Stanford Center for Internet and Society

In a recent decision, a U.S. District Court set standards that would indicate what on-line activities would and would not constitute racketeering under RICO, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c). The United States District Court for the District of Maine held on a motion for summary judgment that a group of individuals who published allegedly defamatory criticism of plaintiff The Gentle Wind Project (“GWP”) on-line did not qualify as an “association-in-fact” under RICO. Having dismissed the RICO-related federal claims over which it had original jurisdiction, the court declined to exercise supplemental jurisdiction over the plaintiff’s state claims and dismissed them without prejudice.GWP is a non-profit organization “dedicated to education and research aimed at alleviated [sic] emotional and mental human suffering and trauma.” As part of GWP’s mission, its members manufacture objects which they describe as “healing instruments that are designed to restore human beings to a natural state of existence.” GWP then sells these objects to the public in return for a “donation.”

The United States District Court for the District of Massachusetts, in a case of apparent first impression, held that an email sent from the domain name of a company was not enough, standing alone, to cloak an agent in apparent authority that would allow him to bind that company to a contract. In the case, defendant Recovery Express, Inc. (Revovery Express) moved for summary judgment after plaintiff CSX Transportation, Inc. (CSX), a seller of out-of-service railcars and parts, brought an action alleging breach of contract, account stated, unjust enrichment, and quantum meruit. The claims arose from an arrangement CSX had entered into with Albert Arillotta (Arillotta), a partner at Interstate Demolition and Environmental Corp. (IDEC). Arillotta sent an email to CSX from the Recovery domain, recoveryexpress.com, in which he claimed to be from IDEC and Recovery Express and offered to buy rail cars. IDEC and Recovery Express shared offices and email services but were distinct companies. Recovery denies that Arillotta ever worked for them. Based on the email and subsequent telephone conversations, CSX agreed to sell the rail cars to Arillotta. After delivery of the goods and a bounced check from Arillotta in the amount of $115,757.36, Recovery refused to pay CSX, who subsequently brought suit against Recovery Express and IDEC.

The Court of Special Appeals of Maryland reinstated the Maryland Commercial Electronic Mail Act (MCEMA), reversing a Circuit Court ruling holding that MCEMA violated the Commerce Clause of the United States Constitution. The Court also reversed the lower court’s holding that Maryland lacked personal jurisdiction over defendant First Choice Internet, Inc. (First Choice), a New York-based Internet marketing company, and its holding that defendant Joseph Frevola, a New York resident and president of First Choice, could not be held personally liable for First Choice’s alleged MCEMA violations. Plaintiffs MaryCLE, LLC (MaryCLE), a Maryland-registered consumer protection company based in Washington, D.C., and defendant NEIT Solutions, its interactive computer Internet service provider, brought an action under MCEMA against First Choice and Frevola. Over the course of two months, MaryCLE received 83 unsolicited emails from First Choice, all containing misleading information as defined in MCEMA. MaryCLE alleged that it opened all these emails in Maryland. The company replied to each email asking First Choice to remove it from its mailing list. These attempts were unsuccessful until MaryCLE sent a letter via postal mail to Frevola notifying him of the MCEMA violation, at which point the emails ceased. MaryCLE subsequently commenced this action.

The United States District Court for the District of Nevada granted Defendant Google, Inc.’s motions for summary judgment, finding Defendant did not infringe Plaintiff web site author’s copyright by maintaining a copy of Plaintiff’s works in its online cache and allowing search engine users access to the cached copy. Defendant uses an automated program (“Googlebot”) to crawl the Internet, analyzing and cataloging web pages. The Googlebot also makes a copy of the pages it finds and stores them in a temporary cache on Defendant’s servers. Web site owners can include a “meta-tag” in the computer code for their web pages to tell Defendant not to cache their pages (“no-archive meta-tag”). These meta-tags are an industry standard. When a user’s search results are displayed, Defendant shows a large link to relevant web pages and a smaller link to its cached copy of each page (unless the web page owner opted out through the use of meta-tags). The cached copy is useful when the web page is inaccessible, the web page has changed, or when users are having trouble finding their search terms (which Defendant highlights in the cached copy). The cached copy has a disclaimer at the top of the page stating it is Defendant’s copy of the page and providing two links to the actual website.

In this patent infringement suit, the United States Court of Appeals for the Federal Circuit considered the question of whether a patent holder retained the standing to sue for infringement according to the terms of a licensing agreement it had concluded with a non-party. According to the Court, the issue turned on whether the agreement “transferred all substantial ownership rights to the ‘747 patent” from Contour Optik, the patent holder, to Chic Optic, the nonparty, “in which case Contour lacked standing to sue for infringement, or whether it merely granted Chic a license to that patent, in which case Contour was still the owner of the patent and had standing to sue.” The patent concerned the attachment mechanism between a traditional eyeglass frame and an auxiliary eyeglass frame that housed sunglasses.

The Federal Circuit denied a petition for rehearing en banc over the issue of what is required in the written description to justify a patent’s claims. Lizardtech’s patent claim was invalidated by the Federal Circuit for having claims “in excess of the specification’s embodiments.” Lizardtech appealed arguing that prior law created uncertainty about what is required in a written description. The concurring opinion stated that the statute governing written description in patent claims (35 U.S.C. § 112) is clear in its requirements but the dissent called for a clarification of written description doctrine in light of confusing case law.

Plaintiff Shelly Landry-Belle sued defendant Various Inc., the operator of AdultFriendFinder.com and several other websites, after Landry-Belle’s ex-boyfriend purportedly posted false, defamatory, and sexually obscene material about her to several of Various’ websites. The posts suggested that Landry-Belle would “engage in lewd and obscene acts of perversion” including “sexual encounters with men and women.” Landry-Belle sought damages for invasion of privacy, defamation, and intentional infliction of emotional distress, as well as an order directing Various to remove the content in question from their sites.

The United States District Court for the Northern District of California, granted plaintiffs’ Video Software Dealers Association (VSDA) and Entertainment Software Association (ESA) motion for a preliminary injunction prohibiting enforcement of a California law (“the Act”) that requires violent video games to be labeled and prohibits their rental or sale to minors.

Governor Schwarzenegger signed the Act into law on October 7, 2005 (to take effect on January 1, 2006). VSDA and ESA, associations of companies in the video game industry, filed a complaint on October 17, 2005; a motion for a preliminary injunction to prevent enforcement of the new law followed two days later. VSDA and ESA claimed that: (1) the Act’s definition of “violent video game” is unconstitutionally vague, (2) the Act’s restriction on sales and rentals to minors violates the First Amendment, and (3) the Act’s labeling requirement violates the First Amendment. The defendants responded that the Act is “neither too vague nor violative of the First Amendment” and is “narrowly tailored to further a compelling state interest.”

The district court for the Southern District of Texas remanded this Internet libel action to state court. Plaintiff had originally filed suit in state court against Defendant, an Internet site administrator and site author who allegedly posted defamatory material on his website. Defendant had then removed the case to federal court. The federal court rejected two possible grounds for removal. First, it did not have original jurisdiction as the parties were not diverse and no federal question was raised in the complaint. Second, the Communications Decency Act (CDA) did not completely preempt the state law defamation claim because the suit was against an author as well as a site administrator and thus was “consistent” with the CDA. The court quickly dismissed any claims that it might have original jurisdiction in this case, pointing to the lack of diversity of citizenship and absence of a federal question in the Plaintiff’s complaint. Though the Defendant raised the CDA as a defense, removal to federal court based solely on a federal question defense is not appropriate, as established in Louisville & Nashville R.R. Co. v. Mottley.

This case involves the GNU General Public License (GPL), which governs the use of many products sold and distributed by the Free Software Foundation (FSF), including GNU/Linux operating systems. The GPL requires, among another things, that users who distribute or publish any work derived from GPL-covered software to license that work to under the GPL to all third parties at no charge. The plaintiff, Daniel Wallace (Wallace), was not a user of FSF software; rather, he was a competitor of FSF’s, trying to sell his own operating system. Wallace brought an action pro se against FSF claiming that it was conspiring with commercial distributors IBM, RedHat, Novell, and others to fix prices for intellectual property in the market by attaching the GPL to GNU/Linux operating system software. Wallace claimed, in essence, that the GPL constituted a horizontal price-fixing scheme among competitors in violation of Section 1 of the Sherman Antitrust Act and sought to enjoin FSF from developing and distributing Linux under the GPL. On motion by FSF, Judge Tinder of the United States District Court for the Southern District of Indiana dismissed the complaint for failure to show any “antitrust injury” from FSF’s conduct, but held that Wallace had otherwise stated a claim upon which relief could be granted.In his third amended complaint, Wallace alleged that FSF was conspiring with its competitors to fix prices for software via the GPL. The court determined that Wallace was effectively claiming the existence of a horizontal price-fixing agreement, which would be illegal per se under the Section 1 of the Sherman Antitrust Act (prohibiting contracts and conspiracies in restraint of trade) because such horizontal arrangements are perceived to have a “pernicious effect” on competition. By comparison, vertical agreements (those between enterprises at different levels within the same chain of distribution) are governed by a “rule of reason” analysis because their effects will not always be anticompetitive. The court determined that the GPL could not be reasonably characterized as a horizontal agreement because it governs agreements between licensees and licensors, who are users at different levels within the same chain of distribution. Therefore, the court reasoned, the GPL is a vertical agreement, and it cannot alone constitute a per se violation of the Sherman Act.