Looking for a suit coat that coordinates with pajama pants

Below is an excerpt from a recent decision in the case of Ideal Instruments, Inc. v. Rivard Instruments, Inc., a patent case from the Northern District of Iowa. [— F.Supp.2d —-, 2007 WL 2296407 (N.D. Iowa, August 10, 2007)] In the future we’ll think it quaint that this deserved special mention in the court’s written opinion. But I’m sure clients will appreciate the cost savings. And imagine trying a federal case while telecommuting!

The court held the Markman hearing in this case on August 3, 2007. The Markman hearing in this case was the first instance in which this court has conducted a hearing using teleconferencing and “webcasts” of the parties’ presentations over the internet. The court and the parties found that this procedure was also extremely effective in both presenting the parties’ arguments and saving the parties substantial sums in attorney fees and travel costs.

***

Owing to the last minute notice by the plaintiff of a desire to present materials using PowerPoint via a webcast and some technical difficulties with working out the procedure to surrender “moderator” rights from one party to the other, the parties actually presented separate, simultaneous webcasts, one for the plaintiff’s presentation and one for the defendants’ presentation, instead of a single webcast. In fact, the parties used different webcast hosts in this case: one used Netspoke and the other used Webex. The court and the parties each logged in to both webcasts at the beginning of the conference call, then switched between them as the parties made their arguments. Although not as elegant a procedure as a single webcast would likely have been, the simultaneous webcasts procedure was very effective, eliminated the technical difficulties in the short time available, and proved quite workable. One “glitch” that occurred when the plaintiff “timed out” of the defendants’ webcast was quickly remedied by the plaintiff logging back in. The parties had also taken the precaution of providing the court and each other with copies of their presentation slides by e-mail prior to the hearing, so that even when the plaintiff temporarily lost the defendant’s webcast, the plaintiff was able to follow the defendant’s presentation by using the copy that the plaintiff had received. The court heartily recommends requiring such a backup procedure when using technology, whether new or tested and true, even though “Murphy’s Law” has not yet been codified into the United States Code.

Public policy concerns invalidate AOL forum selection clause

Dix v. ICT Group, Inc., — P.3d —-, 2007 WL 2003407 (Wash. July 12, 2007)

Dix v. ICT Group was one of the first decisions discussed here at Internet Cases back in early 2005. I wrote about the Washington appellate court’s decision in the case, which reversed a lower court’s dismissal of a class action suit against AOL under Washington’s Consumer Protection Act. The Washington Supreme Court has now affirmed the appellate court’s decision. The court held that the forum selection clause in AOL’s terms of service, which called for all consumer disputes to be heard in Virginia, should not be enforced, because to do so would be against public policy of the state of Washington.

The plaintiff AOL users claim that AOL violated the Washington state Consumer Protection Act by tricking them into signing up for additional AOL accounts. The trial court dismissed the action, on grounds that the suit should have been brought in a court in Virginia, according to AOL’s terms of service. But there is a substantial problem with the situation the dismissal created — Virginia does not recognize class action suits of the type being brought by the plaintiffs. The Washington plaintiffs were thereby denied the sort of remedy they could have obtained in Washington.

The appellate court and the state supreme court observed the significance of the various plaintiffs’ interests at stake. None of the plaintiffs alleged more than $250 or so in damages. So it would not be practicable for each individual plaintiff to seek recovery against AOL. The class action mechanism would be the best way to obtain recovery for small amounts among a large number of persons. The importance of this public policy outweighed the benefits of enforcement of the forum selection clause which, under U.S. Supreme Court authority, was presumptively valid. See, e.g., The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

Parties must use neutral forensics examiner in file-sharing case

Case highlights important privacy interests in electronic discovery dispute.

From Ray Beckerman, we learn of the U.S. District Court for the Eastern District of Texas’s decision on a motion to compel discovery filed by the recording industry against an accused file-sharer. While the defendant will have to submit her hard drive for forensic examination to see whether she had any copyrighted sound recordings stored on it, she will not have to turn it over to the recording industry’s forensic expert.

Instead, seeking to “balance the legitimate interests of both sides,” the court ordered the parties to select a neutral computer forensics expert to conduct the inspection. Such an approach, the court found, would protect the disclosure of the defendant’s personal information, such as personal correspondence, household financial matters, school homework, and perhaps attorney-client privileged information.

Although in theory this sounds like a reasonable approach to protect the confidentiality of the defendant’s information, one could be troubled by a particular part of the court’s decision. The order states that “the Plaintiffs shall have the right to suggest hard drive search methodologies to the neutral expert and the expert shall make every effort to utilize those methodologies.”

But there is nothing in the order giving the defendant the right or opportunity to object to those methodologies. With an obligation to “make every effort” to comply with the suggestions of the plaintiffs, just how neutral is that forensic examiner really going to be?

Sony BMG Music Entertainment et al. v. Arellanes, No. 05-CV-328 (E.D. Tex., October 27, 2006).

Evidence-destroying defendant severely sanctioned in P2P file-sharing case

In the case of Arista Records v. Tschirhart, the U.S. District Court for the Western District of Texas has shown little mercy on a defendant accused by record companies of illegal file-sharing.

Knowing that a court order was in place requiring her to turn over her hard drive to be copied, the defendant allegedly used “wiping” software in an attempt to destroy all evidence of her illegal P2P file sharing. In response, the plaintiff record companies moved, pursuant to Fed. R. Civ. P. 37(b), for the most severe form of sanctions against the defendant – entry of default against her. The court granted the plaintiffs’ motion, and provided them with 30 days to submit a proposed order spelling out their damages.

Given that the record companies’ expert opined that the defendant had downloaded over 200 sound recordings during 2005, those requested damages will probably be substantial. Statutory damages under the Copyright Act can go as high as $150,000 per work infringed, in the most egregious cases.

In reaching its decision to enter default against the defendant, the court exercised its inherent power to do so, making a note of its obligation to act with “restraint and discretion.” It found that the defendant had acted in bad faith. That bad faith was exacerbated – and the default was further warranted – by the fact that the defendant herself was responsible for the destruction of evidence, that the deletion of the files destroyed the strongest evidence relevant to the plaintiff’s infringement claims, and that less drastic sanctions would not be appropriate.

Not only was the sanction intended to dissuade the plaintiff from destroying evidence in the future, it was intended to make an example out of her. Merely awarding the plaintiffs their attorney’s fees or giving the jury an adverse inference instruction at trial would not have been enough to remedy the situation. Given the defendant’s “blatant contempt” for the court and a “fundamental disregard for the judicial process,” only default would be an adequate punishment and deterrent to others considering similar conduct.

[Hat tip to Techdirt for posting on this case.]

Arista Records, LLC, v. Tschirhart, No. 05-372 (W.D. Tex., August 23, 2006).

Company had no standing to challenge discovery on behalf of anonymous defamers

After seeing what it believed to be defamatory statements about it on Yahoo! Finance and Silicon Investor message boards, plaintiff Matrixx Initiatives, Inc. (“Matrixx”) filed a lawsuit against several “John Doe” defendants. Through information obtained from Yahoo!, Matrixx determined that certain of the alleged defamatory statements were posted with computers owned by Barbary Coast Capital Management. Matrixx took the deposition of one Mr. Worthington, the manager of Barbary Coast, asking him to identify the anonymous Internet users who posted the alleged defamatory statements. Worthington refused.

Matrixx filed a motion to compel Worthington to answer the questions, and the trial court granted the motion. Worthington and Barbary Coast sought review, arguing that the posters’ First Amendment right to speak anonymously should prohibit the disclosure of their identities. On appeal, the court affirmed the decision of the lower court, holding that Worthington and Barbary Coast did not have standing to invoke the anonymous posters’ First Amendment rights.

In reaching its decision, the court distinguished two other cases in which the recipient of a subpoena did have standing to challenge the unmasking of another person. In the cases of In re Subpoena Duces Tecum to America Online, Inc., 2000 WL 1210372 (Va. App. 2000), and In re Verizon Internet Services, 257 F.Supp.2d 244 (D.D.C. 2003)(both cases reversed on other grounds), Internet service providers did not have to identify anonymous customers pursuant to subpoenas served on the ISPs. In each of these cases, the courts held that the ISPs had standing to assert the customers’ rights to remain anonymous, because the customer relationships were sufficiently close. In this case, however, the court held that “by contrast, we are presented with no ‘close relationship’ — or, indeed, any relationship — between appellants and the individuals for whom they are seeking First Amendment protection.”

Matrixx Initiatives, Inc. v. Doe, — Cal.Rptr.3d —, 2006 WL 999933 (Cal.App. 6 Dist, April 18, 2006).

Delaware decision defines standards for protecting anonymous Internet speech

The recent case of Doe v. Cahill, coming to us from the Supreme Court of Delaware, illustrates a court’s willingness to ensure adequate safeguards to protect anonymous speech on the Internet.

In September of 2004, an anonymous visitor to a Smyrna, Delaware community weblog posted comments about city councilman Patrick Cahill, which Cahill believed to be damaging to his reputation. Cahill filed a defamation lawsuit. Because he did not know the identity of the anonymous commenter, he filed suit against “John Doe,” and began procedures under Delaware law to discover Doe’s true identity. Cahill learned that Doe used Comcast as an Internet service provider, and obtained a court order requiring Comcast to disclose Doe’s real name.

As required by the federal Cable Communications Policy Act of 1984, at 47 U.S.C. §551(c)(2), Comcast notified Doe of the request for information about his identity. [More on the Cable Communications Policy Act.] In response, Doe sought an emergency protective order to bar Comcast from turning over his information. The trial court denied Doe’s request for a protective order, and held that Cahill could obtain Doe’s identity from Comcast. Doe appealed directly to the Delaware Supreme Court. On appeal, the Court reversed the lower court’s decision.

The Supreme Court determined that the trial court had applied too low a standard in testing whether Comcast should be ordered to turn over Doe’s identity. The trial court had applied a “good faith” standard, namely, that disclosure was warranted because Cahill had established through his pleadings that he had a legitimate, good faith basis on which to bring the defamation claim.

The Supreme Court held that such a low standard was not sufficient to protect one’s right to speak anonymously. The lower, good faith standard might encourage meritless lawsuits brought merely to uncover the identities of anonymous critics. Accordingly, the Supreme Court adopted a standard “that appropriately balances one person’s right to speak anonymously against another person’s right to protect his reputation.”

The Court held that before a defamation plaintiff can obtain the identity of an anonymous defendant through the compulsory discovery process, he must come forth with facts sufficient to defeat a summary judgment motion. Said another way, before a Delaware court will order an anonymous speaker to be unmasked, the plaintiff has to present evidence creating a genuine issue of material fact for each element of the defamation claim.

Applying that standard to the present case, the court held that “no reasonable person could have interpreted [Doe’s] statements to be anything other than opinion.” The court observed that its conclusion was supported by the “unreliable nature of assertions posted in chat rooms and on blogs.” The case was dismissed.

Doe v. Cahill, — A.2d —, 2005 WL 2455266 (Del., October 5, 2005).
[Full text of decision in PDF]

Footnote to Councilman: no action for malicious prosecution

Court dismisses civil suit brought by defendant in high-profile ECPA case

If you track court cases dealing with the Internet, you may be familiar with last month’s First Circuit decision in the case of U.S. v. Councilman, 418 F.3d 67 (1st Cir. 2005), which held that interception of e-mail messages in temporary storage is a criminal violation of the Electronic Communications Privacy Act. [More on U.S. v. Councilman]

The defendant in that case, Bradford Councilman, filed a separate civil lawsuit against two of his former employees, claiming that they made false statements to the police which led to Councilman’s arrest and indictment for unlawfully intercepting e-mail messages. Councilman alleged causes of action for malicious prosecution, abuse of process, and intentional infliction of emotional distress. The case had been proceeding in federal court, but was dismissed last week.

The court held that Councilman’s malicious prosecution claim failed because the police had already initiated a criminal investigation before contacting the defendant former employees. The defendants, by providing information about Councilman (whether accurate or not) did not initiate the prosecution. Their statements to the police were therefore privileged under Massachusetts law, and they could not be liable for any of the tort claims Councilman had brought against them.

It is important to note that a necessary element in a civil action for malicious prosecution is that the underlying criminal action, wrongly initiated, ended in a favorable disposition for the accused. Had the court found that the former employees did “initiate” the prosecution, the matter would have been thrown into a problematic situation, given last month’s First Circuit decision which reversed the dismissal of the indictment against Councilman. The court briefly commented on this notion, observing that “it cannot be said at this time that the prosecution has terminated in favor of the plaintiff.”

Councilman v. Alibris, Inc., — F.Supp.2d —, 2005 WL 2225802 (D.Mass., September 13, 2005).

“Terms and Conditions of Sale” provided by hyperlink created binding contract

[Thanks to the Technology & Marketing Law Blog and the ContractsProf Blog for alerting me to this case.]

Several purchasers of Dell computers filed a class action lawsuit against Dell in an Illinois court. Dell moved to dismiss the action, or to compel arbitration, based on an arbitration clause found in the “Terms and Conditions of Sale” that were available for viewing by clicking on a blue hyperlink found on each of the pages that website visitors saw during the purchasing process.

Although the plaintiffs admitted that by purchasing computers online they entered into contracts with Dell, they claimed that the Terms and Conditions of Sale containing the arbitration clause were not a part of the contracts. They argued that merely making a link to the Terms and Conditions of Sale available was insufficient, and that Dell should have required purchasers to affirmatively manifest their assent by clicking an “I Accept” box.

Dell argued that it had done enough to make purchasers aware of the Terms and Conditions of Sale. It had provided the link by means of a contrasting blue hyperlink. It had also stated on numerous pages on its website, used for marketing and for purchase, that all sales were subject to the Terms and Conditions of Sale.

The trial court determined that the online terms and conditions had not been “adequately communicated” to the plaintiffs, because Dell did not “provide a display text on the Web site that manifested a clear assent to the terms and conditions,” and because the terms and conditions themselves were not visible on the pages viewed while placing the orders. Accordingly, the trial court denied Dell’s motion to dismiss or to compel arbitration. Dell sought review. The appellate court reversed.

On appeal, the court held that the plaintiffs were properly made aware of the terms and conditions. The hyperlinks appearing on the web pages made the pages “the same as a multipage written paper contract. The blue hyperlink simply takes a person to another page of the contract, similar to turning the page of a written paper contract.” The contrasting blue color of the hyperlink served to make it conspicuous. Finally, the court noted that because the plaintiffs were purchasing computers online, they were not novices, and should have known that more information would have been available by clicking on the link.

Because the Terms and Conditions of Sale were part of the online contract, the court held that the arbitration clause applied. It reversed the decision of the trial court and remanded it with directions to either stay or dismiss the action so that the parties could arbitrate their disputes.

Hubbert v. Dell Corp., — N.E.2d —, 2005 WL 1968774 (Ill.App. 5th Dist., August 12, 2005).

Case demonstrates court’s reaction to glitches in electronic case filing

Eighth Circuit overturns ruling against party whose counsel did not receive electronic notification of court orders.

In the recent case of American Boat Co. v. Unknown Sunken Barge, which was a tort action against the United States, the U.S. District Court for the Eastern District of Missouri granted summary judgment against plaintiff American Boat on September 2, 2003. American Boat moved for reconsideration, but the motion was denied on November 5, 2003.

Although they were signed up for the court’s electronic filing system, local counsel for American Boat did not receive notification of the order denying the motion for reconsideration. Lead counsel, who was not signed up for electronic filing and therefore expected to get a paper copy of the order, never received such paper copy. He first learned of the order when he checked the PACER system on March 4, 2004.

Because the time for appeal had passed, American Boat filed a motion to reopen the time for filing an appeal. The district court denied the motion to reopen, finding that notice of the November 5 order was received, notwithstanding counsel’s statements to the contrary.

American Boat moved for reconsideration of the denial of the motion to reopen. It submitted an affidavit of a computer expert who stated “with near to absolute certainty” that the notification e-mail to local counsel never arrived. During the pendency of this motion to reconsider, lead counsel signed up for the court’s electronic filing system. He never received electronic notification, however, when the court denied the motion on August 12, 2004.

In light of the continuing problems with electronic notification, American Boat filed a second motion to reconsider the denial of the motion to reopen. This time it submitted the affidavit of another computer expert which stated that lead counsel did not receive email notification of the denial of the motion to reconsider. The district court denied this motion as well, and American Boat sought review with the Eight Circuit Court of Appeals, which reversed and remanded.

The appellate court noted that the district court correctly presumed the delivery of email messages since they showed up as entries on the clerk’s docket sheet. However, the appellate court concluded that the district court abused its discretion in denying American Boat an evidentiary hearing on whether the presumption of delivery had been rebutted, and remanded to the district court for such a determination.

The court observed that the newness of the electronic filing system made it likely there were glitches yet to be worked out. Furthermore, the fact that attorneys who had not signed up for electronic notification did not receive paper copies demonstrated possible flaws in the system. Finally, one of the government’s attorneys in the matter also reported not receiving electronic notification. In light of these factors, American Boat had “made a sufficient showing to at least be entitled to an evidentiary hearing on the issue of whether they have adequately rebutted the presumption [of delivery].”

American Boat Co. v. Unknown Sunken Barge, — F.3d —, 2005 WL 1949693 (August 16, 2005).

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