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Cyberspace litigation: chasing the information highway bandits.

From domain name theft to jurisdiction issues, new torts and new forums are shaping Internet law.

Poor Jesse, he lived too early.

If Jesse James were alive today, he would be armed with a modem, not a six-shooter. Rather than stealing wallets, rings, and watches worth a few hundred dollars, he'd use the Internet to steal customers, data, content, and goodwill worth millions.

Today's Internet is a wide-open environment devoid of much regulation, like the atmosphere of the Wild West. The prevailing attitude in many quarters is that the Internet should be an unrestricted domain where the First Amendment reigns supreme--an untaxed, uncensored forum for communication and commerce. Attempts to balance this attitude with the need for some legal structure and the struggle to apply old legal concepts to a new, wired environment are shaping Internet law.

This article introduces the main areas of Internet litigation, with an emphasis on practical advice and tips for trial lawyers and their clients.(1) It examines some new torts made possible by the Internet as well as some familiar torts being committed online with new efficiency.

New environment, new wrongs

Cybersquatting. In the Internet environment, a superior domain name address--one likely to attract the greatest number of customers seeking the product--can be the equivalent of prime real estate. Most companies have elected to use their trade names as part of their domain address.

Anticipating this move, some people acquired addresses that incorporated popular companies' trade names or trademarks from Network Solutions, Inc. (NSI), the company that originally oversaw domain name registrations.(2) They then tried to sell companies their own name as a Web address for exorbitant amounts. Since most of these "cybersquatters" were clever enough not to actually use the domain names, competing with the trademark owners, the element of consumer confusion was missing for direct infringement claims.(3)

On January 16, 1996, the Federal Trademark Dilution Act (FTDA) became effective. The act added [sections] 43(c) to the Lanham Act (15 U.S.C. [sections] 1125(c)), under which the owner of a famous and distinctive mark could obtain an injunction and, in some cases, damages for any "commercial use" of the mark that "causes dilution of the distinctive quality" of the mark. Neither competition with the mark's owner nor likelihood of customer confusion is required to show dilution. Any commercial use that causes a "lessening of the capacity [of the mark] to distinguish goods and services" is adequate.

The FTDA quickly became the vehicle of choice to chase the standard cybersquatter. The main two hurdles for the plaintiff against a cybersquatter seemed to be establishing that the trade name was famous(4) and that there had been some "commercial use" by the cybersquatter. Generally, these cases involve individuals who registered many domain names incorporating famous trade names, then offered them for sale to the trademark owners. Where the facts were so compelling, the courts have usually had little difficulty finding for the plaintiff.(5)

Many registered trade names also contain generic terms that are "famous" regardless of the registered mark. If several companies legitimately use the same common word as part of their name, which one is entitled to use the word as its domain name? This may be determined by who registered the name first.(6)

One of the authors is currently litigating a classic example of a domain-name dispute between two companies using the same common term in their names. The client, a California software company using the word "life" in both its company and product name, registered "life.com" as its domain name in 1994. Time, Inc., which owns Life magazine and Time magazine, had earlier registered "time.com" but left "life.com" available. In 1999, the life.com owner sold the domain name to another software and Internet company that also had "life" in its corporate and product name. Time, Inc., then complained based on its registered trademark of the name "Life" used on its magazine.

Of course, the word "life" is a widespread generic term and is used in countless product names, including other magazines. This obviously confuses the "famous mark" element of the dilution claim and affects the strength of the mark under trademark law. We have filed a declaratory judgment action in the Northern District of California to test Time, Inc.'s claim.(7) The case is scheduled for trial in early 2001.

The Lanham Act was recently amended to directly address cybersquatting. The Anti-Cybersquatting Consumer Protection Act was signed into law on November 29, 1999, creating a new cause of action against "bad faith" registration of domain names that violate the plaintiff's trademark.(8) It also provides for transfer of a domain name to the successful plaintiff, as well as damages for cases involving names registered after the act went into effect. In cases where the registrant is outside the United States or has acted under an assumed name, a plaintiff can sue the domain name itself and win cancellation or transfer of the name.

The Internet Corp. for Assigned Names and Numbers (ICANN), the company that now oversees domain name registrations, offers a procedure for domain-name dispute resolution.(9) The party holding trademark rights can file a complaint with an ICANN-approved dispute-resolution provider. The complaining party must show that a name is identical or confusingly similar to the registrant's trademark or service mark; that the registrant has no legitimate rights or interests in the domain name; and that the name was registered and continues to be used in bad faith. If these three elements are shown, ICANN will cancel the domain name registration or transfer it to the complainant after 10 business days unless the registrant files a separate action in court and notifies ICANN during that period.

In July, ICANN resolved to open up new categories (tags) for domain names (in addition to .com, .net, .org, etc.), allowing cybersquatters to jump into action again. Expect a new round of litigation with more sophisticated culprits and new issues.

Misusing trademarks in metatags. Metatags are words embedded in a Web page's coding, unseen by the viewer, that search engines use to find and rank the relevancy of the page in response to a keyword search. Some companies have used competitors' trademarks as metatags to divert customers to their sites. Plaintiffs suing these companies have succeeded on a variety of theories.

In Playboy Enterprises, Inc. v. Asia-focus International, Inc., the district court ruled that the defendant's use of the trademarks "Playboy" and "Playmate" in the metatags of its asian-playmates.com site constituted trademark infringement, false designation of origin, and trademark dilution.(10) Finding the defendant's conduct willful, the court awarded maximum statutory damages of $1 million per trademark.

Earlier this year, the Ninth Circuit was the first federal appellate court to consider the issue. In Brookfield Communications, Inc. v. West Coast Entertainment Corp., the plaintiff, a provider of online entertainment news, asked the court to overrule a lower court's refusal to issue a preliminary injunction against the defendant's use of Brookfield's trademark "MovieBuff" as a metatag on its site.(11)

Ruling in favor of the plaintiff, the appellate court found an adequate basis for trademark infringement because use of the mark in the defendant's metatags caused initial interest confusion (users who arrived at the site in error due to the competitor's misleading use of metatags might realize they had not reached the intended destination, but might stay on the new site because it provided a similar product or service). The court noted that the use of the term "movie buff" by the defendant may have been permissible under trademark law as a descriptive term. However, use of "MovieBuff," which refers to the plaintiff's products, was not.

There are instances in which using trademarks as metatags may be found permissible. For example, trade magazines that publish reviews of products on their Web sites would most likely be permitted to use the trademarks of those products' manufacturers as metatags. The same holds true for a company site that offers a comparison test between its products and a competitor's products.

One question involving metatags has been raised in the courts more than once but has not been finally decided. Last year, Playboy Enterprises filed suit against Netscape and Excite for marketing its trademarks to advertisers. Entering the key words "playboy" and "playmate" in the search engines prompts banner ads for their clients (adult entertainment sites not related to Playboy Enterprises) to appear above the search results. Playboy claimed trademark infringement and dilution and sought a preliminary injunction, but this was denied by the district court.(12)

In its ruling, the court rejected the notion that using the terms "playboy" and "playmate" in a keyword search was equivalent to using the trademarks PLAYBOY[R] and PLAYMATE[R]. The court acknowledged that Web surfers cannot enter these trademarks as they are written into search engines but instead must enter the terms "playboy" and "playmate." However, these are simple words in the English language for which trademarks unrelated to Playboy Enterprises exist, and whether Web users who enter them as search terms are looking for products associated with Playboy Enterprises is impossible to determine. Therefore, the plaintiff did not show that the defendant had "used" its trademarks when it offered the terms "playboy" and "playmate" to its advertisers.

The court distinguished the case from Brookfield, as the term "MovieBuff" is not an English word. Furthermore, in Brookfield, the parties were competitors, rendering the defendant's use of the term more suspect.

Infringing copyright or enabling others to infringe. Everyone's heard the buzz created over Napster, the software that allows Internet users to swap copyrighted music via digital MP3 files. It was only a matter of time before technology enabled this issue to hit Hollywood, and it has.

On July 27, 2000, U.S. District Judge Marilyn Patel granted a preliminary injunction in favor of the Record Industry Association of America and against Napster. The order prohibited Napster "from engaging in or facilitating others in copying, downloading, uploading, transmitting, or distributing plaintiffs' copyrighted musical compositions and sound recordings, protected by either federal or state law, without express permission of the rights owner." The next day, the order was reversed by the Ninth Circuit U.S. Court of Appeals, pending further proceedings.

A new technology, named DivX (after a now defunct, purportedly piracy-proof alternative to DVDs), allows PC users with high-speed DSL lines or cable modems to download feature films from the Internet in under two hours. This new technology relies on two pieces of software: DeCSS, which breaks the encryption designed to prohibit the copying of DVDs, and video-compression software used to make video files fit on computer CDs.

Several companies have asked the courts to halt the spread of DeCSS, which is already widely available on the Internet. And Microsoft Corp., which makes a product from which the video-compression software was derived, has threatened action against DivX distributors. (However, one of DivX's creators is currently working on a different version of the software that does not incorporate the Microsoft technology.)

In the meantime, pirated DivX movies are available through Internet chat rooms and Web sites. And as the technology improves, the films should become easier to download, and the result should be higher viewing quality.(13) Stay tuned for legal developments.

Usurping business methods. Perhaps the biggest Internet litigation wave to occur in the next few years will be fueled by business-method patents. Recently, these patents, which protect a procedure or method of doing business, have skyrocketed, particularly as they relate to the Internet. In 1998, 1,300 business-method patent applications were filed, compared with 2,600 in 1999 and a projected 5,000 in 2000.(14)

Some readers will recall press accounts about Amazon.com's business-method patent (No. 6,029,141) for a "one click" purchase procedure and its successful suit against Barnesandnoble.com. Amazon was able to use the patent to obtain injunctive relief against its competitor's use of one-click purchasing in the middle of the Christmas shopping season.(15) Another widely reported dispute is the attempt by Priceline.com to stop Microsoft from using Priceline's patented "reverse auction procedure.(16)

These suits are only the beginning. Internet innovators often find out that their straightforward business methods have been usurped by an "inventor" who has patented a Web-based version of a known business practice. These inventors make little investment but use their patents to extract royalties from the companies who do build e-commerce. Worse, since patent applications remain secret until the patent is issued, e-commerce companies can be rudely surprised when "submarine" patents that cover their existing method surface.

Many of these patents may not be valid, and as e-commerce expansion is log-jammed by method patents of questionable validity, suits will result. There will be big wins by both successful patent holders and those seeking to break their grip on a method of doing business.

Framing or windowing. Anyone who has surfed the Web has seen a hyperlink, a highlighted (usually blue) word or series of words that, when clicked on, transfers the viewer to another Web page.(17) Hyperlinks are commonly added to a site without obtaining consent from the owner of the transferee site, and most Web operators are happy to receive visitors through unsolicited links.

Linking technology, however, also allows for some practices that are not universally appreciated--for example, linking to only a portion of the transferee page while retaining the visitor at the transferor site and displaying a linked-to page in a small window on the original page. These two practices, known as framing or windowing, have often been used to block or reduce the size of the transferee page's advertising while prominently displaying advertising hosted on the transferor's page.

Washington Post Co. v. Total News, Inc., filed in 1997, was the first legal shot fired in the framing war.(18) Total News operated a news "gateway" page designed to help visitors select among news sites available on the Web. Framed links to other news pages on the Total News host page not only reduced the size of the other news pages but also blocked border advertisements on them. (Total News hosted its own advertisers on its site.) Further, through framing, the addresses of the other pages were concealed while the Total News Web address was entirely visible.

The Washington Post; CNN; USA Today; Time, Inc.; and others called Total News a "parasite site" and sued. They argued that the defendant's practice was like taking stories from a print publication, adding its own advertisements, and selling the repackaged content. Thus, they contended that Total News had violated their copyrights. They also contended that Total News framed out the plaintiffs' trademarks, so that the plaintiffs' content appeared without its trademarks in violation of trademark law.

This analogy to print media does not necessarily hold up under copyright law, as the creation of unauthorized copy is a key element of direct infringement.(19) Using framing technology, the host page does not copy the content of another page but instead allows the Web user to view the linked page through a "hole" in the host page. The better theory would have been that the defendant infringed the plaintiff's copyright by creating a derivative work when it altered the plaintiff's page by using frames.(20)

Arguably, Total News was providing a service to the plaintiffs by allowing viewers to sample their content, potentially increasing traffic on the plaintiffs' sites. In apparent recognition of this, the suit was settled with license agreements whereby Web users could travel from the Total News page to the plaintiffs' pages, but framing and trademark misuse were prohibited.

Other cases have asserted theories of unfair competition, trademark infringement, and trademark dilution against unauthorized framing. All these theories were used by the successful plaintiff in Digital Equipment Corp. v. Altavista Technology, Inc.(21) This case involved more than just the framing issue, however, making it of only limited usefulness to plaintiffs with a pure framing case.

Both federal and state unfair-competition laws may be available in a framing situation. The Lanham Act unfair-competition issue was raised in both the Digital Equipment and Total News cases. If a link falsely implies sponsorship, endorsement, or approval so as to mislead consumers, the act could well apply.(22)

While state statutes concerning unfair competition, unfair trade practices, and misleading advertising vary, they are often written and interpreted broadly. Since framing cases may present facts justifying more than one potential forum, the plaintiff lawyer should study the laws of alternative forum states. State law may present a better vehicle and avoid the uncertainties of federal copyright and Lanham Act statutes in a framing case.

Deep linking. Deep linking offers the viewer a link to a subpage of a site, bypassing the initial home page and other unwanted subpages. The process takes away the site owner's ability to guide visitors through its desired navigational path. By skipping the home page, content credits, copyright notices, disclaimers, and certain advertisements, important information may be bypassed.

Deep linking was the issue in a case filed by Ticketmaster Corp. against Microsoft Corp.(23) Microsoft's Sidewalk sites in various cities allowed residents to scan a menu of upcoming leisure events. To allow users to buy tickets to a selected event, Microsoft created a deep link to Ticketmaster's relevant subpage without the company's permission.

Ticketmaster filed suit. It complained that the deep link bypassed Ticketmaster's "front door," which contained revenue-producing advertising, and proceeded directly to the ticket purchase page, which was devoid of advertising. This form of "electronic piracy," according to Ticketmaster, diluted its trademark and constituted unfair competition. The case settled in February 1999 with Microsoft agreeing to link only to Ticketmaster's home page.

More recently, in another case involving Ticketmaster, a California court held on motion to dismiss that deep linking by itself is not necessarily improper.(24) The court wrote the following:
 [H]yperlinking does not itself involve a violation of the Copyright Act
 (whatever it may do for other claims) since no copying is involved. The
 customer is automatically transferred to the particular genuine Web page of
 the original author. There is no deception in what is happening.... [T]he
 court concludes that deep linking by itself (i.e., without confusion of
 source) does not necessarily involve unfair competition.(25)


An issue closely related to deep linking also raised in the Ticketmaster cases is whether a Web page may compile summary data from another Web page. This practice similarly raises issues of bypassing the advertising in the targeted Web site. In eBay, Inc. v. Bidder's Edge, Inc., the court granted a preliminary injunction in favor of an auction site and against an "auction aggregation site."(26)

The defendant was using automated techniques to search the eBay auction site and post the auctions on its own site. The opinion is noteworthy for its use of a trespass cause of action as well as copyright infringement.

This body of law is in its infancy and may eventually have a dramatic effect on the convenience and the usefulness of the Internet.

There is a certain technological irony to deep linking and framing litigation: In most situations, it is unilaterally preventable. Sites can be programmed to prevent unwanted framing or to redirect attempted deep links to the home page or block them entirely.

A lack of self-protection raises two possible legal theories. The defendant may argue that maintaining an unprotected site creates an implied license for any type of hyperlink, including a deep link or frame. Or the defendant may argue that the plaintiff's cause of action is barred by the doctrine of avoidable consequences (or, in some states, damages reduced by failure to mitigate). This doctrine may impose a duty of vigilance on the owner of an unprotected page to periodically check to see what is linked to its site(27) and whether those linking sites are framing or deep linking the owner's site.

Clients who have valuable content to protect should be advised to periodically check what is linked to their sites. The link checks may also uncover culprits with sites disparaging the client's trademark or defaming the client, as well as parody sites. (Clients should also periodically check their trade names in search engines to uncover improper use.) Relying solely on Web site notices that prohibit linking without written authorization (a practice among some Web operators) is, in the authors' view, unwise.

Old wrongs, new efficiency

The Internet has become a tool for perpetrating a host of old legal wrongs in new and efficient ways. Here are some examples.

* "Pump and dump" artists anonymously post "hot stock tips" in Internet chat rooms, causing day traders to run up the price of a penny stock previously acquired by the artists. The culprits then dump the stock, precipitating its crash and causing most participating traders to lose.

* A fired employee makes off with a list of customer e-mail addresses and distributes defamatory information instantaneously to thousands of customers.

* A jilted lover creates a site featuring photographs and the home address and phone number of his former girlfriend, with a domain name that incorporates the ex-girlfriend's name and links to pornographic sites.

In these examples, the culprits could be convicted or sued using existing criminal and tort law. However, practical problems may exist. The tortfeasor may be located in another state, may act anonymously, and may have few resources to pay a judgment. These problems suggest several legal questions. For example, what state has personal jurisdiction over the resident of a distant state who posts a Web page there that is accessible across the Internet and causes damage to a client? Is an Internet service provider (ISP) liable for hosting a perpetrator's page on its server? How can someone identify a Web page's owner or an anonymous e-mailer?

Practical pointers

Reaching the out-of-state defendant. The evolving law of Web site jurisdiction generally distinguishes between a passive Web site purely for viewing and an interactive Web site. Most courts have held that a passive Web site does not create sufficient contact with another state to confer personal jurisdiction, but an interactive site might. The key seems to be the degree of interactivity. A site permitting individual purchases, without more, is probably inadequate to confer personal jurisdiction, but a site soliciting a subscription relationship with customers for a continued supply of information is probably adequate to confer jurisdiction.(28) However, the law is still evolving in the United States, and at least one foreign country has passed a law claiming total jurisdiction, even when the Web site is passive.(29)

Determining the ISP's legal identity. Nowhere is the difficulty of applying pre-Internet concepts to the online environment better illustrated than by the effort to place ISPs in an existing legal category. Is an ISP like a newspaper publisher and, therefore, generally liable for defamation in its publication? Is it more like a distributor, which is not liable for defamation in a distributed publication without actual knowledge? Or is it like the phone company, which has no liability for the content of conversations crossing its lines?

In the online defamation case of Lunney v. Prodigy Services Co., the court held that by providing an e-mail account, Prodigy was a common carrier and, therefore, not subject to liability based on the content of individual e-mails.(30) Furthermore, the court held that even though Prodigy reserved the right to edit the content of its online bulletin boards, the ISP was not a publisher of electronic messages left on those boards by subscribers and was not liable for any defamation.

The attempt to determine legal identity by comparing one entity with another also carries over to the rights of parties in intellectual property and privacy disputes. While these issues are beyond the scope of this article, suffice it to say that a party may propose different analogies, depending on what legal issue is at stake. For example, a defendant may try to stress one analogy--like that of the common carrier--when trying to avoid liability and another when trying to assert rights.

Uncovering the anonymous tortfeasor. By using codes and intermediaries such as ISPs and bulletin boards, an Internet tortfeasor can enjoy initial anonymity. However, there are techniques to uncover the tortfeasor's identity.

For example, every Web page is accessed through a domain name address registered to its owner. The individual content provider may have a domain name registered or use the service of an ISP to host the Web page and e-mail connection. By conducting a simple search on the NSI Web page, anyone can find out who is the registered host of a particular site.(31)

If the offending party's Web site is hosted by an ISP that refuses to provide identifying information, file a John Doe suit, then subpoena the ISP to reveal the content provider's identity.(32) This is also the procedure to follow in cases involving e-mail addresses and message boards sponsored by uncooperative Internet service providers.

We haven't seen the full extent of the Internet's potential for use--or misuse. As technology continues to change and advance at warp speed, so will the means and methods of Internet bandits. Trial lawyers knowledgeable about the evolving technology, law, and issues will be in a position to represent the victims in cyberspace.

Notes

(1.) For practice tips in technology litigation, see CLYDE H. WILSON, WINNING TECHNIQUES FOR COMPUTER AND HIGH TECH LITIGATION (1995).

(2.) The role of administering domain names is now being assumed by the nonprofit Internet Corp. for Assigned Names and Numbers (ICANN) at http://icann.org. NSI (http://networksolutions.com), however, still maintains the official database of all domain names assigned.

(3.) On the necessity of confusion as an element of trademark infringement, see Sears Roebuck & Co. v. All States Life Ins. Co., 246 F.2d 161 (5th Cir.), cert. denied, 355 U.S. 894 (1957).

(4.) It must be famous before the domain name is acquired by the defendant.

(5.) See, e.g., Panavision Int'l, L.P.v. Toeppen, 141 F.3d 1316, 1326 (9th Cir. 1998).

(6.) See Hasbro, Inc. v. Clue Computing, Inc., 66 F. Supp. 2d 117 (D. Mass. 1999).

(7.) Lifetime Software Tech., Inc. v. Time, Inc., No. C-99-20970 (N.D. Cal. filed Sept. 23, 1999).

(8.) 15 U.S.C. [sections] 1125(d) (2000).

(9.) See note 2.

(10.) No. 97-734-A, 1998 WL 724000 (E.D. Va. Apr. 10, 1998).

(11.) 174 F.3d 1036 (9th Cir. 1999).

(12.) Playboy Enters., Inc. v. Netscape Communications Corp., 55 F. Supp. 2d 1070 (C.D. Cal. 1999).

(13.) Kara Swisher, Boom Town: Filtering Out Noise in the Battle over Free Digital Music, WALL ST. J., July 17, 2000, at B1.

(14.) Jennifer L. Alvey, Business Method Patents Instill Fear in, Don't Mortally Wound, Internet Innovators, 1 COMPUTER TECH. L. 14 (May 5, 2000).

(15.) Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228 (W.D. Wash. 1999).

(16.) Scott Thurm, The Ultimate Weapon: It's the Patent and Critics Say It Threatens to Undermine the Very Nature of the Internet, WALL ST. J., Apr. 17, 2000, at R18.

(17.) This common type of hyperlink is known as an HRLF link. The lesser-used IMG link connects to an image on another site (such as a photograph), but leaves the viewer at the initial site.

(18.) 97 Civ. 1190 (PKL) (S.D.N.Y. filed Feb. 20, 1997).

(19.) Affiliated Enter., Inc. v. Gruber, 86 F.2d 958 (1st Cir. 1936).

(20.) Gillian v. American Broadcasting Co., 538 F.2d 1424 (2d Cir. 1976). This is not a framing case but deals with distortion.

(21.) 960 F. Supp. 456 (D. Mass. 1997).

(22.) See Standard & Poor's Corp. v. Commodity Exch., Inc., 683 F.2d 704 (2d Cir. 1982).

(23.) 97-3055 DDP (C.D. Cal., filed Apr. 28, 1997).

(24.) Ticketmaster Corp. v. Tickets.com, Inc., No. 99-7654, 2000 U.S. Dist. LEXIS 4553 (C.D. Cal. Mar. 27, 2000).

(25.) Id. at *6, *9.

(26.) 100 F. Supp. 2d 1058 (N.D. Cal. 2000).

(27.) The procedure uses a search engine.

(28.) See Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997); Butler v. Beer Across America, 83 F. Supp. 2d 1261 (N.D. Ala. 2000).

(29.) Claudia Ray & Dale M. Cendali, The Internet and Jurisdiction: The International Experience, 14 COMPUTER L. ASS'N BULL. 43 (1999).

(30.) 701 N.Y.S.2d 684 (1999), cert. denied, 120 S. Ct. 1832 (2000).

(31.) To find out who's behind a particular domain name address, go to http://networksolutions.com and click on the "WHOIS Lookup" link at the top right. Type the domain name address in the box, hit "Search," and contact information for the owner of the name will appear.

(32.) For a primer on how this process works, see Columbia Ins. Co. v. Seescandy.com, 185 F.R.D. 573 (N.D. Cal. 1999).

Clyde H. Wilson Jr. heads the practice of computer, Internet, and high-technology litigation at Wilson, Johnson & Jaffer in Sarasota, Florida. M. Susan Wilson is a graduate of the University of Florida and the University of Wisconsin Law School.
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