are many proper ways of addressing the issue; the facts of each circumstance will help guide the company to a rational conclusion in the circumstances. As we have said before, tackling cybergripe Web sites is an art, not a science.

Lee Plave and Scott McIntosh are lawyers in the Franchise and Distribution Law Practice Group of Piper Rudnick LLP in Washington, D.C. They can be reached at 703-773-4243 and 202-861-3979, respectively.