Employer had legitimate reason to fire employees for violating company e-mail policy; court found no age-based discrimination

In the case of Rizzo v. PPL Service Corp., the U.S. District Court for the Eastern District of Pennsylvania has awarded summary judgment in favor of the employer in an age discrimination lawsuit filed by former employees who were fired after sending and receiving personal e-mail at work.

PPL Service Corporation had a zero-tolerance policy against employees using their e-mail accounts to send and receive non-work related messages. After an internal investigation revealed they were in violation of this strict policy, plaintiffs were fired. Believing that the alleged violation of the e-mail policy was merely a pretext for illegal age discrimination, the plaintiffs filed suit against PPL under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq.

PPL moved for summary judgment, and the court granted the motion. Because there was no direct evidence of age discrimination, the court applied the burden shifting analysis set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817 (1973). Under this analysis, a terminated employee has the initial burden of presenting a prima facie case of discrimination. The burden then shifts to the employer to show a legitimate, nondiscriminatory reason for the alleged adverse employment action at issue. If the employer makes this showing, the burden shifts to the plaintiff to show the stated reasons are pretextual.

In this case, the court found that the plaintiffs presented a prima facie case of age-based discrimination. The record revealed that there was a disproportionate number of employees in the protected group (above 40 years old) who were investigated for improper e-mail use. Furthermore, the only people terminated as a result of the investigation were above 40.

There was no dispute, however, that the employer had presented a legitimate, non-discriminatory reason for terminating the plaintiffs. The plaintiffs admitted they were aware of the company’s e-mail usage policy, and admitted they had sent and received prohibited messages.

Notwithstanding the legitimacy of the employer’s reason for termination, the plaintiffs argued that the offered reason was merely a pretext. The court found otherwise, and noted that the plaintiffs presented no evidence that age played any role whatsoever in the decision to terminate them.

Rizzo v. PPL Service Corp., 2005 WL 913091 (E.D.Pa., April 19, 2005).

Court upholds police radio hacker’s conviction under Computer Fraud and Abuse Act

In the case of U.S. v. Mitra, The Seventh Circuit has upheld the defendant’s conviction under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, for using a powerful radio transmitter and computer hardware to intentionally interfere with a computerized radio “trunking system” that coordinated police radio and other emergency communications.

Rajib Mitra, already a convicted hacker, used radio hardware and computer gear to send out a powerful signal that blanketed all of the communication towers in Madison, Wisconsin used by the police, fire, ambulance and other emergency personnel. This blanketing prevented users of the city’s communications system from accessing the “control” channel, this disabling the entire communication network based on a “trunking system” that linked the entire city’s emergency personnel.

Mitra was charged under the Computer Fraud and Abuse Act (the “Act”), and went to trial in the U.S. District Court for the Western District of Wisconsin. A jury convicted him of two counts of intentional interference with computer-related systems used in interstate commerce. Mitra sought review of his conviction.

On appeal, the court held that even though the Act does not specifically address radio trunking systems, interference with such technology is included in the Act’s scope. Mitra had argued that Congress could not have intended such broad coverage, because the Act was drafted before trunking systems were brought to market.

The court rejected this argument, noting legislators “know that complexity is endemic in the modern world and that each passing year sees new developments.” Therefore, Congress can craft legislation in a general manner that will cover emerging technologies. Furthermore, and apparently dispensing with the notion of legislative intent, the court stated that “what Congress would have done about trunking systems, had they been present to the mind of any Senator or Representative, is neither here nor there.”

Mitra next argued that the statute could not rightfully prohibit his conduct, because the radio signals he sent did not cross state lines, and thus his actions did not involve interstate commerce. The court rejected this argument as well. It noted that although the system Mitra used was more powerful than the transmitter on the Huygens spacecraft that recently beamed back images from Saturn, the crucial inquiry was not whether Mitra acted in interstate commerce, but whether the affected computers and computerized systems were used in interstate commerce.

Having found the requirements of the Act met, the court upheld Mitra’s conviction. The question of whether his 96-month prison sentence was proper in light of the recent Booker decision was sent back to the district court for further proceedings.

U.S. v. Mitra, 2005 U.S. App. LEXIS 6717 (7th Cir., April 18, 2005).

Decision further exposes loophole in Electronic Communications Privacy Act

A federal court in Utah has held that although evidence obtained through illegal interception of wire or oral communication would not be admissible at trial, any evidence obtained through illegal interception of an electronic communication is admissible.

A confidential FBI informant accessed defendant Jones’s email account without his permission and printed out several messages which she turned over to FBI agents. Based on these messages, the agents obtained a search warrant and arrested Jones. Before trial, Jones moved to suppress the evidence contained in the e-mail messages, as well as the evidence derived from the search warrant based on those messages.

Jones argued that Section 2515 of the federal Electronic Communications Privacy Act (“ECPA”) prohibited the court from considering this evidence which he argued was illegally obtained by the confidential informant. Section 2515 provides, in relevant part: “Whenever any wire or oral communication has been intercepted, no part of the contents of such communication and no evidence derived therefrom may be received in evidence in any trial . . . if the disclosure of that information would be [prohibited].”

The court rejected Jones’s argument and denied the motion to suppress. Although the ECPA prohibits the introduction into evidence of wire or oral communications that may have been illegally obtained, the court held that the statute specifically excludes electronic communications from the statute’s suppression remedy. “Even though the [ECPA] prohibits the interception and disclosure of any wire, oral or electronic communication, the suppression remedy in §2515 applies only to intercepted wire and oral communications.”

U.S. v. Jones, — F.Supp.2d —, 2005 WL 850991 (D.Utah, April 12, 2005).

E-mail to witness gets attorney’s license suspended

In connection with another lawyer’s disciplinary matter before the Director of Minnesota’s Office of Lawyers’ Professional Responsibility, respondent Soronow sent an e-mail to a witness in the matter, asking the witness not to cooperate. Soronow also made “misleading statements” on his own law firm’s website. As a result of this conduct, the Director of the Office of Lawyers’ Professional Responsibility instituted a disciplinary action against Soronow for violations of various rules of professional conduct. Soronow agreed to a minimum 30 month suspension and was ordered to pay the costs of the disciplinary proceedings against him.

In re Disciplinary Action Against Soronow, — N.W.2d —, 2005 WL 851932 (Minn., March 28, 2005).

Deutsche Telekom victorious in not-so-egregious cybersquatting case

Here’s a twist on the typical cybersquatting fact pattern: What can a company do if someone registers a domain name using the company’s trademark, but instead of setting up a gripe site or otherwise acting mischievously, the cybersquatter promotes the company’s goods and services? Deutsche Telekom recently faced this question when it initiated a WIPO arbitration proceeding against an individual who had registered “tmobil.com”. Nothwithstanding the apparent good intentions of the registrant, Deutsche Telekom won a transfer of the domain name.

The respondent Mighty LLC/Domain Admin developed a site at tmobil.com which had as its only links various “sponsored links” that when clicked on, led to sites of authorized distributors of T-Mobile products. Deutche Telekom, the owner of trademark registrations for “T-MOBILE” and “T-MOBIL” sought a transfer of the domain name under the Uniform Domain Name Dispute Resolution Policy (“UDRP”).

For a domain name be transferred under the UDRP, the complainant must demonstrate that (1) the domain name is identical or confusingly similar to a trademark in which the complainant has rights, (2) the respondent has no rights or legitimate interests in the domain name, and (3) the domain name was registered and is being used in bad faith.

In this case, the parties agreed that the domain name was identical or confusingly similar to Deutsche Telekom’s T-MOBILE mark. The difficult issues for the panel were whether the respondent had any right or legitimate interests, and whether there was the requisite bad faith to warrant a transfer.

No Rights or Legitimate Interests

Under the UDRP, a respondent can demonstrate rights or legitimate interests in the domain name by, among other things, using the domain name in connection with a bona fide offering of goods or services. In this case, the respondent argued that “under the [UDRP] the sale of products associated with a trademark contained in a domain name constitutes the bona fide offering of goods and services, where competitive products are not being promoted and where the Respondent has done nothing to confuse users into believing the site is endorsed by or associated with the Complainant.”

The panel rejected this argument, applying the four-factor test set forth in the decision of Oki Data Americas, Inc v. ASD, Inc. WIPO Case No. D2001-0903. Among the Oki Data factors for bona fide offering are that the respondent (a) actually be offering the goods or services at issue for sale, (b) that the site be used to sell only the trademarked goods, and (c) that the site accurately disclose the site owner’s relationship with the trademark owner. In this situation, the respondent “ran afoul” of all of these factors. No goods were sold from the site, the links led to distributors not only of T-Mobile products and services but of competitors, and a copyright notice at the bottom of the page reading “© Copyright 2005 tmobil.com. All Rights Reserved.” would mislead visitors as to the relationship between the respondent and Deutsche Telekom.

Bad Faith

To find that the respondent had registered and used the domain name in bad faith, the panel invoked a provision of the UDRP which states that bad faith arises where a respondent intentionally attempts to attract, for commercial gain, Internet users to its website by creating a likelihood of confusion with the complainant’s trademark. In this situation, the respondent did not make it clear it was not associated with Deutsche Telekom, gave a false impression by using the copyright notice as it read, and sought commercial gain through the pay-per-click links featured on the site.

Deutsche Telekom AG v. Mighty LLC/Domain Admin, Case No. D2005-0027

Drug company can sue FDA for posting trade secrets online

The U.S. Court of Appeals for the D.C. Circuit has reversed the district court’s dismissal of a drug company’s tort claims against the Food and Drug Administration (“FDA”), holding that the drug company could proceed against the FDA for violations of the company’s trade secrets which the FDA had posted on its website.

Jerome Stevens Pharmaceuticals (“JSP”) is a drug company that sought FDA approval of one of its drugs used to treat thyroid diseases. As required by the regulations governing new drug approval, JSP provided the FDA with various information about the drug, including trade secrets and confidential information relating to the manufacturing of the drug. The FDA accidentally posted these trade secrets on its website.

JSP was one of only two companies that met the FDA’s initial deadline for submitting New Drug Applications for drugs of this type. Before the deadline expired, however, the FDA extended the deadline by a year, allowing other drug companies to enter into the market.

JSP filed suit alleging, among other things, damages of approximately $1.3 billion as a result of the FDA’s posting of JSP’s trade secrets and for arbitrarily and capriciously extending the deadline for New Drug Applications. The FDA moved to dismiss, claiming that the Federal Tort Claims Act (“FTCA”) 28 U.S.C. §§ 2671-2680 barred the claims. The district court granted the motion, and JSP appealed. The appellate court reversed.

In general, the federal government is immune from tort lawsuits brought by individual citizens. Congress enacted the FTCA to waive that immunity to a certain extent. The FTCA “grants federal district courts jurisdiction over claims arising from certain torts committed by federal employees in the scope of their employment, and waives the government’s sovereign immunity from such claims.” This waiver of immunity, however, is subject to exceptions. For example, an individual cannot maintain an action against the government if the claim is based upon a government employee’s exercise of discretion.

The FDA had argued that JSP’s claims for damages were based on the extension of the deadline for other companies to submit new drug applications. In support of its motion to dismiss, the FDA had attached a damage calculation prepared by one of JSP’s experts in a prior administrative proceeding, which tied the alleged amount of damages to the entry into the market of other drug companies, not the disclosure of trade secrets. The FDA argued that because the extension of the deadline (the conduct alleged to have caused the damages) was an exercise of the FDA’s discretion, the FTCA barred JSP’s lawsuit.

The appellate court held, however, that the district court erred in determining that JSP’s claims were based only on the extension of the deadline. The issue before the district court was not whether JSP had established sufficient proof of damages caused by the disclosure, but whether it had sufficiently pled claims for such damages. The court held that JSP had indeed sufficiently pled such claims.

Jerome Stevens Pharmaceuticals v. FDA, —F.3d—, 2005 WL 783074 (D.C.Cir., April 8, 2005).

Court upholds admissibility of weblog evidence used to convict

Case gives good example of what not to say on one’s weblog.

On May 19, 2002, police in Henderson County, North Carolina investigated an incident where a rock had been thrown off an overpass damaging a rig traveling on Interstate 26. Earlier that day, Gerald Velardi had written in his weblog “I’m going to trash some s**t tonight, maybe my damage will be shown on the news.” Velardi was arrested for the crime of assault with a deadly weapon with intent to kill and sentenced to no less than two years in prison.

At trial, the prosecutor brought up Velardi’s weblog during cross examination. On appeal, Velardi argued that this evidence was gathered as the result of an illegal search and seizure. The appellate court rejected this argument and denied relief to Velardi, as he had not properly raised any objection to the alleged illegal search and seizure at the trial court level.

State v Velardi, 2005 WL 757057 (N.C.App., April 5, 2005).

Password protection not enough to protect trade secrets

In the case of Liebert Corp. v. Mazur, the Illinois Court of Appeals has held that customer lists stored online in password protected directories were not entitled to trade secret protection where employer did not adequately make employees aware of the lists’ confidential nature.

After several former sales representatives began working for a competitor, Plaintiffs Zonatherm Products and Liebert Corporation filed suit for violations of the Illinois Trade Secrets Act (ITSA), 765 ILCS 1065/1 et seq. and sought a preliminary injunction against the former sales representatives. The court denied the motion for preliminary injunction and plaintiffs appealed.

Zonatherm and Liebert claimed that one of the trade secrets defendants had misappropriated was the plaintiffs’ customer lists. These customer lists were stored online on a server in password protected directories, and each sales representative had a copy on his or her desktop computer. One of the issues on appeal was whether the customer lists could be protected as a trade secret under the ITSA.

To establish that information is a trade secret under the ITSA, two requirements must be met: (1) the plaintiff must show the information was sufficiently secret to give the plaintiff a competitive advantage, and (2) the plaintiff must show that it took affirmative measures to prevent others from acquiring or using the information. Although the court determined in this case that the customer lists met the first requirement, it denied trade secret protection based on the second requirement.

The court held that “[r]estricting access to sensitive information by assigning employees passwords on a need-to-know basis is a step in the right direction.” This precaution in and of itself, however was not enough. The court was “troubled by the failure to either require employees to sign confidentiality agreements, advise employees that its records were confidential, or label the information as confidential.” There was insufficient evidence in the record to show the employees understood the information to be confidential, thus the trial court’s finding that the customer lists were not trade secrets was not against the manifest weight of the evidence.

Liebert Corp. v. Mazur, — N.E.2d —, 2005 WL 762954 (Ill.App. 1st Dist., April 5, 2005).

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