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).

Forum selection clause upheld in content scraping case

In the case of Cairo, Inc. v. CrossMedia Services, Inc., decided on April 1, 2005, the U.S. District Court for the Northern District of California has held that although a company using scrapers to gather content from a competitor’s website did not expressly assent to the website’s terms of use, the scrapers’ “repeated and automated” access to the site created imputed assent to the terms of service and the forum selection clause appearing therein.

Both parties to this case operate database-driven websites that users can access to get information about local retail sales. Soon after Cairo launched its site in late 2004, CrossMedia noticed that Cairo was “scraping” content and images from CrossMedia’s sites and implementing that material on Cairo’s sites. Cairo also created “deep links” in its site leading to pages within CrossMedia’s sites. According to CrossMedia, Cairo automatically accessed CrossMedia’s servers thousands of times each month to gather information.

CrossMedia sent a cease and desist letter to Cairo in November 2004. Soon thereafter, without waiting to be sued for infringement, Cairo filed the present case in federal court in California, asking for a declaratory judgment. Cairo sought a determination that, among other things, Cairo’s website did not infringe any of CrossMedia’s copyrights or trademarks.

Cairo is a California company and CrossMedia is located in Chicago. CrossMedia moved to dismiss the action, citing a forum selection clause appearing in the terms of service of its various websites. This forum selection clause stated that “[j]urisdiction for any claims arising under this Agreement shall lie exclusively with the state or federal courts in Chicago, Illinois where CrossMedia has its principal place of business.”

The court sided with CrossMedia by determining that the forum selection clause applied and dismissed the action.

Cairo had argued the action should not be dismissed because it had no agreement with CrossMedia. Cairo contended that it never assented to the websites’ terms of use, thus it was not bound by the forum selection clause.

The court found these arguments unpersuasive. It looked to the decision in Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004) to determine that “when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes acceptance of the terms, which accordingly become binding on the offeree.” Cairo’s visits to CrossMedia’s sites with knowledge of the terms of use constituted acceptance of the terms.

Similarly, the court rejected Cairo’s argument that the Specht v. Netscape Comm. Corp. case (306 F.3d 17 (2d Cir. 2002)) should apply. In that case, the Second Circuit ruled that a click-wrap agreement did not bind the parties where users had to scroll down their screens without reason to do so in order to see the terms of the agreement. In the present case, the court found that Cairo had imputed knowledge of the terms of use through its “repeated and automated use” of CrossMedia’s sites. “[E]ven accepting Cairo’s allegation that it did not explicitly agree to [CrossMedia]’s Terms of Use, the Court finds that Cairo’s use of [the] web site under circumstances in which Cairo had actual or imputed knowledge of [the] terms effectively binds Cairo to [the] Terms of Use and the forum selection clause therein.”

Cairo, Inc. v. CrossMedia Services, Inc., 2005 WL 756610 (N.D. Cal., April 1, 2005).

See also Dix v. ICT Group, — P.3d —, 2005 WL 372483 (Ct. App. Wash., Feb. 17, 2005).

Eighth Circuit upholds preliminary injunction against alleged cybersquatter

The law firm of Faegre & Benson (“Faegre”) brought suit against defendant Purdy and related defendants for trademark infringement, cybersquatting and various state law claims resulting from the defendants’ registration of several domain names incorporating variations of Faegre’s firm name. The district court entered a preliminary injunction against the defendants on January 5, 2004.

The district court had enjoined the defendants from: (1) using domain names identical to or confusingly similar to Faegre’s marks unless the protest or critical commentary nature of the attached website was apparent from the domain name itself, (2) from using marks identical to or confusingly similar to Faegre’s marks, (3) from displaying any website whose appearance is identical or confusingly similar to the trade dress of Faegre’s website; and (4) from illegally appropriating Faegre names.

On appeal, the defendants argued that (1) the injunction was overbroad, (2) the websites were noncommercial and used to make critical comments about Faegre, (3) use of the domain names was not likely to cause confusion as to the sponsor of the sites, and (4) that the use of the domain names was protected by the First Amendment.

The court rejected each of these arguments by the defendants, and affirmed the district court’s entry of a temporary injunction. It held that defendants had not shown the district court abused its discretion in issuing the preliminary injunction.

Faegre & Benson, LLP v. Purdy, 2005 WL 742732 (8th Cir., April 4, 2005).

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